Nabors Industries Ltd (NBR) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Nabors Industries Limited Fourth Quarter 2010 Earnings Conference Call. During today's presentation all participants will be in a listen-only mode.Following the presentation the conference will be open for questions.

(Operator Instructions) This conference is being recorded today, Wednesday, February 16th of 2011. At this time, I'd like to turn the conference over to Mr. Denny Smith, Director of Corporate Development. Please go ahead, sir.

Good morning everyone, and thank you for joining us today. As usual, we'll have our call here with about 20 to 30 minutes of remarks by Gene, followed by question-and-answer and wind up in one hour. Besides Gene and myself today is Tony Petrello, President and Chief Operating Officer, Laura Doerre, our General Counsel, Clark Wood, our Chief Accounting Officer, and most of the heads of our principal business units. I just want to remind you about that what we're going to be talking about obviously is the outlook for the business, and as such, these constitute forward-looking statements under the SEC rules, and are subject to uncertainty and change, and we encourage you to look at our various filings. And with that I'll hand it to Gene to get started.

Thanks again.Welcome to our Fourth Quarter Conference Call. Again, I want to thank everybody for joining, and as usual we have posted to the Nabors website a series of slides that contain details about the performance of the various units or segments of the Company. Please refer to these as we speak.

The fourth quarter was a significant [beat], with earnings per share increasing, this is sort of non-GAAP, from $0.29 to $0.44, an increase of approximately 20% over the First Call consensus of $0.37. Our most important metric, which we always emphasize is operating income, which rose to $222 million from $164 million in the prior quarter, and this also was substantially above consensus. This was due to the strong performance from our North American Land Operations, better than expected performance from our international unit, and a full quarter's contribution from Superior Well Services business unit.

The quarter's results [portend] a significant improvement in 2011, despite a not only relative but absolutely anemic gas price, a [projected] carry out of recovery in our international markets, which we obviously will discuss more later, and continued delays in the resumption of normalized activity in the Gulf of Mexico. Financially, we remain in pretty good shape, as we previously brought back half of the $2.75 billion convertible debt, which is due May 15th of this year. We have adequate liquidity to pay off the remaining $1.4 million,(Sic-see press release) while still funding a pretty ambitious capital expenditure requirement, and to do this we used our current and anticipated cash flow on hand, the proceeds from the sale of our Colombian E&P properties, mostly oil, as well as a temporary draw on our revolving line of credit. Our safety record remains one of the best in the industry, and we continue to emphasize this, along with our program to achieve a zero incidence rate, which we continue to strive for and make our goals. Looking ahead to 2011, we are optimistic in factors that our numbers are in fact tracking ahead of the current consensus, and while there is obviously downside to meeting this projection, I personally believe there's a lot more potential and sizeable upside possibilities.

Let me first turn to Superior Well Servicing. This is the largest driver of our performance in the fourth quarter.In its first full quarter with Nabors, the unit posted approximately $55 million in operating income, despite a seasonally low December. Demand and average pricing in this unit continue to improve, and we are therefore, in light of the pricing and returns, we're devoting a significant amount of capital to the expansion of our pumping capacity and to enter into the coiled tubing business, which is pretty ancillary to our existing businesses.

When we first acquired Superior, they were operating 12 large spreads. They now are operating 14 and we expect to hit 23 or 24 by the end of the year. Needless to say, we are quite pleased with the contribution this unit has made in such a short time, and we believe our initial as well as incremental capital investments will continue to produce outstanding returns.

We expect to receive the first increment of increase in pressure pumping spreads in March, and an increase thereafter of approximately one per month. We also have a number of coiled tubing units in order, and we'll start receiving those in May or June at the rate of at least one a month for the first six months and perhaps thereafter. There has been a logical shift in both rigs and pressure pumping services away from the conventional dry gas areas and towards the oils and liquid- rich plays, as well as to the premium market, which is the Marcellus Shale. As a result of this, we expect this unit to continually improve in 2011, even as the industry has substantial fracking capacity.

Sooner or later, we accept there will be a better, or a rebalancing, of supply and demand in this market. In the meantime, two things, we are doing our best to lock up term contracts so that we can sort of mitigate the potential effects of balancing of supply and demand, and I think the other thing I should mention is the quality of our crews and their performance and the relative, well the absolute, quality of our equipment in terms of the average age, it's probably a year and a half, and it's the right size. It's the current size, ideal size.

Anyway, let me switch to Nabors Drilling. Operating income in the US operation increased substantially during the quarter rising to $85,000 compared to $70,000 in the prior quarter. The rig count was flat sequentially, but average margins increased by [$800] a day. I think the most important thing about this unit is there is a continued demand for new builds; ie, fit-for-purpose rigs, specifically for various shale operations by our customers. Last year, we had 29 new builds, including two that may have crossed into January of this year. That includes 26 AC rigs and three major upgrades of SCR rigs, which were economically equivalent of the new build (inaudible).

I think, let me tell you how this evolved from our viewpoint of the new build approach. We had sort of specked or agreed to approve an AFE for seven new build rigs for the lower 48, and we had two in construction against prospective demands in Canada, and before we actually got the AFE approved, one of the US rigs was contracted and the US entity contracted one of the two Canadian rigs.And I think there's a super high probability that we'll have two more of these locked up in the next week or two, and I'm confident that we'll have many more.And what we'll tend to do, our confidence is, relatively speaking, high enough so that we'll continue to keep a backlog until the environment changes, with about seven rigs under construction against the contracts we fully expect to get, and I don't expect that number to decrease any time in the near future.

We continue to move, I think, fully with or perhaps even ahead of the trend by moving rigs from the pure dry gas areas to the liquids-rich areas and a measure of that is that 85% in 2006, 85% of the USA's income was from dry gas units, while this year, we expect it to be 68% to be derived from oil and fluids-rich, and the way this is going, the 85/15 is probably going to be reversed in the next year or so. Anyway, we're right at the crest of that movement.

Nabors Well Servicing, this unit posted a significant increase in operating income during the quarter, $9 million to $12 million.The results primarily are attributable to an increase in hourly rates and strong trucking activity. This unit probably will comfortably more than double its operating income this year versus last. Among the factors involved, during quarter we created the acquisition of Energy Contractors, a well respected well servicing, fluids handling, rig moving, and construction Company, in the Appalachia Basin, and this should actually [lead] to our penetration of the Marcellus Shale, and this is really the home grounds of our Superior Well Servicing operation. We intend to augment this business, this well servicing business, with surplus equipment, which we're not using, from previously suspended operations in Canada and North Dakota, so that should enhance our operation. We also have pretty significant potential synergies with this unit and (inaudible).We are spending a bunch of money, probably around $75 million, in additional fluid handling, frac tanks, trucks, trailers, which will be facilitated by the synergies with Superior, and I heard this morning we did how many, 40 tanks? So it's a two-year contract?

We're looking at 100.

100 tanks, so it's even possible that these things will be locked up for two-year contracts at decent rates, and these things obviously have real depreciation that's pretty low. I think it's also worthwhile to add that we have a very profitable operation with a large market position in Canada, and we're taking advantage of that by adding a significant number of [400-plus] Millennium rigs for that market, which we expect to show a good payout. Anyway, we also expect to have further price improvement in this area. The fact that the oil price is pretty good is not an insignificant factor, and the Fluids Management business is booming everywhere, especially for us, with the synergies that we have inter-business units.

Nabors International, our international operations did pretty well in this quarter, $72 million, I'd say quite well, from $64 million in the previous quarter, and this was a substantial reduction in down time, with fewer start up delays than anticipated, and this was across multiple rigs.Of less significance was the temporary extension of rigs at current rates, particularly jack-ups, which were originally scheduled to renew early.However, while we expect the overall 2011 results to approach those of 2010, the facts are that we're going to have approximately a $90 million reduction in operating income between the first and second quarters, which will result from scheduled dry docking for regulatory upgrades for probably four jack-ups, and the repricing of three of those jack-ups to - - they are going to be employed, but the current market for jack-ups, as you all know, is a bunch lower than when these rigs were [assigned].And also we're going to have down time for six rigs in Saudi, which are being converted from oil to gas. These will be good longer term contracts, but the up front price we'll pay in the second quarter.

So the flat forecast within the face of this $90 million hit implies that the business is improving fairly dramatically and should continue to do so after a depressed early 2011. Specifically, we expect to exit - - the fourth quarter number will be higher in 2011 than 2010.And longer term, the fact is that we're probably among the best, certainly the best position land driller, and a lot of the international drilling is land, to take advantage of the inevitable increase in CapEx associated with a strong demand for crude relative to the longer term availability of crude.So sooner or later, and probably demonstratively by the end of last year, the potential of this unit compared to the (inaudible) we've been having in the last couple years, I think will be manifest.

Nabors Offshore, this unit has continued to be dramatically adversely impacted by the spill and the consequent results. We lost $5 million in the quarter, which was a little bit more than we expected. The bottom line is that we probably lost $40 million in operating income, compared to what it would have been without the spill, and this year, we'll probably lose $20 million of that anyway, and eventually, either the year after or maybe at the rate some time next year, we'll make up the $40 million.And in addition to that, I think we've been talking in the last couple of quarters about front-end planning and designing and all that stuff we'd add to two big major rigs, and how they've converted into contracts.One of the rigs we will sell and show a profit on the sale, and then we'll operate for a long period, five or seven years, at a pretty decent operating. The other one we'll own and operate, and those two things will enhance our longer term profitability in this unit.

Canada, results in Canada represent a significant increase, $17 million compared to $1 million in the fourth quarter. These results track to ramp up [in the] traditional ramp up in winter exploration. We should peak in what promises to be a very good first quarter as well. Activity in this market is pretty similar to what's going on in the US, where there's a shift from the dry gas in British Columbia to the more oil or liquid-rich shales east of that. Here again, we have three rigs under construction in drilling. We probably have a couple of rigs under construction, two or three smaller capital rigs in work over, and all these, the drilling, are against full pay contracts, and these rigs are probably going to have an opportunity to [be] contracted for 360 days a year, or a full calendar year compared to a typical Canadian year.

Nabors Alaska Drilling, you've heard this story before, we've come down pretty dramatically. We're going to be, 2010 was down pretty good from last year, and 2011 is going to be down probably 60% from 2010, but we're still doing pretty well there, and let me tell you the reasons for this. We have the best units (inaudible) in our coiled tubing units and the first, probably still the only operating AC rig up there.As you know, we've told you in the past, we've lost bids to Packer, and while I wish everybody luck, their rigs are going way over capital and they are late, and anyway, we have an opportunity which we haven't talked about yet to fill the gaps if there are issues there.

But even more importantly, there's a ton of work to be done on the slope, with high-vis oil, and even if you look at the medium-vis oil, the stuff that's not the heavy, heavy stuff, but much more workable and marketable oil, there's almost an infinite number of wells to be drilled.And I think the issue there is if the oil companies initiate the program, they will have a tax hit, they will react to their [money] and it will cost them.In the meantime, if the states come to the oil companies and say - - we would like to induce you to do some more drilling, that deal is going to, in effect, require a three-year standoff before it's resolved, but ultimately, it will be resolved. Also, the biggest operator at BP [is] rumors that they are selling it and CapEx is uncertain, and all that stuff. That is going to be resolved one or another.So, while Alaska, we got the bad news here and we've had it for a while, and it will carry into the next year but it won't kill us overall next year, as the outlook is surprisingly favorable.

Our other segments are doing pretty well. Not important but doing well, including our technology from ROCKIT and our equipment sales, which are doing well. Oil and Gas business, as you know we're selling our Colombian assets and their oil, and what's happened de facto, is that we had hope to sell - - there are two entities, our joint venture entity with First Reserve, and [100%] Entity.We hope to sell them - - one contract for the joint venture, one contract for our own (inaudible), and it's going into sections, acres, individual blocks.And so what that means is, while I still think we'll get to really the low end, which I said was approximately $400 million, I think it's going to be in blocks, it might even be multiple sales, there might be multiple closing but I think we'll net-net get that by the end of next quarter.

Our Canadian E&P properties, other than Colombia, include our Canadian Gas Operations and our 50% interest in NFR, and these are essentially gas-related, and as I think we've said before, say again, the crude price the near month was actually below $4 when I came down here this morning. There's no chance of commercially realizing either a joint public or NFR sale of the gas [things] at least for this year.But we don't need to do it, so we'll wait. We also had, in our GAAP results, I'll point out another impairment in the carrying value of various gas-related holdings, and as you know, those things go down, when gas goes down; i.e., the write-up goes up, and as gas prices go up, and if they get reversed, the non-GAAP goes up.

In summary, let me remind you that at the end of last quarter I was pretty bullish, and I said so, and I think that was justified by the fact that our stock price is up, I guess approximately 50% since the timing of our last presentation, and I still remain very bullish, because I think there's a lot of value yet to be realized in our [rigging] units.And without being redundant, I base this on the increasing strength of our domestic operation, with all of its components, and the fact that, internationally, we're ideally suited for the ultimate upturn in international demand, based on the fact that it's oil-based drilling and we're going to need it.I think that concludes my comments.

Operator? We're ready to start the question and answer session please.

(Operator Instructions)Our first question comes from the line of Marshall Adkins with Raymond James. Please go ahead.

Good morning, guys. Gene, I guess in hindsight here, the Superior acquisition looks absolutely brilliant, so I want to spend just a minute getting a little more color on the state of the Pressure Pumping market, specifically - -

David's here, so be careful what you say --

Some of the other players in the Pressure Pumping market mentioned that Q4 was a little bit negatively impacted by weather, and they are also expecting Q1 to be impacted by weather. Can you give us some quick commentary on just how much weather impacted you, and how much you expect that to follow through in Q1?

I think we did experience it. We expect a similar [hickey] in Q1. Dave do you want to elaborate on what that meant?

Yes, I think February again, we're just seeing a lot of cold areas. You expect it in the Rockies, but you don't expect it in South Texas and Louisiana, so we've had a lot of days where we've had down time just due to ice and cold temperatures.

Well then that leads to, you still saw very nice improvements quarter-over-quarter in the margins in that business. Once we get past this weather, I'm talking into Q2, Q3 of this year, should we look for further margin improvement in that business?

It's either going to be margin improvement or hopefully term contracts. We're pushing both those things. At the moment, I think we would prefer a multiple-year contract at today's prices to another 3% [in price], but both those things are cooking.

Well then how much of your fleet is under long-term contract, and how much would you like to be, or do you think could be under long-term contracts three, four months from now?

I'm going to not respond directly because I think that's kind of competitively - - anyway the point is we are doing okay on term contracts, and we want to do a bunch better. I guess I'd be happy if we had, say, 2/3 of our spreads under term contracts, at least 2 years.

Oh, okay. All right, last question - -

I'm not automatically happy though.

Last question and I'll turn it over. You mentioned the fleets increasing, I believe one a month you mentioned. Just could you highlight, how much horsepower did you have at the end of Q4, and how much do you anticipate having a year from now, in December of 2011?

Yes, Marshall, this is Dave. We were roughly 450, 475 at the end of fourth quarter. We did add some units during fourth quarter, and again, based on the different basins that we're going to put these crews, the horsepower per crew can range anywhere from 20,000 to 40,000-horsepower per crew.

Total that we're adding is about 250.

300. It's roughly 300.

Okay. That's fantastic guys. Thank you all.

Thank you. Our next question comes from the line of Arun Jayaram with Credit Suisse. Please go ahead.

Good morning, Gene.

Hi.

Gene, I wanted to see if you could elaborate on what you're seeing in Canada. Obviously the Chinese came in with a very large eye-popping deal with EnCana. Can you comment on some of the emerging new shale plays? What is the operator interest in paced rigs, and how much operating leverage do you see in Canada over the next 12 months to 18 months.

Well there are two aspects of Canada, to your point.One, we own a lot of gas acreage in British Columbia, almost all of it of that in the Horn River, and we obviously would like to sell that. We would like to see if the Chinese, Japanese, anybody - -

You don't discriminate.

No, no, we'll take anybody. We'll even take Canadian dollars.

Then from an operating viewpoint, we had a predominant position in British Columbia, but it's analogous to the Haynesville. They are moving from not only the Horn River but from the Southern prospects, which had been even more active, but it's mostly dry gas and it's pretty remote (inaudible) and then moving to the oil-rich plays to the east of that.And we're participating pretty fully as I mentioned, that we probably have at least three, three-year contracts ending, and we're deciding to build rigs against those prospects now, so Canada is going to be pretty good.

Gene, are the oil plays, what kind of rigs do those require?

So far, the rigs we have, I don't think they need quite the horsepower that the Horn River rigs, so we have enough rigs to do it and we're building, actually I'm not 100% sure whether it's the existing shales or the prospective shales, but we're building kind of slant rigs for this application, drilling slant rigs.

Okay.Okay, and my second question and final question, Gene on the international side, you cited three issues, pretty well documented, but the three issues that will hurt operating income by $90 million. Can you help us frame what the first half of the year will look like and some of the positive offsets against that?

Yes, we're guessing the first half will be pretty bad in the first quarter, up 50% in the third quarter, and then by the fourth quarter, we'll probably be double what we average per quarter in the first half.And this year, we ended with, say, a $72 million, $73 million operating income, and I think we'll do at least, well, approximately 10% better than next year, and the first two quarters will be a fraction, maybe 40% of the fourth quarter.

40%, okay. Thanks.

First quarter - - the second quarter will be a little more than half of the fourth quarter.

Okay, Gene, thanks a lot.

Thank you. Our next question comes from the line of Dan Boyd with Goldman Sachs.

Hi Gene, how you doing?

Hi, good.

So everything you say sounds pretty good, it looks like you're investing a lot in the business. I was a little taken back by the guidance number you gave out there for EPS, and maybe we can walk through a couple of the divisions in terms of what you earned this quarter, but what type of earnings power the investments are making?And maybe just starting with the US lower 48, we are doing over $80 million in operating income but you're adding 26 rigs next year, so can you just talk about how you see that impacting the earnings power and the progression we should see throughout the year?

Yes, that's a good question. I think these new rigs are one or two things. One, they are starting up and getting to their design operating income a whole bunch quicker than used to be the case, and I think basically they are in the mid to high 20s on three year deals, at I guess an operating cost of $112,000 a day I guess, and they are all at least three-year deals.And so what's been happening is the older rigs, the vintage rigs, at least the high-end rigs, the good SCR rigs and/or the AC rigs are rolling over at pretty good prices, so we're going to do better without, and it's mostly going to be in terms of incremental rigs without too much in the way of incremental margin.

It's going to be good, and frankly, I think our domestic guys are sand-bagging a little bit, but the outlook in terms, I mean, the most significant thing is guys are coming to us today with new build; i.e., from their viewpoint that's built for purpose rigs, where they feel that if they get one or two more wells drilled within a 12-year period, it pays for them to buy a rig which they design or they incorporate into our design to do the job they think is best.So the ultimate trick is how many, it goes without saying, but how many wells per year can you drill? And that implies ROP, it implies rig moves, a whole bunch of things, and they are getting onto a manufacturing basis where they like to do this quicker, and the truth is that the new rigs in fact can do it, and I don't see a real end to that in sight, so if we did 29 last year, I don't know why we shouldn't do a significant number this year.

Okay, so it sounds like your guys are potentially sand-bagging, as you put it, in that they aren't expecting incremental rig growth with these new builds. They are thinking more of a steady run rate?

Some growth.

Some growth.Okay.

Not margin growth. I think the other thing is, if you have a contract today, the rig is going to come in a year from now, let's say, and it's going to be a three-year deal starting then, and frequently we have a deal to fill in, so it's not only good that you get the new builds, but you get them for three years from when they commence, so we're not only doing wells for this year or next year, but we're locking in three years beyond that.

Okay, and then how should we think about what Superior can do as you add this capacity? So you're looking to put some on contract. You just did $55 million in operating income, you're doubling the amount of crews that you have. Clearly you aren't doubling all the horsepower though, but I suspect you might add more eventually. How are you thinking about the Q4 year-over-year 2011 versus 2010 in what the opportunity is for them?

I think he's sand-bagging a little bit too, but it's pretty dramatic. We didn't have anything until essentially the fourth quarter, so for us it's going to be a comparison versus zero for potentially - -

Oh, I'm sorry. I'm thinking 4Q 2011 versus 4Q 2010, where you have the full quarter but now you're adding a bunch of - -

Okay, I would say more than 50% higher.

Okay. And then just international is the one we've always struggled with forecasting, because it's a little bit less transparent.Maybe you can help add some transparency to how you make that dramatic increase in the back half of the year, what portion of that is backed by contract? What portion of that maybe requires some of this new CapEx that you're adding, and just help us get more of this same level of comfort that you have with that 4Q number?

Denny, can you help on this?

Yes, Dan. There's about roughly 15 rigs that are deals that are starting up over the time frame, and it also contemplates a little bit of higher activity in Mexico, but obviously that can be a little variable.But we've already started. We've got, I think, four more rigs working in Mexico than when we hit the bottom last year, and so it's starting to come back, but that timing is always subject, but basically pretty visible rig start ups. The price the jack-ups will price at, I think our guys are moderately more optimistic, but that's yet to be seen.

I think we're fairly optimistic in Iraq. The proof will be in the pudding. We're signing contracts as we speak.

Part of the advantage we have is we bought a number of these 500-horsepower PLC work over rigs, which weren't exactly optimum for use in the US and Canada, and we're successfully supplying them. I think we've got five or six already deployed to Iraq. Basically, they are good prices, good returns, and from our viewpoint, we're using a lot of [sunk] costs here.So I would say the two big areas are a Mexico comeback, as it inevitably would, and its been inevitable but it hasn't happened for the last 2 conference calls to the degree we'd like, and how quickly can we convert prospects in Iraq to cash flow.

All right, great guys. I appreciate the color.

Thank you. Our next question comes from the line of Kevin Simpson with Miller Tabbak.

Thanks and good morning.Good quarter, Gene.

Thank you.

I just wanted to get back to international as well. So it sounds like Iraq exiting 2011 and into 2012 then could be a material contributor, material being, I don't know, $30 million to $50 million of EBIT annualized. Is that reasonable?

I don't know what the number is frankly, Kevin, but I think it's going to be significant. Siggi has probably spent more time in Iraq than Houston in the last six or eight months, and we have a pretty good deal with the Iraq Drilling Company and that's manifested in some contract. Everybody has a deal with them but ours is manifested in contracts, and we're optimistic, and also, I think I told you we have that extra bit of Nabors-type profitability when we deploy a Millennium (inaudible) rig there, really from a [stacked] status.

So something you don't have to put capital into? And then in Mexico, have you gotten any positive feedback from Pemex in terms of timing of when rigs will go back to work there, and how much are you banking on Mexico to get to the increase in 4Q 2011?

Not that much, just a couple of rigs, but they are very confident.They have the plan and the funding, but sometimes the capital is just not available from the government yet. But that's been true frankly the last couple quarters, Kevin. I mean, it's inevitable. They have to do it; they have the prospects. They need the hydrocarbons, and you have to switch the money from one place to another.

It seems logical, it seems inevitable, but it has been slower rather than quicker.And as you know, the two big [hickeys] we've had internationally are the decline in Mexico [counterfold] for not by prospects, not by needs, but by funding sources, not that the funding is not there, but it goes into one pocket and it has to get transferred to Pemex's profit.And the other thing is, we anticipated the slowdown in Saudi, which by the way, is prospects are improving there with gas rigs right now, but Iraq has been slower than we expected, and we expected the transition between Saudi and Iraq to be quicker, and it has been slower. So those account were the [monster] percentage of the drop internationally.

Okay, and then I just wanted to flip to properties. With the Superior deal, there was a whatever the right word, commitment, I guess to some degree, that one of the sources of funds consistently is going to be sale of property, so since then, it sounds like Colombia a little light relative to what you expected, maybe a little longer, I just wanted to make sure. Are you saying it will take until the middle of the year to complete everything there?

My guess right now is that instead of two sales, we're going to have multiple blocks (inaudible) more than two buyers, and there might even, probably will be multiple closings, and I think we'll still get the 400-ish, but it will be during the second quarter, not in one fell swoop earlier.

Okay, and I guess, is there still a commitment on the part, are you still committed to using this as a source of funds over time, and if conditions get a little better next year, that you'd be back putting these on the market, or are you reconsidering?

They are on the market now and I think we'll sell them, and also there's no shortage of funds. I mean, we're going to pay out $1.4 billion May 15. We have cash. We have a revolver right now of 750 and even before the issue of not an immediate 100% sale of Colombia occurred, we were contemplating and initiated a program to essentially double our revolver.

Not that I compared myself or Nabors with them, but whether it has 1.75 or higher revolver, ours is 0.750, and right now the incremental revolver costs, they don't count as [hickeys] with the rating agencies, and incremental borrowings under our currently unused line is LIBOR plus 150, so we can borrow [at] under 2%.So to make a long story short I don't see a financing issue, even if we don't sell the stuff by May 15.

Okay, and so but just going further out, my thought was that the properties has been a use of funds for a long time and was finally going to be a consistent source of funds, and so it doesn't look like that's going to be the case in 2011 over and above whatever you get out of Colombia, but - -

Well frankly, I think that's right. I think if we have good ramps on investment prospects, or continue to, we have investments that are starting to reposition in Alaska. We have California with [steam] assisted things and we're pretty close to having more come out than is going in. We might have investments in the [EP] this year.

Specifically, NFR is in a pretty tight position, because apart from one rig, the rest of it is potentially in very dry gas, so they only have two rigs working, one in the Haynesville, there's the shallow stuff that has liquid content.But even them, we said if you can have the futures curve which is pretty lousy for gas if you can show a 20% to 25% return, go buy the assets now. So I don't see a capital crunch. We could do $1 billion tomorrow if we wanted to increase debt. We don't particularly want to do that, and the better way is to get the revolver up, which we are in the process of doing.

Okay, thanks Gene.That's it for me.

Thank you. Our next question comes from the line of Jeff Tillery with Tudor, Pickering, Holt & Co. LLC. Please go ahead.

Hi, good morning. A question on weather impacting the other businesses outside pressure pumping. Do you anticipate any sort of material impact to the Lower 48 drilling business this quarter?

Weather impacting it?

Weather doesn't impact the - -

Okay.

It's cold in the winter, most winters.

Not the drilling business but a little bit of our well service business.

And you mentioned a robust CapEx plan for this year. Could you give us more color on what exactly the numbers look like?

I think the total is probably around 1.3. How much is?- - the big chunk is - -

Roughly $300 million.

$300 million.Joe, you have even more than that I guess?

This [of that] domestic is probably as much as twice that.

How much is your CapEx this year?

It's around 600.

So that's almost twice what Superior is, and that's essentially 100% maintenance, a small percentage maintenance CapEx and 100% against term contracts. Well Servicing is pretty big, and we had the acquisition, was that this year or last year?

Last year.

Last year, okay, and this year we still have more Millennium rigs, we have more water issues, total of which are - -

150.

150, and we'll have some elsewhere and some in ENP actually.

That's good color.And then my last question just on pricing in the Lower 48 Land Rig business, you guys had shown a fair amount of appreciation on some of the lower-end rigs in terms of closing the gap relative to AC rigs. How do you see the pricing dynamics playing out between the AC and higher-end SCR rigs relative to some of the lower quality assets?

Joe?

Well, we think again the AC rigs and the high end SCR rigs will continue to improve somewhat. As Gene mentioned, we have a high number of our rigs are on term, so obviously those are set for the year. The ones that are off are on the spot market, we're going to continue to improve those numbers, push them closer, not where Gene put specifically on turn but at least keep them viable to also look at going into the term market.The legacy assets as we call them, we continue to improve those numbers. Specifically a lot of the legacy assets we have working are up in North Dakota, so we have a very good market up there and we reflect the value [without marking the] assets being in North Dakota.So again, it's the high-end premium assets, the AC and the SCR rigs though; however, away from the Bakken and the North Dakota markets, there's a pretty broad gap between the two numbers.

Okay.

[And we'll] see it completely closing.

All right, well thank you guys very much.

Thank you. Our next question comes from the line of Jud Bailey with Jefferies & Company. Please go ahead.

Thanks, good morning. I wanted to follow-up on something you said or I should clarify. Gene, did you say that you hope to keep a queue of seven new builds in the Lower 48 at all times, and did you say those were all behind contract?

I would say that, under current circumstances, we have described how we started that, and [we usually] committed a bunch of them before we even signed the [AFE], but under current conditions, we'll keep the backlog at seven.If that looks like it's too much we'll reduce it; if it looks like it's not enough, we'll increase it.

Okay.Now, under the current outlook, which is pretty favorable, we've got seven, and I'd say short-term, I don't see that declining. Okay, and just to clarify, those are seven that don't have contracts that you're - -?

Yes.

Okay.

I mean, sometimes the availability is relevant to getting the contract, not always, but it's a factor.And this is true for every business, so we like to do things and in fact we do it against contracts, but if we have the prospect of, say, three or four contracts, we'll commit to a smaller number of rigs against that prospect.In this case, there's a year lag in delivery, so their judgment is pretty good, and if they don't do it, they have the burden of higher capital costs, lower return on capital, higher depreciation, so, not that they are well motivated anyway but the P&L was also a business unit factor.

Okay, and then follow-up on the Saudi Arabia rigs, the land rigs and also jack-ups. Just to clarify, do you have contracts in hand, or are you finalizing negotiations? Can you just give us an update if those are actual contracts yet?

Oh, the gas rigs have been in hand, and we've been constructing the components for a while, and this is to install them on the rigs.So each rig will be out of market for about 60 days while we do that, and it's a new contract. The jack-ups are yet to be determined but [big tenders pending].

Okay, all right.That's all I have.

There are a couple of features, well anyway, it's the details, but there is hidden pluses even in the jack-ups --.

Operator, we're bumping up against our one hour constraint, so maybe just one more question and we'll wind up, please.

Certainly sir, thank you. Ladies and gentlemen, we do have time for one more question.(Operator Instructions)The last question comes from the line of Geoff Kieburtz with Weeden & Company.

Thanks very much. I appreciate getting my question in. Probably a question for Dave I guess, as we look at your expansion plan in the Pressure Pumping business, we've heard some stories about maybe some equipment delivery delays working into the system. We've also heard some folks talking about logistics difficulties in relation to prop and to chemicals. Could you give us a little bit more background on how the operation is positioned in regards to both of those issues?

We've probably seen a 30-day delay in deliveries on equipment so far. We thought we'd get the first crew probably in February, and now March looks like a good date, and going forward, we feel pretty good about the one a month after that. As far as proppant, we've expanded our committed proppant for this year. We initially were at roughly 400,000 tons, and now we're up to about three times that, with additional capacity expected to be put in place as well.So we've been hearing the same things that you've been talking about and taking steps to really prepare ourselves to make sure we don't run behind as far as meeting our expectations there.

Okay, great. That was all I had. Thank you.

Thank you.

Operator, that will wind up our call today. If you want to close it out, please?

Certainly, sir. Thank you. Ladies and gentlemen, that does conclude today's Nabors Industries Limited Fourth Quarter 2010 Earnings Conference Call. Thank you for your participation. You may now disconnect.