Nabors Raises 2026 Free Cash Flow Projection as Q3 EBITDA Grows

Nabors Industries Ltd. (NYSE: NBR) raised its 2026 adjusted free cash flow projection after third-quarter adjusted EBITDA increased across every operating segment, supported by higher rig activity and margins in both international and U.S. Lower 48 drilling. The company also reduced gross debt by about $100 million during the quarter, advancing its effort to strengthen the balance sheet.

Nabors reported third-quarter net income of $16.0 million, compared with a net loss of $1.5 million in the second quarter. Adjusted EBITDA rose to $245.5 million from $221.7 million sequentially and $236.3 million a year earlier.

Adjusted free cash flow increased to $74.5 million from $12.3 million in the second quarter and $5.6 million in the prior-year period. The non-GAAP measure reflected $238.9 million of net cash provided by operating activities, less $164.4 million of capital expenditures net of asset-sale proceeds.

Drilling operations lead sequential growth

International Drilling remained Nabors’ largest business, representing 51% of third-quarter revenue. Segment adjusted EBITDA increased to $145.7 million from $130.5 million in the previous quarter and $127.6 million a year earlier.

The international average rig count reached 95, up 1.5 rigs sequentially, while average daily adjusted gross margin exceeded $19,000, a record for the business. Since the first quarter of 2024, the international average working rig count has increased 17% and average daily adjusted gross margin has risen 19%, according to the presentation.

Nabors said its international strategy remains focused on selective deployment into markets where customer demand and expected returns support investment. The company operates in about 20 countries and reported a net increase of 11 international rigs from the end of 2024 through September 30, 2026. Its established positions include Saudi Arabia through SANAD, deep-gas drilling in Kuwait, and operations in Argentina, Colombia and Mexico. Nabors is also deploying an idle U.S. rig under a multiyear contract in Venezuela and said it is tracking more than 80 international opportunities.

U.S. Drilling adjusted EBITDA rose to $99.4 million from $94.1 million in the second quarter and $94.2 million a year earlier. The Lower 48 average rig count increased by five sequentially to 73, while average daily adjusted gross margin rose by $232 to more than $14,000, materially exceeding the company’s guidance. Nabors attributed the performance to operational efficiency, pricing, cost discipline and its customer portfolio.

Since the Lower 48 business reached a trough in November 2025, its working rig count has increased 28% and average daily adjusted gross margin has risen 7%. Nabors said it gained market share over that period.

Drilling Solutions expands sequentially

Drilling Solutions, also known as NDS, generated adjusted EBITDA of $43.9 million, up from $40.0 million in the second quarter but below $60.7 million a year earlier. Third-quarter revenue excluding Quail Tools increased to $116.1 million from $110.6 million sequentially, comprising $47.1 million in the U.S. and $68.9 million internationally.

The business produced an adjusted gross margin of about 47% and accounted for 15% of adjusted EBITDA from operations. Nabors said increased product penetration and a stronger service-line mix supported the segment’s performance. Excluding Quail Tools, Drilling Solutions recorded adjusted free cash flow conversion of about 91% for the first nine months of 2026, calculated as adjusted EBITDA less capital expenditures divided by adjusted EBITDA.

Rig Technologies adjusted EBITDA increased to $5.0 million from $3.2 million in the second quarter and $3.8 million in the year-earlier period.

Nabors also highlighted the deployment of a PACE-B rig at Project Obsidian in Oregon, the initial phase of a planned superhot-rock geothermal development. Phase I is designed for 50 megawatts, while the longer-term project target is a power plant exceeding one gigawatt. The presentation did not provide a timetable for reaching that target.

Debt reduction and 2026 outlook

Nabors ended the quarter with gross debt of $2.02 billion, down from $2.12 billion at June 30, following a $100 million partial redemption of notes due in 2030. Cash and short-term investments totaled $475.1 million, leaving net debt of $1.55 billion, compared with $1.61 billion at the end of the second quarter.

Gross leverage declined to 2.3 times trailing 12-month adjusted EBITDA, its lowest level since 2013, while net leverage was 1.7 times. The debt repayment is expected to reduce annual interest expense by more than $9 million. Nabors continues to target net leverage of about one times.

For the full year, management projects adjusted EBITDA of approximately $930 million, capital expenditures of $710 million to $720 million and adjusted free cash flow of $100 million to $110 million. Planned capital spending includes $295 million to $305 million for SANAD newbuilds, while the free cash flow forecast includes about $20 million of SANAD cash consumption.

In the fourth quarter, Nabors expects a Lower 48 average rig count of about 75, exiting the year with 76 to 77 rigs, and average daily adjusted gross margin of $14,500 to $14,700. International Drilling is expected to average 92 to 93 rigs, exit at 92 and produce average daily adjusted gross margin of about $19,500, which would mark another record. Management also expects fourth-quarter adjusted EBITDA of approximately $46 million from Drilling Solutions and $8 million from Rig Technologies.

Fourth-quarter capital expenditures are projected at $250 million to $260 million, including $140 million to $150 million for SANAD newbuilds. Adjusted free cash flow is expected to be $60 million to $70 million, including approximately $20 million of cash consumption at SANAD.

The outlook remains exposed to oil and natural-gas prices, exploration and production spending, demand for drilling services, contract renewals, customer concentration and operating risks. Nabors also identified geopolitical instability, tariffs and sanctions, cybersecurity incidents, access to capital, long-term debt obligations and its ability to complete and realize the expected benefits of strategic transactions as material uncertainties.