Nabors Industries Ltd (NBR) 2021 Q1 法說會逐字稿

Good day, and welcome to the Nabors' First Quarter 2021 Earnings Conference Call. (Operator Instructions)

Please note that this event is being recorded. I would now like to turn the conference over to William Conroy, Vice President of Investor Relations and Corporate Development. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining Nabors' First Quarter 2021 Earnings Conference Call. Today, we will follow our customary format with Tony Petrello, our Chairman, President and Chief Executive Officer; and William Restrepo, our Chief Financial Officer, providing their perspectives on the quarter's results along with insights into our markets and how we expect Nabors to perform in these markets. In support of these remarks, a slide deck is available, both as a download within the webcast and in the Investor Relations section of nabors.com. Instructions for the replay of this call are posted on the website as well.

With us today, in addition to Tony, William and myself, are Siggi Meissner, President of our Global Drilling Organization and other members of the senior management team.

Since much of our commentary today will include our forward expectations, they may constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks and uncertainties as disclosed by Nabors from time to time in our filings with the Securities and Exchange Commission. As a result of these factors, our actual results may vary materially from those indicated or implied by such forward-looking statements.

Also during the call, we may discuss certain non-GAAP financial measures such as net debt, adjusted operating income, adjusted EBITDA and free cash flow. All references to EBITDA, made by either Tony or William during their presentations, whether qualified by the word adjusted or otherwise, mean adjusted EBITDA as that term is defined on our website and in our earnings release. Likewise, unless the context clearly indicates otherwise. References to cash flow mean free cash flow as that non-GAAP measure is defined in our earnings release. We have posted to the Investor Relations section of our website, a reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures.

With that, I will turn the call over to Tony to begin.

Good afternoon. Thank you for joining us as we review our results for the first quarter of 2021. This afternoon, I will begin with overview comments, then I will follow with a discussion of the markets and highlights for the quarter. William will discuss our financial results. I will make some concluding remarks before opening up to your questions.

Our performance in the first quarter exceeded the expectations, which we laid out on our last conference call. We made further progress on our twin priorities of generating free cash flow and reducing net debt. Our free cash flow was especially noteworthy. In the first quarter, we generated $60 million. We accomplished this after funding some of the annual cash interest payments on the outstanding notes. We generated adjusted EBITDA of $108 million. All our major segments performed well, highlighting the earnings power of Nabors' portfolio. We believe this accomplishment will rank favorably compared to the market. I am pleased with this start to 2021. I am looking forward to reporting further progress as the year unfolds.

Now I would like to spend a few moments on the macro environment. The quarter began with WTI in the high $40s. By early March, WTI exceeded $66. The price settled back and has been in a tight range around $60 since. Global oil supply and demand continued to be balanced in the first quarter. The EIA reports a global inventory draw of approximately 185 million barrels during the quarter. These trends in commodity prices and inventory are supportive of generally increasing oilfield activity across markets.

Comparing the first quarter and fourth quarter averages, the Baker Hughes Lower 48 land rig count increased by 28%. According to Inverness, from the beginning of the first quarter through the end, the Lower 48 rig count increased by 116 or approximately 30%. The growth rate among smaller clients outpaced the growth of the larger operators at 39% versus 13%. Among the larger clients, approximately 2/3 only modestly increased their operating rig counts or held them flat. In comparison, with our focus on larger and mid-sized companies, our own average working rig count increased by 21%. Our total rig count increased by 3 rigs as we added rigs with multiple customers, while the number of rigs stacked on rate declined by 6.

Once again, we surveyed the largest Lower 48 clients. This group accounts for approximately 40% of the working rig count. Our review of these clients shows flattish activity planned for the balance of 2021. Smaller and medium-sized operators are responding faster to the recent strength in commodity prices. In our international markets, we saw the expected demand increase in selected geographies, as measured by the number of active rates. This trend extends across major markets in Latin America and in Saudi Arabia.

In summary, global oil supply and demand continues to approach equilibrium as inventories rationalized. Commodity prices seem to have stabilized at levels which generate acceptable operator economics. In response, drilling activity is increasing. Having said that, virtually, every day, there is a report of a major outbreak of COVID in some geography. The most recent example is India. The possibility of a resurgence of COVID remains a drag on confidence in the recovery. Overall, assuming global economics continue to improve, the oilfield market environment is poised to support higher levels of activity.

Now I will comment on our first quarter results. Total adjusted EBITDA was $108 million in the quarter. These results reflect operating performance that was somewhat better than anticipated. With this performance, we generated approximately $60 million in free cash flow. Our global rig count for the first quarter increased by 8 rigs. We saw growth across all our drilling segments. In our Lower 48 business, reported daily rig margin of $8,466 was in line with our guidance. For the international segment, adjusted EBITDA for the quarter met our expectations. Daily margin at $12,917 was near the upper end of our guidance range, driven by excellent performance in the field. Once again, we had outstanding operational execution on our high-spec rig fleet. Strong operations, our leading safety performance, continued cost control and CapEx discipline all drove the quarter's results.

Next, I would like to mention some specific highlights. During the first quarter, we completed additional debt exchange transactions. Between these and our free cash flow, we logged another quarter of balance sheet improvement. Adjusted EBITDA in our Drilling Solutions segment again increased sequentially. We saw continued growth in the penetration of our SmartDRILL app. SmartDRILL is Nabors' proprietary rig activity sequencer that digitizes workflows and optimizes rig processes. Our installations on Nabors' Lower 48 rigs increased by nearly 25% versus the fourth quarter. Overall, NDS penetration of 5 or more services on Nabors' Lower 48 rigs increased versus the prior quarter. It now stands at more than 70%. A year ago, this penetration rate was 60%. As we are adding rigs, clients increasingly realize the value in NDS services. We see this reflected in NDS' results.

Also in NDS, client use of our RigCLOUD platform for digital operations increased. In the first quarter, clients utilized RigCLOUD on nearly all of our working rigs in the Lower 48. Our third-party installations also grew sequentially. We continue to roll out our differentiated RigCLOUD analytics platform. This innovative platform aggregates a wide spectrum of drilling and well data, including KPIs and wellbore placement statistics. Clients receive this information with customizable dashboards that enable real-time decision-making and drive optimal results. We successfully completed the restart of 8 idle rigs in Saudi Arabia. This is notable considering the logistical and staffing challenges, starting up a large number of rigs in a compressed timeframe. The local team in the Kingdom collaborated closely with our customer to plan the idling process. This arrangement yielded significant cost benefits while the rigs were idle and as they were restarted.

We recently published our updated ESG report for 2020. I think you will be impressed with our progress in this area. On a related note, we now have 2 rigs running advanced battery-based hybrid energy management solutions in the Lower 48. We believe Nabors has the first successful installation on a natural gas fuels rig in the industry. This system has yielded significant fuel savings as well as an improved emissions profile. A third Lower 48 system is expected to deploy in the near future. We are in early discussions with multiple operators for systems in our international markets as well.

In addition to these highlights, I would like to discuss RigCLOUD analytics in more detail. As a reminder, the RigCLOUD value chain combines our edge, analytics and digital workflow capabilities. These create a unique and compelling value proposition during the well construction process. RigCLOUD analytics is powered by high-end edge computing at the rig site. This infrastructure enables us to deliver real-time analytics that drive database decisions across multiple wells and rigs. In addition, RigCLOUD analytics offers key differentiators for NDS' digital and automated solutions, such as our Smart Suite.

With RigCLOUD analytics, clients can explicitly determine the value generated by our apps in drilling services. In turn, these features should support a faster pace of technology adoption and mutually beneficial performance based contracts. The initial focus of our RigCLOUD analytics is the prediction of future outcomes, answering the questions, what is likely to happen and when. Our road map should lead us beyond this functionality and ultimately facilitate true automation of the drilling process.

I will also make some comments on the energy transition and our initiatives to position Nabors as a leader as our industry evolves. I mentioned earlier, increased deployments of the power management system for rigs. We are also examining several alternatives to improve Nabors' own carbon footprint, including technologies aimed at carbon capture, emissions, minimization and power management. We look forward to leveraging our expertise, global footprint, and proven record of innovation to develop and deploy impactful clean energy solutions. We expect to make tangible progress in the near future, and I'm excited with the potential of these strategic initiatives.

Before turning the call over to William, I will discuss our view of the market in more detail. The Lower 48 industry has added 197 rigs or 87% since its low in August. Based on the commodity price backdrop and our conversations with clients, we expect Nabors' rig count to increase each quarter through the balance of 2021. Along with this activity outlook and the resulting increases in utilization, we see pricing traction in the second half of the year. In our international markets, we continue to see steady increases in activity across our major markets.

There are 2 specific developments, which I would like to draw your attention to. First, the SANAD joint venture in Saudi Arabia has now received 4 awards for new buildings from Saudi Aramco. We expect the first of these to deploy in early 2022. These new deployments are the first step to scale the operation to a new level backed by the support of our key customer. We are excited at the beginning of this phase of relationship with our partner and the future growth opportunity it presents. In Latin America, we are seeing the customer base broaden in both Argentina and Colombia. We have rigs working for 3 customers in Colombia and 5 in Argentina, where we hold 38% of the market. We think this diversification is healthy for Nabors. It indicates the wide appeal of our value proposition across the customer base.

Now let me turn the call over to William, who will discuss our financial results and guidance.

Thank you, Tony, and good afternoon, everyone. The net loss from continuing operations of $141 million in the first quarter represented a loss of $20.16 per share. First quarter results compared to a loss of $112 million or $16.46 per share in the fourth quarter of 2020. The fourth quarter included $162 million of pretax gains from debt exchanges and repurchases, partially offset by charges of $71 million, mainly from asset impairments for a net after-tax gain of $52 million or $7.40 per share. Excluding these unusual items, the net loss improved by $23 million, primarily reflecting lower depreciation and interest expense.

Revenue from operations for the first quarter was $461 million, a sequential gain of 4%. Revenue improved in most of our segments, driven by increased drilling activity in the markets we serve. In the Lower 48, drilling revenue of $110 million increased by $6.2 million or 6% as the rig count improved by 5%. Despite some deterioration in the average pricing for our fleet, revenue per day increased by $700, reflecting a significant reduction in the number of rigs stacked on rate. Generally, as stacked on rate rigs return to work, their day rates increased substantially. Lower 48 average rig count at 66.2 was up sequentially by 2.6 rigs, in line with our expectations.

International drilling revenue at $247 million increased by $1.7 million or 1%, despite the absence of $4 million in early termination revenue from the prior quarter. Average rig count of 64.8 increased by 2.2 rigs or 3.5%, matching our expectations for the quarter. As anticipated, 8 rigs were reactivated in Saudi Arabia progressively during the first quarter. However, average rig count in the Eastern Hemisphere fell, reflecting mostly the contract terminations we experienced in the fourth quarter. Canada drilling revenue was $21 million, an increase of $6.2 million or 42%. Rig count increased by 4 rigs on the seasonal ramp-up in activity. Daily revenue increased by nearly $400. Nabors Drilling Solutions revenue was $35.7 million, up $3.7 million or 12%, primarily driven by improved performance software and managed pressure drilling. Notably, there was continued growth of rocket with third parties and further adoption of SmartDRILL by new clients.

Rig Technologies revenue of $25.7 million decreased by $1.6 million or 6% due to lower capital equipment sales and fewer rentals. Although asset certification and repair activity were favorable, several clients deferred deliveries of new equipment. Total adjusted EBITDA for the quarter was $108 million, in line with the fourth quarter and somewhat ahead of our expectations. Sequentially, improved results in Canada and NDS offset reductions in our other segments. U.S. drilling adjusted EBITDA of $58.8 million was down by $3.4 million or 5.4% sequentially. Lower 48 performance was in line with our expectations. As we expected, daily rig margin came in at $8,466, a $1,000 impact compared to the fourth quarter. Quarter-on-quarter, although rig count increased, the additional volume was more than offset by a reduction in the number of rigs working at pre-pandemic rate and of rigs stacked on rate. I would like to point out that margins of the stack on rate rigs are generally higher than the fleet average.

For the second quarter, we expect daily rig margins of between $7,000 and $7,500, driven mainly by the signing of renewals or new contracts at current day rates, which are lower than the average for our fleet. We forecast a 6 to 7 rig increase for the second quarter or an 11% to 12% sequential improvement. Our rig count in the Lower 48 currently stands at 64 rigs or about 7.8 rigs higher than the average for the first quarter. Our other markets within the U.S. Drilling Solutions are expected to improve somewhat as compared to the first quarter, reflecting incremental rig count. International adjusted EBITDA decreased by $1.9 million to $62.6 million in the first quarter or 2.9% sequentially. The improvement in rig count was more than offset by the absence of early termination revenue that occurred in the fourth quarter. Daily gross margin for the quarter was $12,917, a $600 reduction as compared to the prior quarter. The fourth quarter included approximately $700 per day in early termination revenue.

Turning to the second quarter. We expect an international rig count increase of 3 to 4 rigs, or 5% to 6%, driven by units that returned to work in Latin America and Saudi Arabia over the course of the prior quarter. We expect gross margin per day of approximately 12,500, reflecting a long rig move in Mexico and general strikes in Argentina. These strikes could result in a period on standby rates for some other weeks. Current rig count in the international segment is 69 rigs, which translate into a 6.5% increase over the average of the first quarter. We believe that activity in international markets where we operate already inflected in the fourth quarter of last year.

SANAD adjusted EBITDA of $9.7 million increased by $6.2 million. Rig count at 13.7 rigs was 4 higher sequentially. Gross margin per day of 8,160 also increased due to the higher activity level and the receipt of $3.5 million in governmental wage subsidies. In the second quarter, we expect the effects of the seasonal spring breakup to impact results, with average rig count around 6 rigs and daily margins between $5,500 and $6,000. We currently have 6 rigs operating in Canada.

Drilling Solutions adjusted EBITDA of $11.5 million was up $1.2 million in the first quarter or 12% on the strong performance drilling and managed pressure drilling revenue. We expect adjusted EBITDA in the second quarter to be in line with the first quarter. Rig Technologies reported negative adjusted EBITDA of $500,000 in the first quarter, a decrease of roughly $1 million. For the second quarter, the segment should once again deliver positive EBITDA and improved capital equipment sales.

Now before I turn to our liquidity and cash generation, let me remind you that the mandatory convertible preferred shares will be converting next Monday, May 3. Approximately 668,000 common shares will be issued and a final dividend will be paid on the conversion. In the first quarter, free cash flow totaled $60 million. This compares to free cash flow of approximately $66 million in the fourth quarter. I would like to point out that in the first quarter of 2020, we delivered $8 million in free cash flow. Our EBITDA in that quarter was almost twice the EBITDA of the first quarter of 2021. This improvement in cash flow conversion as compared to a year ago reflect sustained efforts in cost and capital discipline that will continue over the years to come.

As in the past, the first quarter was marked by the semiannual interest payments on our senior notes of over $70 million and by approximately $25 million in several annual payments that we incurred at the beginning of the year. These payments, which were not recurred during the remainder of the year, include property and other taxes as well as employee incentive bonuses. These outflows were offset by strong customer collections in the first quarter, including some catch-up from last year-end as well as by lower CapEx and higher asset sales. Our capital expenditures of $40 million in the first quarter included $7.5 million in payments related to SANAD newbuilds. To date, we have been awarded 4 rigs by Saudi Aramco.

During the second quarter, we expect to incur $80 million in CapEx, of which $30 million will be paid by SANAD for the newbuild program. Our target remains at $200 million for the full year 2021, excluding inland renewables for SANAD. For this year, the total payments by SANAD for the newbuilds will depend on the achievement of construction milestones by the local manufacturer. Although the local rig program has been delayed by multiple years, Saudi Aramco has now demonstrated its commitment to SANAD's rig building program. Given the recent awards and additional rig purchase orders by SANAD, we now expect SANAD's total payments for additional rates to approach $100 million for this year, assuming milestones are met.

In January, SANAD distributed a combined $100 million of the excess cash that had accumulated to its partners. Half of that amount was paid to a Nabors' subsidiary and the other half to Saudi Aramco. On a consolidated basis, the payment to Saudi Aramco partially offset the free cash flow generation. As a result, the net debt reduction for the quarter was limited to $6 million. Nonetheless, with a SANAD distribution to Nabors and other cash we generated, we continued to reduce our total debt.

During the quarter, we retired approximately $40 million in senior notes, including convertibles, which resulted in a $30 million reduction in our total debt as reported. We also reduced the amount outstanding in our revolving credit facility by an additional $40 million. Our total debt reduction for the quarter was $70 million. At the end of the first quarter, the amount drawn on our credit facility was $633 million, and our cash balances stood at $418 million. For the second quarter, we are targeting approximately $50 million in free cash flow.

Although our interest payments will decrease sharply in Q2, we anticipate a reduction in customer collections, higher CapEx and lower asset sales as compared to the prior quarter. We will continue to focus on delivering industry-leading drilling performance to our customers and sustain growth and market penetration in our Drilling Solutions business, while continuing to push for cost and capital discipline. We believe the successful implementation of these goals will support our exceptional free cash flow generation. We will continue to allocate our future cash flow to debt reduction until we reach our leverage targets.

With that, I will turn the call back to Tony for his concluding remarks.

Thank you, William. I will now conclude my remarks this afternoon with the following. As we review the first quarter results, I could not lose sight of the fact that it was just a year ago that we began to understand the full impact of the COVID-19 virus. The effects of a global pandemic were far-reaching. I think it is fair to say that virtually, every aspect of our lives is impacted. The same is true for our company. As we adapted to the demands of the pandemic environment, we were forced to examine all of our business processes, policies and procedures.

The beginning of the second year of this pandemic era reinforces our concentration on several priorities. First, we maintain a laser focus on safety. Over the past year, we continued to improve our work processes and procedures. What has become more evident is a palpable change in our underlying safety culture for the better. For this reason, I now believe that mission zero, our goal of zero safety instruments is closer to reality than any time since we introduced it. Second, our commitment to operational excellence continues. Clients value and compensate for performance. Our industry-leading rig level economic results stems from a multiyear company-wide effort at extending Nabors' position as the global performance driller of choice.

And we're not finished yet, which brings me to the third priority. Nabors remains dedicated to extending its position as the drilling industry's technology leader. Nabors has been an innovation engine for decades. It has become clear that our industry must now transform itself. Looking ahead, our advanced solutions will enhance performance and efficiency as well as sustainability. We believe our investments in robotics and automation technology will catapult us to a new level of performance. I hope you sense my enthusiasm and genuine excitement for our future. I look forward to reporting on our progress.

That concludes my remarks this afternoon. Thank you for your time and attention. With that, we will take your questions.

(Operator Instructions)

Our first question today will come from Karl Blunden with Goldman Sachs.

You keep making progress on paying down some of the maturities both on the bank side and the bond side. Just curious your thoughts on what the next steps would be here. You have some maturities coming due a little bit later this year, but the miss more in '23 and '24. And then the liquidity levers that you see as most feasible to address this?

So at this point, what we have left this year amounts to a fairly manageable amount. So nothing particular needs to be done for that. And then the next, the maturities coming in 2023. So at this point, I don't think it makes sense to telegraph anything or start. We have many options. And as the market develops over the coming year, we will decide what we do about those maturities.

That makes sense. And certainly, our -- the newly issued guaranteed bonds are trading at levels that are relatively tight now. With regard to other ways to raise capital and maybe address on this already, but some companies in the industry with the strong equity rally have spoken about equity-linked issuance. Is that something that you would consider as well in the range of options?

We consider everything all the time, but again, like I said, we're not going to be telegraphing what we will do in the future because, I mean, we have many options. So I don't think it makes sense to focus on anything and talk about it at this point.

And our next question will come from Taylor Zurcher with Tudor, Pickering, Holt.

My first question is in international, the margin guidance for $12,500 a day. It sounds like that includes some negative impact from rig move in Mexico, and then also some negative impact from Argentina strike event. I was hoping you could help us think about the magnitude of the negative impact for both those points, and maybe give us some guidance or just high-level commentary on where you see the margins trending once you get past Q2 and into the back half of the year?

Okay. So you're right. The guidance was 12 5, and we expect the second Q guidance to be impacted by a long move in Mexico and the strike in Argentina. I think we've indicated that we expect the rig count to grow behind higher throughout the course of the year, and those incremental rigs will be accretive to the overall fleet. I think the issue about margins, though, is as those rigs roll out, there will be start-up costs, ramp-up costs that will have to also bear. So on that basis, we'll see what happens. But we're not going to give any specific numbers for the rest of the year on margins beyond the second quarter right now.

So I'll add to what Tony said. I mean the pricing right now is fairly stable to up in the international markets. That deterioration in this coming quarter is solely resulting from the rig move in Mexico. And it's really the health employees in Argentina that are striking, and they're basically blocking the roads and the access into the well side. So that's what's going on in Argentina. They're asking for higher salary increases, and they're sort of arguing with the government on what that should be. So we expect the government to sort that out pretty quickly. But nonetheless, decided to put some preventive contingency for those potential standby rates.

Okay, that's helpful. And from an international activity perspective, I mean, the backdrop just feels like it has to be improving right now. Your rig count is trending higher. And so I'm curious what sort of visibility you have towards incremental rig additions in both Latin America and the Middle East, and maybe even elsewhere in the back half of the year. Are those things that you do have visibility on today, or is it just a bit too early to make that comment today.

Well, as I said, I think we do see visibility to say enough right now that we think the rig count is going to grind higher during the course of the year. I think as William alluded to, we thought the inflection point occurred last quarter. And I think...

In the fourth.

In the fourth quarter, rather -- in the fourth quarter. And therefore, we do believe that's the case in that, that will be in the Middle East and in Latin America. But I'm not going to get into specific countries right now.

And our next question will come from Waqar Syed with ATB Capital Markets.

So just following up on the last question on International. So some of the larger cap service companies are saying that second half the revenues in international would be up or upstream capital spending could be up like low double digits, maybe 12%, 13% year-over-year. So would your rig count international kind of mirror that. That means second half international rig count for Nabors could be like 12%, 13% or something in that range, up second half of last year. That would imply maybe 75, 76 rigs on average in H2. Is that the right way to think about it?

Waqar, I think you shouldn't extrapolate what the big companies are. Remember, we're in different -- we're not in all the markets internationally, and we're certainly not an offshore internationally. So I don't think those percentages are applicable to our fleet. But we're pretty confident given the clients that we do have, some of the negotiations ongoing and some of the tenders that we feel we're very well positioned for that you will see a very nice progression in the second half of 2021.

Okay. Secondly, your margin guidance for Canada, does that include weight subsidies?

No.

It does not. Okay. And then second -- and then finally, just...

We don't expect a number as big as that in the second quarter. So that's what we had in the first.

Okay. Right. And then, in terms of the U.S. Lower 48 drilling margins, do you think that second quarter is the bottom?

No, I do not. I think today in the market, Waqar, we are looking at an average current margin on a marginal basis, incremental basis is somewhere in the 6,000 range. That's where the new contracts are being signed roughly. It's a range, of course, but that's the average. So we do believe, as Tony mentioned, and I think Tony can elaborate a little bit on that, that pricing will evolve in the second half. So we'll go up from that, but it's a question on how many rigs we add and how fast. So it's -- depending on how well we do with rig additions. It's good in general, but it does bring these margins slightly down. Now we don't think we'll -- we are hoping to hold the line at 7,000. That's what we're hope where we think we will bottom.

Yes. Just to add some more color there. So I think the good news is, we are seeing some slight movement in leading-edge pricing, particularly West Texas and East Texas. Both of those, I think, as the high-spec rigs gain utilization there, it's a much more constructive pricing environment. I think South Texas, North Dakota and the Northeast are lagging there a little bit. But in terms of pricing, leading edge pricing continues to be below our current average of the fleet. However, I think from even last quarter, we're now seeing leading edge rates in the high teens and maybe crossing over into the low 20s. So it is constructive. The question is, as utilization drives forward in the second half and pricing increases, will that offset the decline that you're seeing in terms of the delta between the historical backlog of rigs versus the spot price. And as William said, we're hoping to balance that to have some good results going in the second half.

Makes sense. Now do you have handy the -- your schedule of contract expirations going forward in the coming quarters for the Lower 48 rigs?

I think, I don't really have it handy. So maybe you can follow-up with Bill.

(Operator Instructions)

Our next question will come from Gregg Brody with Bank of America.

Just maybe could you clarify a bit on SANAD? So you said, there is 4 rigs coming -- that are on order now. I think you said it's $100 million of CapEx...

No, no, let me clarify. Aramco has awarded 4 rigs. We have not yet issued deals for all of those rigs, only for some of them. So that -- so we have an order, but yes, I mean, we expect that we will order those 4 rigs sometime this year.

Got it. So how much CapEx at SANAD should we expect this year? I'm trying to separate what's the total CapEx for the company, and then just figure out what's at SANAD.

I think we can talk about that at another venue. I don't have the specifics. We look at Saudi Arabia together. But what I can tell you is, for the in-Kingdom rigs, depending, of course, on the milestones and achieving the milestones by our local manufacturer, which is part of the assumption of the number that I gave earlier, we should approach somewhere in the range of $100 million this year paid by SANAD for those newbuilds. The rest is -- the rest of our CapEx spending is in line with what we've guided before at the end of the year, and we still expect that the number will hit for the...

And you -- am I correct, is that $265 million? That was the guidance, right?

No. The guidance is $200 million for the full year. Some number approaching $100 million, depending on milestones being achieved by the local manufacturer paid by SANAD.

So you're saying $200 million, plus whatever it is between 0 and $100 million is CapEx. Got it. And then you made a comment about exceptional free cash flow this year. Could you help us think through what's driving that -- what's -- what we should expect from working capital harvesting? And are you comfortable actually giving what that exceptional free cash flow number is?

I think this is not just working capital. Working capital did well in the first quarter. We had maybe a few tens of millions extra from the delays we suffered at the end of last year. We had a a couple of customers that sat on their invoices, large ones, so that had an impact in the fourth quarter of last year. But a lot of what you're seeing today in Nabors is driven by reductions in overheads, cuts in CapEx and interest rates, of course, have been going down. So all those items are much more impactful that perceived or working capital harvesting, as you said. That's not a big component of our free cash flow.

Got it. And one last one for you. So you mentioned you're planning on participating in the carbon -- the energy transition with investments. You mentioned a few of them. Can you talk a little bit about how should we think about the timing of those investments from your side? And when you see that becoming part of your business?

Yes. Well, I think some of the things are internally developed from our normal course operations. And as I said, the power management, we're rolling out right now, and we have some follow-on activities in the next couple of quarters. You're going to see some follow-on products that are add-ons. I don't see that as a big capital expenditure consumer, though, if that's what you're getting at.

Yes. I mean, that's part of it, but I'm just trying to understand what the business can be, if there's much investment required.

Yes, I -- well, like I said, what we're targeting is things that actually have scale capability, that is our goal to think that -- and that not only apply to Nabors' rigs, it could apply more generally as well. So that's the kind of thing we're looking at. And next couple of quarters, I think you'll begin to see what some of those products will look like.

(Operator Instructions)

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Bill Conroy for any closing remarks.

Thank you, Cole. We'll wrap the call up there. Thank you, ladies and gentlemen, for joining us this afternoon. If you have any questions, please give us a call or e-mail us.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.