Nabors Industries (NBR) Q3 2026 earnings review
Nabors rig profit rises, while delayed spending lifts cash flow
Oil and gas drilling contractor Nabors Industries beat its operating targets across all four divisions while delayed rig-building bills created a cash windfall. Stripping out the sold Quail Tools business from last year's figures, underlying sales grew 11% and adjusted EBITDA rose 14% to $246 million by our math. Chief executive Anthony Petrello pointed to a record $19,060 daily gross margin on international rigs, and the company used its $75 million of free cash flow to pay off $100 million of high-interest debt.
| Sales from continuing businesses (ex Quail Tools) | $872.2M +11.3% from a year ago by our math (+6.6% reported) |
|---|---|
| International daily gross margin, excluding one-offs | $19,060 record high; +9% from last quarter |
| Adjusted free cash flow | $74.5M planned for ~$40M cash burn |
| Full-year cash flow outlook | Raised $80M to $100–$110M (EBITDA at top of range: ~$930M) |
⚖️ Verdict: 🟢 Bullish
The story got better because daily profit per rig is rising in both international and U.S. markets, lifting full-year expected EBITDA to the top of the prior range at $930 million despite five rig suspensions in Saudi Arabia. Two cautions temper the $80 million raise to the full-year cash flow plan: most of the third-quarter cash beat came from shifting $86 million of capital spending into later periods, and partner payouts on the Saudi joint venture still left Nabors shareholders with an $11 million net loss.
The question now is whether rising daily rig margins and software sales can generate enough cash to cover next year's delayed Saudi construction bills and partner payouts. If U.S. and international margin gains hold, Nabors can keep cutting debt; if Saudi suspensions spread, joint-venture spending will eat up the cash. Fourth-quarter cash collection and the 2027 capital budget will decide it.
🐂 Bull Case
International Rig Margins Hit a Record
Nabors relies on its International Drilling division for just over half of its revenue. Chief executive Anthony Petrello said the unit "achieved a record daily adjusted gross margin" of $19,060 per rig, which is revenue minus direct operating costs per working day. "Strong field performance and new rig deployments with attractive economics drove the increase," Petrello added, as a new rig in Argentina and the 17th newbuild in Saudi Arabia started work.
That daily profit beat the company's $18,100 to $18,400 plan and lifted international adjusted EBITDA — profit before interest, taxes, depreciation and one-offs — by 14% from a year ago to $145.7 million. Even better, Petrello said, "We expect further margin improvement in the fourth quarter, despite a lower SANAD rig count following the suspension of five rigs." The fourth-quarter plan calls for $19,500 per day, proving newer contracts earn enough to outweigh suspended rigs.
What to watch: fourth-quarter international daily gross margin against the $19,500 target. Hitting that mark while five Saudi rigs sit idle would confirm that new additions carry higher profit per day than the older fleet.
Lower 48 Rigs and Margins Climb Together
In the Lower 48 states, Nabors has been adding working rigs while waiting for newer, higher-priced contracts to lift its daily profit. This quarter both moved up together. Average working rigs rose by 5 from last quarter to 72.8, up 23% from a year ago. Daily gross margin excluding one-offs reached $14,016 per rig, beating the $13,800 target as daily revenue rose $1,209 from last quarter to $34,764.
"Advanced drilling technology and reliable field delivery position us to continue increasing both rig count and daily margin," Petrello said. The fourth-quarter outlook backs up his claim. Management plans for 75 average working rigs — exiting the year between 76 and 77 — and expects daily gross margin to step up to between $14,500 and $14,700 per day as higher contract rates take effect across the fleet.
What to watch: Lower 48 daily gross margin in the fourth quarter against the $14,500 to $14,700 range. Reaching that level would show that higher contract prices are finally flowing through to fleet-wide profit.
Drilling Software Lifts High-Cash-Flow Services
Drilling Solutions sells performance software, automation and downhole services on top of drilling rigs, turning about 91% of its operating profit into cash so far this year. Reported segment revenue fell 18% from a year ago because Nabors sold its Quail Tools rental business in August 2025. Stripping out Quail Tools, underlying sales grew 7.7% from a year ago to $116.1 million, and segment adjusted EBITDA rose 8.8% to $43.9 million by our math.
"Greater adoption of our Performance Software and Downhole Services on Nabors rigs in the Lower 48 drove the gains," Petrello said, alongside international growth in pipe-handling services. Meanwhile, the Canrig equipment unit won commitments for four more RZR rig-floor automation modules, bringing its total to six. Management expects Drilling Solutions adjusted EBITDA to rise again in the fourth quarter to about $46 million.
What to watch: third-party revenue inside Drilling Solutions when the full quarterly report is filed. Growing sales on rivals' rigs would show the software can expand faster than Nabors's own rig fleet.
🐻 Bear Case
Free Cash Flow Rests on Delayed Spending
Nabors highlighted $74.5 million of third-quarter adjusted free cash flow — operating cash flow minus capital spending — and raised its full-year target from $20–$30 million to $100–$110 million. Three months ago, however, the company had planned to burn about $40 million of cash in the third quarter while spending $245 million to $255 million on capital equipment. Instead, capital spending came in at just $164.4 million.
Finance chief Miguel Rodriguez explained that "SANAD newbuild spending was below forecast as certain construction milestones shifted to later periods." SANAD is the company's joint venture in Saudi Arabia. That $86 million spending delay accounts for three-quarters of the $115 million cash beat, and the bill is still coming due: fourth-quarter capital spending is planned at $250 million to $260 million, with two Saudi rigs moving into early 2027.
What to watch: full-year 2027 capital spending plans on the fourth-quarter call. Because construction milestones for the Saudi rigs slipped out of 2026, next year's capital bill will absorb the delayed payments.
Saudi Suspensions and Partner Payouts Hurt Shareholders
SANAD, the 50-50 Saudi Arabian drilling joint venture with Saudi Aramco, is Nabors's main international growth engine, deploying its 17th newbuild rig this quarter under a 50-rig programme. Yet Petrello disclosed "the suspension of five rigs" at SANAD, which will pull total international working rigs down from 94.9 in the third quarter to between 92 and 93 in the fourth quarter, exiting the year at 92.
- Consolidated net income: $16.0 million
- Profit attributable to joint-venture partner (noncontrolling interest): $27.1 million
- Accrued distribution on redeemable partner interest: $6.8 million
- Net loss for Nabors common shareholders: $11.2 million, or $1.24 per share
Because Nabors consolidates SANAD on its books, 100% of the venture's EBITDA appears in the headline total, but half its profit goes to Saudi Aramco. After deducting the partner's $27.1 million share and $6.8 million of preferred distributions, Nabors shareholders were left with a loss even as consolidated operations beat targets.
What to watch: whether Saudi Aramco extends or reverses the five rig suspensions in early 2027, and whether it awards the next five-rig newbuild batch.
Equipment Manufacturing Trails Its Original Annual Plan
Rig Technologies manufactures drilling equipment, automated tools and spare parts. At the start of the year, management set a full-year 2026 adjusted EBITDA target of $22 million to $25 million for the division, before Middle East shipping delays hurt first-quarter deliveries. In the third quarter, the unit's revenue rose 17% from a year ago to $41.7 million, and adjusted EBITDA reached $5.0 million, just meeting the bottom of its $5 million to $6 million target.
For the first nine months of 2026, however, Rig Technologies has earned only $8.7 million in adjusted EBITDA. Management's fourth-quarter plan of $8 million brings the implied full-year total to $16.7 million by our math — roughly 30% below the original annual outlook, which the release no longer mentions.
What to watch: fourth-quarter Rig Technologies adjusted EBITDA against the $8 million target, which requires a 60% jump from the third quarter.
Risks this quarter didn't answer
Four standing concerns could not be fully tested from the earnings release and presentation alone.
- Fifth Saudi newbuild batch: last quarter Petrello expected complete visibility on the next five-rig SANAD award within the third quarter, but the release is silent on it; the earnings call Q&A is the place to check.
- Standalone SANAD profit: the release discloses SANAD's capital spending and cash burn, but not its standalone revenue or EBITDA; the 10-Q filing will show only its balance sheet.
- Customer payment delays in Mexico and Saudi Arabia: net accounts receivable jumped $68 million in the quarter, and regional collection details await the 10-Q footnote.
- Related-party SPAC exposure: any update on the consolidated NETC II acquisition vehicle and its settlement accounting awaits the 10-Q footnote.
👓 Other Themes
Nabors Signs Venezuela Contract and Geothermal Rig
Nabors signed a multiyear contract to send one idle U.S. drilling rig to Venezuela in early 2027, marking its return to the country. Separately, the company deployed a PACE-B rig at Quaise Energy's Project Obsidian in Oregon, a superhot-rock geothermal project aiming for 50 megawatts in its first phase. Neither project changes 2026 earnings, as the Venezuela rig starts next year and the Oregon rig is already in the Lower 48 count.
💲 Other KPIs
Nabors paid off $100 million of its 9.125% notes using cash on hand, "continuing to deliver on our commitment to reduce gross debt," Rodriguez said. Total debt is down $472 million since year-end 2025, cutting quarterly interest expense by 23% from a year ago to $42.1 million and trimming over $9 million in annual interest.
Money owed by customers rose 15.4% from last quarter — more than double the 7.0% sequential rise in operating revenue — and is up 30.6% since the end of 2025. Although management said working capital helped cash flow in the third quarter, the growing receivable balance ties up cash ahead of the fourth quarter.
Headline operating revenue rose 6.6% from a year ago and 7.0% from last quarter. Excluding the sold Quail Tools unit from last year's base, underlying sales grew 11.3% by our math. Direct drilling costs rose from 60.1% of revenue a year ago to 61.5% without high-margin Quail Tools, but lower overhead lifted adjusted operating margin by 0.6 percentage points to 9.8%.
🔮 Guidance
Raised to the top of the prior range. The drilling contractor lifted the middle of its full-year target by $5 million to roughly $930 million, even after factoring in five rig suspensions in Saudi Arabia. With $672 million earned in the first nine months, the plan leaves $258 million for the fourth quarter by our math — up 16.4% from a year ago and 5.1% above the third quarter.
Raised. Management lifted its full-year cash flow target by $80 million at the middle of the range. The increase comes from cutting expected full-year SANAD cash burn from $60–$80 million down to $20 million, as rig construction payments shifted into 2027, alongside lower capital spending across the rest of the business.
Cut. The middle of the full-year capital spending plan moved down $5 million overall and $30 million for SANAD newbuilds. It is the second straight cut to the 2026 capital plan: total midpoints moved from $745 million to $720 million, then $715 million, while SANAD midpoints dropped from $370 million to $330 million, then $300 million.
New. The fourth-quarter plan adds 2.2 average working rigs from the third quarter's 72.8 and expects to exit the year with 76 to 77 rigs. Daily gross margin excluding one-offs is planned to rise by $584 at the middle of the range, up 9.8% from a year ago by our math. If its 1.8% four-quarter average beat holds, daily margin would reach about $14,870.
New. Average working rigs are set to fall by 2.4 from the third quarter's 94.9 — exiting at 92 rigs — after five rigs were suspended in Saudi Arabia. Despite fewer working rigs, daily gross margin is planned to rise another $440 per day from the third quarter's record, up 10.6% from a year ago by our math.
New. All three smaller operating lines are planned higher than in the third quarter. Drilling Solutions rises $2.1 million (+11.4% from a year ago by our math; ~$47.4 million if its 3% four-quarter beat record holds), Rig Technologies rises $3.0 million (+61.8% from a year ago), and Alaska and Gulf of America rises about $0.3 million from our derived $11.7 million third-quarter figure.
New. Fourth-quarter capital spending steps up by $91 million at the middle of the range as $140 million to $150 million of Saudi newbuild payments land. Even with that heavier bill and $20 million of cash burn at SANAD, the company plans for $60 million to $70 million of positive free cash flow. Adding the $65 million midpoint to nine-month cash flow of $38.6 million equals $103.6 million, inside the raised full-year range.
❓ Key Questions
Why were five Saudi rigs suspended, and for how long?
Petrello disclosed five rig suspensions at the SANAD joint venture that will reduce fourth-quarter international rigs to 92–93, and two newbuilds also shifted into early 2027. Investors need to know if these are temporary budget pauses or permanent cuts, and whether the fifth five-rig newbuild batch is delayed.
How much will 2027 capital spending rise from delayed milestones?
Management cut 2026 SANAD capital spending twice — from $370 million at the start of the year to $300 million today — because construction payments slipped into later periods. Investors need to know how much of that $70 million lands in 2027 on top of normal spending.
Why did customer receivables jump $68 million this quarter?
Net accounts receivable grew 15.4% sequentially to $511.7 million, more than twice the pace of revenue, even as management cited improved working capital. Investors need to know how much of that balance sits in Mexico or Saudi Arabia and whether fourth-quarter cash flow relies on collecting it.
What are SANAD's standalone revenue and profit margins?
Nabors consolidates 100% of SANAD's EBITDA, but paid $27.1 million of net income and $6.8 million of preferred distributions to its joint-venture partner this quarter, leaving Nabors shareholders with an $11.2 million loss. Without standalone SANAD figures, investors cannot tell how much profit stays with common shareholders.