NABORS INDUSTRIES LTD (NBR)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following discussion and analysis of our financial condition and results of operations is based on, and should be read in conjunction with, our consolidated financial statements and the related notes thereto included under Part II, Item 8.—Financial Statements and Supplementary Data. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A.—Risk Factors and elsewhere in this annual report. See “Forward-Looking Statements.”

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Management Overview

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We are a leading provider of advanced technology for the energy industry. With operations in over 15 countries, Nabors has established a global network of people, technology and equipment to deploy solutions that deliver safe, efficient and sustainable energy production. By leveraging its core competencies, particularly in drilling, engineering, automation, data science and manufacturing, Nabors aims to innovate the future of energy and enable the transition to a lower carbon world.

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Outlook

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The demand for our services and products is a function of spending by oil and gas companies for exploration, development and production activities. The level of exploration, development and production activities is to a large extent tied to the prices of oil and natural gas, which can fluctuate significantly, are highly volatile and tend to be highly sensitive to factors including supply and demand cycles and geopolitical uncertainties, particularly those impacting large hydrocarbon-producing countries. Certain oil and gas companies may also intentionally limit their capital spending as they focus on generating returns to shareholders as opposed to maximizing hydrocarbon production. Additionally, there has recently been an increasing number of customer consolidations within the industry especially in the United States. In some cases, these transactions may have an impact on overall rig demand, as the acquiring company may apply criteria that results in a different level of demand for drilling rigs than the previous two companies would have had on a stand-alone basis.

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Since late 2022 and continuing through the fourth quarter of 2024, global energy commodity markets have experienced high levels of volatility. In the U.S., operators generally reacted to these market conditions by reducing their drilling activity. Recent production actions announced by certain large international oil producers have been supportive of both oil prices and oil-focused activity broadly, especially in international markets. Natural gas prices, particularly in the United States, declined significantly through 2023 and into 2024, to levels which largely persisted into the fourth quarter of 2024 and which have caused operators to reduce natural gas directed activity.

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In early 2023 economic sentiment was overshadowed by a pervasive concern that a global recession would take hold. The U.S. Federal Reserve’s tightening of interest rates reduced capital availability in the U.S energy market. As these higher interest rates continued, rig counts in the U.S. Lower 48 continued to decline throughout the year. More recently, the U.S. Federal Reserve reduced interest rates. The impact of that decision should become evident in the coming quarters. Despite the reduction in rig count, rig pricing discipline remained intact, generally supportive of rig dayrates and daily rig margins.

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U.S. oil and gas production has proved resilient throughout 2024 in the face of reduced drilling activity. Internationally, we generally see an expansion of production capacity as well as the widespread development of unconventional resources driving an expected increase in oilfield activity broadly across those markets.

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Recent Developments

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2024 Credit Agreement

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On June 17, 2024, Nabors Delaware amended and restated its’ credit agreement (the “2024 Credit Agreement”). Under the 2024 Credit Agreement, the lenders have committed to provide to Nabors Delaware up to $350.0 million in revolving loans, and the issuing banks have committed to provide a standalone letter of credit tranche that permits Nabors Delaware to issue reimbursement obligations under letters of credit in an aggregate principal amount not in excess of $125.0 million. Letters of credit issued will not affect revolving loan capacity and vice versa. The 2024 Credit Agreement contains a $200.0 million uncommitted accordion feature that can be applied to increase the commitments under either the revolving loans or the letter of credit tranche, or both. The facility matures on the earlier of (a) June 17, 2029 and (b) to the extent 10% or more of the respective principal amount of any of the 7.375% Senior Priority Guaranteed Notes due May 2027 or 7.50% Senior Guaranteed Notes due January 2028 or 50% or more of the principal amount of the 1.75% Senior Exchangeable Notes due June 2029 remains outstanding on the date that is 90 days prior to the applicable maturity date for such Indebtedness, then such 90th day.

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8.875% Senior Guaranteed Notes due August 2031

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On July 22, 2024, Nabors issued $550.0 million in aggregate principal amount of 8.875% senior guaranteed notes, which are fully and unconditionally guaranteed by Nabors and certain of Nabors’ indirect wholly-owned subsidiaries. Interest on the notes is payable on February 15 and August 15 of each year. The notes have a maturity date of August 15, 2031. Nabors used the net proceeds, along with cash on hand, to redeem all of its 7.25% senior guaranteed notes due January 2026.

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Acquisition of Parker Drilling Company

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On October 14, 2024, we and certain subsidiaries of ours entered into a merger agreement (the “Merger Agreement”) to acquire Parker Drilling Company (“Parker”), pursuant to which, upon the terms and subject to the conditions set forth therein, we will acquire Parker for 4.8 million of our common shares, subject to a collar. The precise number of shares to be issued to Parker stockholders will be determined based upon the volume weighted average price of Nabors common shares on the NYSE for the 15 trading days ending the fifth day before the closing of the merger (“Closing Price”) and, if that Closing Price is below $42.70, Parker stockholders will also receive a cash component for their shares of Parker stock.  If the volume weighted average price is above $99.62, the merger consideration will consist of the number of shares equal to $478,176,000 divided by the Closing Price.

Parker provides drilling services across global energy markets. Through its Quail Tools subsidiary, Parker is the leading rental provider of high-performance downhole tubulars in the U.S. market. Internationally, Parker provides tubular rentals and repair services, with state-of-the-art facilities located in key geographies. Parker offers differentiated, casing and tubular running services in the U.S., the Middle East, Latin America, and Asia. Its portfolio also includes a fleet of 17 drilling rigs in the U.S. and international markets, as well as Operations & Maintenance services primarily in Canada and Alaska.

The transaction is expected to close in the first quarter of 2025, subject to customary closing conditions and receipt of required regulatory approvals.

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Financial Results

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Comparison of the years ended December 31, 2024 and 2023

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Operating revenues in 2024 totaled $2.9 billion, representing a decrease of $75.9 million, or 3%, from 2023. For a more detailed description of operating results see Segment Results of Operations, below.

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Net loss from continuing operations attributable to Nabors common shareholders totaled $176.1 million for 2024 ($22.37 loss per diluted share) compared to a net loss from continuing operations attributable to Nabors common shareholders of $11.8 million ($5.49 loss per diluted share) in 2023, or a $164.3 million increase in the net loss. Adjusted operating income (loss) across our operating segments, declined by $16.9 million, or 2%.  A decline in U.S. activity was largely offset by increased activity in international markets, benefiting both our International Drilling and Drilling Solutions segments.  Approximately $78.0 million of the increase in net loss is attributable to lower mark-to-market gains related to the common share warrants, which decreased from $54.7 million in 2023 to $16.9 million in 2024, and the impact from gains or losses from debt repurchases, which resulted in a gain of $25.3 million in 2023 and losses of $14.9 million in 2024.  In addition, interest expense increased by approximately $25.6 million due to increasing interest rates.  See Segment Results of Operations and Other Financial Information below for additional discussion.

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General and administrative expenses in 2024 totaled $249.3 million, representing an increase of $5.2 million, or 2% from 2023. This is reflective of increases in workforce costs, general operating costs and inflationary pressures as market conditions have changed.

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Depreciation and amortization expense in 2024 was $633.4 million, representing a decrease of $11.9 million, or 2%, from 2023. The decrease is a result of a higher amount of older assets reaching the end of their useful lives.

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Segment Results of Operations

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During the years ended December 31, 2024 and 2023, our business consisted of four reportable segments: U.S. Drilling, International Drilling, Drilling Solutions and Rig Technologies.

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Management evaluates the performance of our reportable segments using adjusted operating income (loss), which is our segment performance measure, because we believe that this financial measure reflects our ongoing profitability and performance. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance. Adjusted operating income (loss) represents income (loss) before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), and other, net. A reconciliation of adjusted operating income to net income (loss) from continuing operations before income taxes can be found in Note 17—Segment Information in Part II, Item 8.—Financial Statements and Supplementary Data.

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The following tables set forth certain information with respect to our reportable segments and rig activity:

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U.S. Drilling

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Operating revenues decreased by $179.5 million or 15% in 2024 compared to 2023 primarily due to a decrease in activity as reflected by an 13% decrease in the average number of rigs working, while pricing remained stable.

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International Drilling

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Operating revenues increased by $100.8 million or 7% in 2024 compared to 2023. The increase is primarily attributable to an 8% increase in the average rigs working, reflecting increased drilling activity as market conditions and demand for our international drilling services have increased since the prior year.

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Drilling Solutions

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Operating revenues increased by $12.3 million or 4% in 2024 compared to 2023 as an increase in demand for our international and third-party services offset a decline in results in the U.S. markets, which was driven by the reduction in drilling activity.

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Rig Technologies

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Operating revenues decreased by $41.1 million or 17% in 2024 compared to 2023 due to the overall decline in activity in the U.S. as mentioned previously. Adjusted operating income was relatively flat despite the 17% drop in operating revenues, due to a change in mix of business focusing more on the higher margin product lines.

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Other Financial Information

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Interest expense

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Interest expense for 2024 was $210.9 million, representing an increase of $25.6 million, or 14%, compared to 2023. The increase was primarily due to an increase in our effective interest rate levels on our outstanding debt throughout 2024 as compared to 2023.

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Other, net

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Other, net for the year ended December 31, 2024 was a loss of $106.8 million, compared to a gain of $0.7 million during 2023. During 2024, this loss was from $28.1 million in foreign currency losses, $14.9 million for losses on debt buybacks, $26.4 million from loss on sale of assets and $26.1 million from other than temporary impairment of securities. This loss was offset by $16.9 million of gain from mark-to-market gains related to the common share warrants. In comparison, during 2023, $54.7 million of the gain was from mark-to-market gains related to the common share warrants and $25.3 million was from gains on debt repurchases. The 2023 gain was offset by $37.3 million in foreign currency losses, $26.5 million for litigation reserves and $13.9 million from loss on sale of assets. (See Note 11 — Shareholders’ Equity in Part II, Item 8.—Financial Statements and Supplementary Data for discussion of the common stock warrants).

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Income taxes

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Our worldwide income tax expense for 2024 was $56.9 million compared to $79.2 million for 2023. The decrease in tax expense was primarily attributable to tax expense of $11.8 million in 2023 related to an audit settlement, as well as changes in the amount and the geographic mix of our pre-tax earnings (losses) in the jurisdictions in which we operate.

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Liquidity and Capital Resources

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Financial Condition and Sources of Liquidity

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Our primary sources of liquidity are cash and investments, availability under the 2024 Credit Agreement and cash generated from operations. As of December 31, 2024, we had cash and short-term investments of $397.3 million and working capital of $427.6 million. As of December 31, 2023, we had cash and short-term investments of $1.1 billion, which included proceeds from our offering of $650.0 million in aggregate principal of 9.125% senior priority guaranteed notes due 2030 that were used primarily to retire certain outstanding indebtedness during the first quarter of 2024 and working capital of $431.7 million.

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At December 31, 2024, we had no borrowings outstanding and $51.6 million of letters of credit outstanding under the 2024 Credit Agreement, which has a total borrowing capacity of $350.0 million and a separate letter of credit tranche that permits us to issue letters of credit with total reimbursement obligations not to exceed $125.0 million. Letters of credit issued will not affect revolving loan capacity and vice versa.

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The 2024 Credit Agreement requires us to maintain an interest coverage ratio (EBITDA/interest expense of 2.75:1.00) and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 90% of the consolidated property, plant and equipment of the Company. Additionally, the Company is subject to certain covenants (which are subject to certain exceptions) and include, among others, (a) a covenant restricting our ability to incur liens (subject to the additional liens basket of up to $150.0 million, among other exceptions), (b) a covenant restricting its ability to pay dividends or make other distributions with respect to its capital stock and to repurchase certain indebtedness, and (c) a covenant restricting the ability of the Company’s subsidiaries to incur debt (subject to the grower debt basket of up to $100.0 million). The facility matures on the earlier of (a) June 17, 2029 and (b) to the extent 10% or more of the respective principal amount of any of the 7.375% Senior Priority Guaranteed Notes due May 2027 or 7.50% Senior Guaranteed Notes due January 2028 or 50% or more of the principal amount of the 1.75% Senior Exchangeable Notes due June 2029 remains outstanding on the date that is 90 days prior to the applicable maturity date for such Indebtedness, then such 90th day.

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As of the date of this report, we were in compliance with all covenants under the 2024 Credit Agreement, including those regarding the required interest coverage ratio and minimum guarantor value, which were 4.40:1.00 and 99.79%, respectively, as of December 31, 2024. If we fail to perform our obligations under the covenants, the revolving credit commitments under the 2024 Credit Agreement could be terminated, and any outstanding borrowings under the facilities could be declared immediately due and payable. If necessary, we have the ability to manage our covenant compliance by taking certain actions including reductions in discretionary capital or other types of controllable expenditures, monetization of assets, amending or renegotiating the revolving credit agreement, accessing capital markets through a variety of alternative methods, or any combination of these alternatives. We expect to remain in compliance with all covenants under the 2024 Credit Agreement during the twelve-month period following the date of this report based on our current operational and financial projections. However, we can make no assurance of continued compliance if our

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current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.

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Our ability to access capital markets or to otherwise obtain sufficient financing may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies in the United States and our historical ability to access these markets as needed. While there can be no assurances that we will be able to access these markets in the future, we believe that we will be able to access capital markets or otherwise obtain financing in order to satisfy any payment obligation that might arise upon maturity, exchange or purchase of our notes and our debt facilities, loss of availability of our revolving credit facilities and our A/R Agreements (see—Accounts Receivable Purchase and Sales Agreements, below), and that any cash payment due, in addition to our other cash obligations, would not ultimately have a material adverse impact on our liquidity or financial position. The major U.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future, increase the cost of future debt, and potentially require us to post letters of credit for certain obligations. See Part I, Item 1A.—Risk Factors—A downgrade in our credit rating could negatively impact our cost of and ability to access capital markets or other financing sources.

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We had seven letter-of-credit facilities with various banks outstanding as of December 31, 2024. Availability under these facilities was as follows:

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We are a holding company and therefore rely exclusively on repayments of interest and principal on intercompany loans that we have made to our operating subsidiaries and income from dividends and other cash flows from our operating subsidiaries. There can be no assurance that our operating subsidiaries will generate sufficient net income to pay us dividends or sufficient cash flows to make payments of interest and principal to us. See Part I., Item 1A.—Risk Factors—As a holding company, we depend on our operating subsidiaries and investments to meet our financial obligations.

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Accounts Receivable Purchase and Sales Agreements

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On September 13, 2019, we entered into an accounts receivables sales agreement (the “A/R Sales Agreement”) and an accounts receivables purchase agreement (the “A/R Purchase Agreement” and, together with the A/R Sales Agreement, the “A/R Agreements”), whereby the originators, all of whom are our subsidiaries, sold or contributed, and will on an ongoing basis continue to sell or contribute, certain of their domestic trade accounts receivables to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”). The SPE in turn, sells, transfers, conveys and assigns to third-party financial institutions (“Purchasers”), all the rights, title and interest in and to its pool of eligible receivables.

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Over the term of the facility, we entered into a number of amendments. Most recently, on April 1, 2024, we entered into the Fourth Amendment to the A/R Purchase Agreement, which among other things, extended the term of the A/R Purchase Agreement to the earliest of (i) April 1, 2027 and (ii) the date that is ninety (90) calendar days prior to the occurrence of the maturity date under and as defined in the 2024 Credit Agreement.

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The amount available for purchase under the A/R Agreements fluctuates over time based on the total amount of eligible receivables generated during the normal course of business after excluding excess concentrations and certain other ineligible receivables. The maximum purchase commitment of the Purchasers under the A/R Agreements is $250.0 million and the amount of receivables purchased by the third-party Purchasers as of December 31, 2024 was $130.0 million.

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The originators, Nabors Delaware, the SPE, and the Company provide representations, warranties, covenants and indemnities under the A/R Agreements and the Indemnification Guarantee. See further details at Note 3—Accounts Receivable Purchase and Sales Agreements.

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Other Indebtedness

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See Note 9—Debt, in Part II, Item 8.—Financial Statements and Supplementary Data, for further details about our financing arrangements, including our debt securities.

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Future Cash Requirements

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Our current cash and investments, projected cash flows from operations, proceeds from equity or debt issuances, the A/R Agreements and the facilities under our 2024 Credit Agreement are expected to adequately finance our purchase commitments, capital expenditures, acquisitions, scheduled debt service requirements, and all other expected cash requirements for at least the next 12 months. However, we can make no assurances that our current operational and financial projections will prove to be correct. A sustained period of highly depressed oil and natural gas prices could have a significant effect on our customers’ capital expenditure spending and therefore our operations, cash flows and liquidity.

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Purchase commitments outstanding on December 31, 2024 totaled approximately $323.8 million, primarily for rig-related enhancements, sustaining capital expenditures, operating expenses, and purchases of inventory. $323.6 million of the outstanding commitments are expected to be paid in 2025. Purchase commitments include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the approximate timing of the transaction. We can reduce planned expenditures if necessary or increase them if market conditions and new business opportunities warrant it. The level of our outstanding purchase commitments and our expected level of capital expenditures for 2024 represent a number of capital programs that are currently underway or planned.

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As of December 31, 2024, we had approximately $2.5 billion of net book value of long-term debt outstanding with $2.5 billion in aggregate principal. We have expected aggregate future interest payments of $894.5 million related to the outstanding debt with $193.3 million due in the next twelve months. See Note 9—Debt in Part II, Item 8.—Financial Statements and Supplementary Data for additional details. Our obligations for operating leases total $34.6 million with $8.6 million of the obligations coming due in the upcoming year. See Note 19—Leases in Part II, Item 8.—Financial Statements and Supplementary Data for additional details.

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We may from time to time seek to retire or purchase our outstanding debt through cash purchases or exchanges for equity or debt securities, both in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors and may involve material amounts.

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We are a party to transactions, agreements or other contractual arrangements defined as “off-balance sheet arrangements” that could have a material future effect on our financial position, results of operations, liquidity and capital resources. The most significant of these off-balance sheet arrangements include the A/R Agreements (see —Accounts Receivable Purchase and Sales Agreements, above) and certain agreements and obligations under which we provide financial or performance assurance to third parties. Certain of these financial or performance assurances serve as guarantees, including standby letters of credit issued on behalf of insurance carriers in conjunction with our workers’ compensation insurance program and other financial surety instruments such as bonds. In addition, we have provided indemnifications, which serve as guarantees, to some third parties. These guarantees include indemnification provided by us to our share transfer agent and our insurance carriers. We are not able to estimate the potential future maximum payments that might be due under our indemnification guarantees, if any. Management believes the likelihood that we would be required to perform or otherwise incur any material losses associated with any of these guarantees is remote.

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The following table summarizes the total maximum amount of financial guarantees issued by Nabors:

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Cash Flows

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Our cash flows depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Sustained decreases in the price of oil or natural gas could have a material impact on these activities and could also materially affect our cash flows. Certain sources and uses of cash, such as the level of discretionary capital expenditures or acquisitions, purchases and sales of investments, loans, issuances and repurchases of debt and of our common shares are within our control and are adjusted as necessary based on market conditions. We discuss our 2024 and 2023 cash flows below.

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Operating Activities. Net cash provided by operating activities totaled $581.4 million during 2024, compared to net cash provided of $637.9 million during 2023. Operating cash flows are our primary source of capital and liquidity.  Cash from operating results (before working capital changes) totaled $682.7 million during 2024, a decrease of $27.8 million when compared to $710.5 million in 2023. This was due to the decrease in activity across our business in 2024 compared to 2023. Changes in working capital items such as collection of receivables, other deferred revenue arrangements and payments of operating payables are significant factors affecting operating cash flows and can be volatile in periods of increasing or decreasing activity levels. Changes in working capital items used $101.2 million in cash flows during 2024 and used $72.6 million in cash flows during 2023.

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Investing Activities. Net cash used for investing activities totaled $555.5 million during 2024 compared to net cash used of $570.4 million in 2023. Our primary use of cash for investing activities is for capital expenditures related to rig-related enhancements, new construction and equipment, and sustaining capital expenditures. During 2024 and 2023, we used cash for capital expenditures totaling $567.9 million and $540.9 million, respectively. We received $15.5 million in proceeds from sales of assets during 2024 compared to $14.1 million in 2023. We also invested $7.7 million in companies that focus on energy transition related technologies in 2024 compared to $21.3 million in 2023.

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Financing Activities. Net cash used for financing activities totaled $662.1 million during 2024. During 2024, we received net proceeds of $539.0 million from issuance of long-term debt and repaid $1.2 billion of outstanding long-term debt.

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Net cash provided by financing activities totaled $592.6 million during 2023. During 2023, we received net proceeds of $881.7 million from issuance of long-term debt and repaid $298.5 million of outstanding long-term debt. We received $305.0 million from the public offering of NETC II and made distributions of $286.4 million from the Trust Account to NETC stockholders. Cash in these trusts can only be used in connection to the business combination or winding down of the SPAC and is not available to us for general operations.

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Other Matters

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Recent Accounting Pronouncements

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See Note 2—Summary of Significant Accounting Policies in Part II, Item 8.—Financial Statements and

Supplementary Data.

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Critical Accounting Estimates

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The preparation of our financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. We analyze our estimates based on our historical experience and various other assumptions that we believe to be reasonable under the circumstances. However, actual results could differ from our estimates. The following is a discussion of our critical accounting estimates. Management considers an accounting estimate to be critical if:

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For a summary of all our significant accounting policies, see Note 2—Summary of Significant Accounting Policies in Part II, Item 8.—Financial Statements and Supplementary Data.

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Depreciation of Property, Plant and Equipment. The drilling and drilling services industries are very capital intensive. Property, plant and equipment represented 63% of our total assets as of December 31, 2024, and depreciation and amortization constituted 21% of our total costs and other deductions in 2024.

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Depreciation for our primary operating assets, drilling rigs, is calculated based on the units-of-production method. For each day a rig is operating, we depreciate it over an approximate 4,927-day period, with the exception of our jackup rigs which are depreciated over an 8,030-day period, in each case after provision for salvage value. For each day a rig asset is not operating, it is depreciated over an assumed depreciable life of 20 years, with the exception of our jackup rigs, where a 30-year depreciable life is typically used, after provision for salvage value.

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Depreciation on our buildings, oilfield hauling and mobile equipment, aircraft equipment, and other machinery and equipment is computed using the straight-line method over the estimated useful life of the asset after provision for salvage value (buildings—10 to 30 years; aircraft equipment—5 to 20 years; oilfield hauling and mobile equipment and other machinery and equipment—3 to 10 years).

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These depreciation periods and the salvage values of our property, plant and equipment were determined through an analysis of the useful lives of our assets and based on our experience with the salvage values of these assets. Periodically, we review our depreciation periods and salvage values for reasonableness given current conditions. Depreciation of property, plant and equipment is therefore based upon estimates of the useful lives and salvage value of those assets. Estimation of these items requires significant management judgment. Accordingly, management believes that accounting estimates related to depreciation expense recorded on property, plant and equipment are critical.

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There have been no factors related to the performance of our portfolio of assets, changes in technology or other factors indicating that these estimates do not continue to be appropriate. Accordingly, for the years ended December 31, 2024, 2023 and 2022, no significant changes have been made to the depreciation rates applied to property, plant and equipment, the underlying assumptions related to estimates of depreciation, or the methodology applied. However, certain events could occur that would materially affect our estimates and assumptions related to depreciation. Unforeseen changes in operations or technology could substantially alter management’s assumptions regarding our ability to realize the return on our investment in operating assets and therefore affect the useful lives and salvage values of our assets.

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Impairment of Long-Lived Assets. As discussed above, the drilling and drilling services industries are very capital intensive. We review our assets for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the estimated undiscounted future cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to the extent the carrying amount of the long-lived asset exceeds its estimated fair value determined utilizing either a discounted cash flows or market approach model. Management considers a number of factors such as estimated future cash flows from the assets, appraisals and current market value analysis in determining fair value. The determination of future cash flows requires the estimation of utilization, dayrates, operating margins, sustaining capital and remaining economic life. Such estimates can change based on market conditions, technological advances in the industry or changes in regulations governing the industry. The appraisals require estimation based on location, working status, asset condition and market conditions. Significant and unanticipated changes to the assumptions could result in future impairments. A significantly prolonged period of lower oil and natural gas prices could continue to adversely affect the demand for and prices of our services, which could result in future impairment charges. As the determination of whether impairment charges should be recorded on our long-lived assets is subject to significant management judgment, and an impairment of these assets could result in a material charge on our consolidated statements of income (loss), management believes that accounting estimates related to impairment of long-lived assets are critical.

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Assumptions in the determination of future cash flows are made with the involvement of management personnel at the operational level where the most specific knowledge of market conditions and other operating factors exists. For 2024, 2023 and 2022, no significant changes have been made to the methodology utilized to determine future cash flows.

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For an asset classified as held for sale, we consider the asset impaired when its carrying amount exceeds fair value less its cost to sell. Fair value is determined by calculating the expected sales price less any costs to sell.

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Income Taxes. We operate in a number of countries and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We are currently contesting tax assessments in a number of countries and may contest future assessments. We believe the ultimate resolution of the outstanding assessments, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments.

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Audit claims of approximately $122.3 million attributable to income tax have been assessed against us. We have contested, or intend to contest, these assessments, including through litigation if necessary, and we believe the ultimate resolution, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. Tax authorities may issue additional assessments or pursue legal actions as a result of tax audits and we cannot predict or provide assurance as to the ultimate outcome of such assessments and legal actions.

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Applicable income and withholding taxes have not been provided on undistributed earnings of our subsidiaries. We do not intend to repatriate such undistributed earnings except for distributions upon which incremental income and withholding taxes would not be material.

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In certain jurisdictions we have recognized deferred tax assets and liabilities. Judgment and assumptions are required in determining whether deferred tax assets will be fully or partially utilized. When we estimate that all or some portion of certain deferred tax assets such as net operating loss carryforwards will not be utilized, we establish a valuation allowance for the amount ascertained to be unrealizable. We continually evaluate strategies that could allow for future utilization of our deferred assets. Any change in the ability to utilize such deferred assets will be accounted for in the period of the event affecting the valuation allowance. If facts and circumstances cause us to change our expectations regarding future tax consequences, the resulting adjustments could have a material effect on our financial results or cash flow.

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Litigation and Self-Insurance Reserves. Our operations are subject to many hazards inherent in the drilling and drilling services industries, including blowouts, cratering, explosions, fires, loss of well control, loss of or damage to the wellbore or underground reservoir, damaged or lost drilling equipment and damage or loss from inclement weather or natural disasters. Any of these and other hazards could result in personal injury or death, damage to or destruction of equipment and facilities, suspension of operations, environmental and natural resources damage and damage to the property of others. Our offshore operations are also subject to the hazards of marine operations including capsizing, grounding, collision and other damage from hurricanes and heavy weather or sea conditions and unsound ocean bottom conditions. Our operations are subject to risks of war or acts of terrorism, civil disturbances and other political events.

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Accidents may occur, we may be unable to obtain desired contractual indemnities, and our insurance may prove inadequate in certain cases. There is no assurance that our insurance or indemnification agreements will adequately protect us against liability from all the consequences of the hazards described above. Moreover, our insurance coverage generally provides that we assume a portion of the risk in the form of a deductible or self-insured retention.

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Based on the risks discussed above, it is necessary for us to estimate the level of our liability related to insurance and record reserves for these amounts in our consolidated financial statements. Reserves related to self-insurance are based on the facts and circumstances specific to the claims and our past experience with similar claims. The actual outcome of self-insured claims could differ significantly from estimated amounts. We maintain actuarially determined accruals in our consolidated balance sheets to cover self-insurance retentions for workers’ compensation, employers’ liability, general liability and automobile liability claims. These accruals are based on certain assumptions developed utilizing historical data to project future losses. Loss estimates in the calculation of these accruals are adjusted based upon actual claim settlements and reported claims. These loss estimates and accruals recorded in our financial statements for claims have historically been reasonable in light of the actual amount of claims paid.

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Because the determination of our liability for self-insured claims is subject to significant management judgment and in certain instances is based on actuarially estimated and calculated amounts, and because such liabilities could be material in nature, management believes that accounting estimates related to self-insurance reserves are critical.

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During 2024, 2023 and 2022, no significant changes were made to the methodology used to estimate insurance reserves. For purposes of earnings sensitivity analysis, if the December 31, 2024 reserves were adjusted by 10%, total costs and other deductions would change by $7.8 million, or 0.26%.

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Fair Value of Assets Acquired and Liabilities Assumed. In conjunction with accounting for acquisitions, it is necessary for us to estimate the values of assets acquired and liabilities assumed in business combinations using various assumptions. These estimates may be affected by such factors as changing market conditions, technological advances in the industry or changes in regulations governing the industry. The most significant assumptions, and the ones requiring the most judgement, involve estimated fair value of property, plant and equipment, and the resulting amount of goodwill, if any. The determination of the fair value of assets and liabilities is based on the market for the assets and the settlement value of the liabilities. Unforeseen changes in operations or technology could substantially alter management’s assumptions and could result in lower estimates of values of acquired assets or future cash flows. This could result in impairment charges being recorded in our consolidated statements of income (loss). As the determination of the fair value of assets acquired and liabilities assumed is subject to significant management judgement and a change in purchase price allocations could result in a material difference in amounts recorded in our consolidated financial statements, management believes that accounting estimates related to the valuation of assets acquired and liabilities assumed are critical. Given the nature of the evaluation of the fair value of assets acquired and liabilities assumed and the application to specific assets and liabilities, it is not possible to reasonably quantify the impact of changes in these assumptions.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following discussion and analysis of our financial condition and results of operations is based on, and should be read in conjunction with, our consolidated financial statements and the related notes thereto included under Part II, Item 8.—Financial Statements and Supplementary Data. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A.—Risk Factors and elsewhere in this annual report. See “Forward-Looking Statements.”

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Management Overview

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We are a leading provider of advanced technology for the energy industry. With operations in over 15 countries, Nabors has established a global network of people, technology and equipment to deploy solutions that deliver safe, efficient and sustainable energy production. By leveraging its core competencies, particularly in drilling, engineering, automation, data science and manufacturing, Nabors aims to innovate the future of energy and enable the transition to a lower carbon world.

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Outlook

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The demand for our services and products is a function of the level of spending by oil and gas companies for exploration, development and production activities. The level of exploration, development and production activities is to a large extent tied to the prices of oil and natural gas, which can fluctuate significantly, are highly volatile and tend to be highly sensitive to supply and demand cycles. Additionally, some oil and gas companies may intentionally limit their capital spending to a percentage of their operating cash flows.

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Since late 2022 and through 2023, global energy commodity markets have experienced high levels of volatility. In the U.S., operators generally reacted to this market by reducing their drilling activity. Recent production actions announced by certain large international oil producers have been supportive of both oil prices and oil-focused activity broadly, especially in international markets. Natural gas prices, particularly in the United States, declined significantly through 2023.

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Coming into 2023 economic sentiment was overshadowed by a pervasive concern that a global recession would take hold. The U.S. Federal Reserve’s tightening of interest rates reduced capital availability in the U.S energy market. Rig counts in the U.S. Lower 48 continued to decline throughout the year. Despite the reduction in rig count, rig pricing discipline remained intact.

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Entering 2024 U.S. oil and gas production has proved resilient in the face of reduced drilling activity. Internationally, we see the expansion of production capacity as well as the widespread development of unconventional resources driving an expected increase in oilfield activity across those markets.

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Recent Developments

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1.75% Senior Exchangeable Notes Due June 2029

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In February 2023, Nabors Delaware issued $250.0 million in aggregate principal amount of 1.75% senior exchangeable notes, which are fully and unconditionally guaranteed by Nabors. The notes bear interest at a rate of 1.75% per year payable semiannually on June 15 and December 15 of each year, beginning on December 15, 2023. The notes have a maturity date of June 15, 2029.

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The exchangeable notes are currently exchangeable, under certain conditions, at an exchange rate of 4.7056 common shares of Nabors per $1,000 principal amount of exchangeable notes (equivalent to an exchange price of approximately $212.51 per common share). Upon any exchange, Nabors will settle its exchange obligation in cash, common shares of Nabors, or a combination of cash and common shares, at our election.

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NETC Merger Agreement

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In February 2023, Nabors Energy Transition Corp. (“NETC”) entered into a definitive agreement for a business combination with Vast Renewables Limited (“Vast”), a development-stage company specializing in the design and manufacturing of concentrated solar thermal power (CSP) systems. The business combination was completed in December 18, 2023 with NETC merging with and into a wholly owned subsidiary of Vast. Following the merger, Nabors now has a significant non-controlling equity investment in Vast.

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Nabors Energy Transition Corporation II

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In July 2023, Nabors Energy Transition Corp. II (“NETC II”), a special purpose acquisition company, commonly referred to as a “SPAC”, co-sponsored by Nabors completed its initial public offering of 30,500,000 units at $10.00 per unit, generating gross proceeds of approximately $305.0 million. Simultaneously with the closing of the IPO, NETC II completed the private sale of an aggregate of 9,540,000 warrants for an aggregate value of $9.5 million and issued unsecured promissory notes for an aggregate amount of $3.1 million. $308.1 million of the amount received at closing was placed into a trust account.

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NETC II was formed for the sole purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses with significant growth potential and to create value by supporting the company in the public markets. NETC II intends to identify solutions, opportunities, companies or technologies that focus on advancing the energy transition; specifically ones that facilitate, improve or complement the reduction of carbon or greenhouse gas emissions while satisfying growing energy consumption across markets globally. NETC II is accounting for as a consolidated VIE.

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9.125% Senior Priority Guaranteed Notes due January 2030

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In November 2023, Nabors issued $650.0 million in aggregate principal amount of 9.125% senior priority guaranteed notes, which are fully and unconditionally guaranteed by Nabors and certain of Nabors’ indirect wholly-owned subsidiaries. Interest on the notes is payable January 31 and July 31 of each year. The notes have a maturity date of January 31, 2030.

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5.75% Senior Notes due 2025 Redemption Notice

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On December 14, 2023, Nabors issued a redemption notice for the remaining principal of the 5.75% Senior Notes due 2025. The remaining balance of $474.1 million was redeemed on January 3, 2024.

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Financial Results

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Comparison of the years ended December 31, 2023 and 2022

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Operating revenues in 2023 totaled $3.0 billion, representing an increase of $0.4 billion, or 13%, from 2022. All of our operating segments experienced an increase in operating revenues over this period. For a more detailed description of operating results see “—Segment Results of Operations,” below.

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Net loss from continuing operations attributable to Nabors common shareholders totaled $11.8 million for 2023 ($5.49 loss per diluted share) compared to a net loss from continuing operations attributable to Nabors common shareholders of $350.3 million ($40.52 loss per diluted share) in 2022, or a $338.5 million decrease in the net loss. The decrease in net loss is attributable to improved market conditions, which has resulted in an increase of approximately $239.3 million in adjusted operating income across all of our segments from the prior year. In addition, gains related to mark-to-market activity for the common share warrants during 2023 contributed approximately $153.8 million to the decrease in net loss along with approximately $20.7 million in gains related to debt repurchases. These gains were offset by an increase of $30.6 million in foreign currency losses. See Other Financial Information —Other, net below for additional discussion.

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General and administrative expenses in 2023 totaled $244.1 million, representing an increase of $15.7 million, or 7% from 2022. This is reflective of increases in workforce costs, general operating costs and inflationary pressures as market conditions have improved and operating levels have increased.

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Research and engineering expenses in 2023 totaled $56.3 million, representing an increase of $6.4 million, or 13%, from 2022. This is primarily reflective of an increase in research and development activities, along with increased engineering support costs for the higher general operating activity levels, as market conditions have improved.

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Depreciation and amortization expense in 2023 was $645.3 million, representing a decrease of $19.8 million, or 3%, from 2022. The decrease is a result of the limited capital expenditures over recent years coupled with a higher amount of older assets reaching the end of their useful lives.

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Segment Results of Operations

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During the years ended December 31, 2023 and 2022, our business consisted of four reportable segments: U.S. Drilling, International Drilling, Drilling Solutions and Rig Technologies.

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Management evaluates the performance of our reportable segments using adjusted operating income (loss), which is our segment performance measure, because we believe that this financial measure reflects our ongoing profitability and performance. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance. Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges and other, net. A reconciliation of adjusted operating income to net income (loss) from continuing operations before income taxes can be found in Note 18—Segment Information in Part II, Item 8.—Financial Statements and Supplementary Data.

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The following tables set forth certain information with respect to our reportable segments and rig activity:

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U.S. Drilling

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Operating revenues increased by $107.0 million or 10% in 2023 compared to 2022. The increase is primarily attributable to an increase in day rates, as pricing for our services has improved. Adjusted operating income increased by $153.8 million. The component of the revenue increase driven by the day rates contributed directly to the increase in adjusted operating income. Also, depreciation was lower due to the limited capital expenditures over recent years.

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International Drilling

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Operating revenues increased by $146.0 million or 12% in 2023 compared to 2022. The increase is attributable to an increase in day rates, as pricing for our services has improved and a 5% increase in the average rigs working, reflecting increased drilling activity as market conditions and demand for our drilling services have increased since the prior year.

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Drilling Solutions

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Operating revenues increased by $58.4 million or 24% in 2023 compared to 2022 as market conditions and demand for our services have rebounded.

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Rig Technologies

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Operating revenues increased by $47.6 million or 24% in 2023 compared to 2022 as market conditions and demand for our services have improved since the prior year.

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Other Financial Information

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Interest expense

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Interest expense for 2023 was $185.3 million, representing an increase of $7.4 million, or 4%, compared to 2022. The increase was primarily due to an increase in our effective interest rate levels on our outstanding debt throughout 2023 as compared 2022.

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Other, net

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Other, net for the year ended December 31, 2023 was a gain of $0.7 million, compared to $127.1 million of loss during 2022. During 2023, $54.7 million of the gain was from mark-to-market gains related to the common share warrants and $25.3 million was from gains on debt repurchases. This gain was offset by $37.3 million in foreign currency losses, $26.5 million for litigation reserves and $13.9 million from loss on sale of assets. In comparison, during 2022, $99.2 million was from mark-to-market losses of the common share warrants and $15.2 million from increases in litigation reserves. (see Note 12 — Shareholders’ Equity in Part II, Item 8.—Financial Statements and Supplementary Data for discussion of the common stock warrants).

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Income taxes

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Our worldwide income tax expense for 2023 was $79.2 million compared to $61.5 million for 2022. The increase in tax expense was primarily attributable to changes in the amount and the geographic mix of our pre-tax earnings (losses) in the jurisdictions in which we operate.

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Liquidity and Capital Resources

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Financial Condition and Sources of Liquidity

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Our primary sources of liquidity are cash and investments, availability under the 2022 Credit Agreement and cash generated from operations. As of December 31, 2023, we had cash and short-term investments of $1.1 billion, of which $629.6 million was deployed on January 2024 to redeem the remaining $474.1 million of 5.75% Senior Notes due 2025 and the remaining $155.5 million of 0.75% senior exchangeable notes due 2024, and working capital of $431.7 million. As of December 31, 2022, we had cash and short-term investments of $452.3 million and working capital of $404.2 million.

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At December 31, 2023, we had no borrowings outstanding under the 2022 Credit Agreement, which has a total borrowing capacity of $350.0 million.

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The 2022 Credit Agreement requires us to maintain an interest coverage ratio (EBITDA/interest expense) of 2.50:1:00, which increases to 2.75:1:00 by June 30, 2024 and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 90% of the consolidated property, plant and equipment of the Company. Additionally, the Company is subject to certain covenants (which are subject to certain exceptions) and include, among others, (a) a covenant restricting our ability to incur liens (subject to the additional liens basket of up to $150.0 million), (b) a covenant restricting our ability to pay dividends or make other distributions with respect to its capital stock and to repurchase certain indebtedness, and (c) a covenant restricting the ability of the Company’s subsidiaries to incur debt (subject to the grower basket of up to $100.0 million). We had $47.8 million of letters of credit outstanding under the 2022 Credit Agreement.

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As of the date of this report, we were in compliance with all covenants under the 2022 Credit Agreement, including those regarding the required interest coverage ratio and minimum guarantor value, which were 5.17:1.00 and 99.77%, respectively, as of December 31, 2023. If we fail to perform our obligations under the covenants, the revolving credit commitments under the 2022 Credit Agreement could be terminated, and any outstanding borrowings under the facilities could be declared immediately due and payable. If necessary, we have the ability to manage our covenant compliance by taking certain actions including reductions in discretionary capital or other types of controllable expenditures, monetization of assets, amending or renegotiating the revolving credit agreement, accessing capital markets through a variety of alternative methods, or any combination of these alternatives. We expect to remain in compliance with all covenants under the 2022 Credit Agreement during the twelve-month period following the date of this report based on

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our current operational and financial projections. However, we can make no assurance of continued compliance if our current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.

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Our ability to access capital markets or to otherwise obtain sufficient financing may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies in the United States and our historical ability to access these markets as needed. While there can be no assurances that we will be able to access these markets in the future, we believe that we will be able to access capital markets or otherwise obtain financing in order to satisfy any payment obligation that might arise upon maturity, exchange or purchase of our notes and our debt facilities, loss of availability of our revolving credit facilities and our A/R Agreements (see—Accounts Receivable Purchase and Sales Agreements, below), and that any cash payment due, in addition to our other cash obligations, would not ultimately have a material adverse impact on our liquidity or financial position. The major U.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future, increase the cost of future debt, and potentially require us to post letters of credit for certain obligations. See Part I, Item 1A.—Risk Factors—A downgrade in our credit rating could negatively impact our cost of and ability to access capital markets or other financing sources.

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We had 8 letter-of-credit facilities with various banks outstanding as of December 31, 2023. Availability under these facilities was as follows:

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We are a holding company and therefore rely exclusively on repayments of interest and principal on intercompany loans that we have made to our operating subsidiaries and income from dividends and other cash flows from our operating subsidiaries. There can be no assurance that our operating subsidiaries will generate sufficient net income to pay us dividends or sufficient cash flows to make payments of interest and principal to us. See Part I., Item 1A.—Risk Factors—As a holding company, we depend on our operating subsidiaries and investments to meet our financial obligations.

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Accounts Receivable Purchase and Sales Agreements

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On September 13, 2019, we entered into an accounts receivables sales agreement (the “A/R Sales Agreement”) and an accounts receivables purchase agreement (the “A/R Purchase Agreement” and, together with the A/R Sales Agreement, the “A/R Agreements”), whereby the originators, all of whom are our subsidiaries, sold or contributed, and will on an ongoing basis continue to sell or contribute, certain of their domestic trade accounts receivables to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”). The SPE in turn, sells, transfers, conveys and assigns to third-party financial institutions (“Purchasers”), all the rights, title and interest in and to its pool of eligible receivables.

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On July 13, 2021, we entered into the First Amendment to the A/R Purchase Agreement which, among other things, reduced the commitments of the third-party financial institutions (the “Purchasers”) from $250 million to $150 million.

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On June 27, 2022, we entered into the Third Amendment to the A/R Purchase Agreement which extended the term of the Purchase Agreement to August 13, 2024 and increased the commitments of the Purchasers from $150 million to $250 million. Subject to Purchaser approval, the A/R Purchase Agreement allows for purchase commitments to be increased to $300 million.

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The amount available for purchase under the A/R Agreements fluctuates over time is based on the total amount of eligible receivables generated during the normal course of business after excluding excess concentrations and certain other ineligible receivables. The maximum purchase commitment of the Purchasers under the A/R Agreements is approximately $250.0 million and the amount of receivables purchased by the third-party Purchasers as of December 31, 2023 was $145.0 million.

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The originators, Nabors Delaware, the SPE, and the Company provide representations, warranties, covenants and indemnities under the A/R Agreements and the Indemnification Guarantee. See further details at Note 4—Accounts Receivable Purchase and Sales Agreements.

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Other Indebtedness

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See Note 10, Debt, in Part II, Item 8.—Financial Statements and Supplementary Data, for further details about our financing arrangements, including our debt securities.

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Future Cash Requirements

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Our current cash and investments, projected cash flows from operations, proceeds from equity or debt issuances and the facilities under our 2022 Credit Agreement are expected to adequately finance our purchase commitments, capital expenditures, acquisitions, scheduled debt service requirements, and all other expected cash requirements for the foreseeable future. However, we can make no assurances that our current operational and financial projections will prove to be correct. A sustained period of highly depressed oil and natural gas prices could have a significant effect on our customers’ capital expenditure spending and therefore our operations, cash flows and liquidity.

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Purchase commitments outstanding on December 31, 2023 totaled approximately $351.4 million, primarily for rig-related enhancements, sustaining capital expenditures, operating expenses, and purchases of inventory. $336.5 million of the outstanding commitments are expected to be paid in 2024. Purchase commitments include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the approximate timing of the transaction. We can reduce planned expenditures if necessary or increase them if market conditions and new business opportunities warrant it. The level of our outstanding purchase commitments and our expected level of capital expenditures for 2023 represent a number of capital programs that are currently underway or planned.

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As of December 31, 2023, we had approximately $3.1 billion of net book value of long-term debt outstanding with $3.2 billion in aggregate principal with $629.6 million due in the next twelve months. This amount includes the remaining $474.1 million of 5.75% senior notes due February 2025 and the remaining $155.5 million balance of the 0.75% senior exchangeable notes due January 2024. We have expected aggregate future interest payments of $818.6 million related to the outstanding debt with $180.9 million due in the next twelve months. See Note 10—Debt in Part II, Item 8.—Financial Statements and Supplementary Data for additional details. Our obligations for operating leases total $38.1 million with $7.6 million of the obligations coming due in the upcoming year. See Note 20—Leases in Part II, Item 8.—Financial Statements and Supplementary Data for additional details.

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We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt securities, both in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors and may involve material amounts.

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We are a party to transactions, agreements or other contractual arrangements defined as “off-balance sheet arrangements” that could have a material future effect on our financial position, results of operations, liquidity and capital resources. The most significant of these off-balance sheet arrangements include the A/R Agreements (see —Accounts Receivable Purchase and Sales Agreements, above) and certain agreements and obligations under which we provide financial or performance assurance to third parties. Certain of these financial or performance assurances serve as guarantees, including standby letters of credit issued on behalf of insurance carriers in conjunction with our workers’ compensation insurance program and other financial surety instruments such as bonds. In addition, we have provided indemnifications, which serve as guarantees, to some third parties. These guarantees include indemnification provided by us to our share transfer agent and our insurance carriers. We are not able to estimate the potential future maximum payments that might be due under our indemnification guarantees, if any. Management believes the likelihood that we would be required to perform or otherwise incur any material losses associated with any of these guarantees is remote.

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The following table summarizes the total maximum amount of financial guarantees issued by Nabors:

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Cash Flows

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Our cash flows depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Sustained decreases in the price of oil or natural gas could have a material impact on these activities and could also materially affect our cash flows. Certain sources and uses of cash, such as the level of discretionary capital expenditures or acquisitions, purchases and sales of investments, loans, issuances and repurchases of debt and of our common shares are within our control and are adjusted as necessary based on market conditions. We discuss our 2023 and 2022 cash flows below.

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Operating Activities. Net cash provided by operating activities totaled $637.9 million during 2023, compared to net cash provided of $501.1 million during 2022. Operating cash flows are our primary source of capital and liquidity.  Changes from operating results (before working capital changes) totaled $648.8 million during 2023, an increase of $195.9 million when compared to $452.8 million in 2022. This was due to the increase in activity across our business in 2023 compared to 2022. Changes in working capital items such as collection of receivables, other deferred revenue arrangements and payments of operating payables are significant factors affecting operating cash flows and can be volatile in periods of increasing or decreasing activity levels. Changes in working capital items used $10.9 million in cash flows during 2023 and provided $48.3 million in cash flows during 2022.

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Investing Activities. Net cash used for investing activities totaled $570.4 million during 2023 compared to net cash used of $368.7 million in 2022. Our primary use of cash for investing activities is for capital expenditures related to rig-related enhancements, new construction and equipment, and sustaining capital expenditures. During 2023 and 2022, we used cash for capital expenditures totaling $540.9 million and $373.4 million, respectively. We received $14.1 million in proceeds from sales of assets during 2023 compared to $26.7 million in 2022. We also invested $21.3 million in companies that focus on energy transition related technologies in 2023 compared to $19.8 million in 2022.

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Financing Activities. Net cash provided by financing activities totaled $570.4 million during 2023. During 2023, we received proceeds of $900.0 million from issuance of long-term debt and repaid $298.5 million of outstanding long-term debt. We received $305.0 million from the public offering of NETC II and made distributions of $286.4 million from the Trust Account to NETC stockholders. Cash in these trusts can only be used in connection to the business combination or winding down of the SPAC and is not available to us for general operations.

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Net cash used for financing activities totaled $661.5 million during 2022. During 2022, we reduced $460.0 million in amounts borrowed under our revolving credit facilities and repaid $182.6 million on our senior notes. Additionally, we had distributions of $10.3 million from our SANAD joint venture to our partner.

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Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries

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Nabors Delaware is an indirect, wholly owned subsidiary of Nabors. Nabors fully and unconditionally guarantees the due and punctual payment of the principal of, premium, if any, and interest on Nabors Delaware’s registered notes, which, as of December 31, 2023, are its 5.75% Senior Notes due 2025 (the “Registered Notes”), and any other obligations of Nabors Delaware under the Registered Notes when and as they become due and payable, whether at maturity, upon redemption, by acceleration or otherwise, if Nabors Delaware is unable to satisfy these obligations. Nabors’ guarantee of Nabors Delaware’s obligations under the Registered Notes are its unsecured and unsubordinated obligation and have the same ranking with respect to Nabors’ indebtedness as the Registered Notes have with respect to Nabors Delaware’s indebtedness. In the event that Nabors is required to withhold or deduct on account of any Bermudian taxes due from any payment made under or with respect to its guarantees, subject to certain exceptions, Nabors will pay additional amounts so that the net amount received by each holder of Registered Notes will equal the amount that such holder would have received if the Bermudian taxes had not been required to be withheld or deducted.

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The following summarized financial information is included so that separate financial statements of Nabors Delaware are not required to be filed with the SEC. The condensed consolidating financial statements present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.

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In lieu of providing separate financial statements for issuers and guarantors (the “Obligated Group”), we have presented the accompanying supplemental summarized combined balance sheet and income statement information for the Obligated Group based on Rule 13-01 of the SEC’s Regulation S-X that we early adopted effective April 1, 2020.

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All significant intercompany items among the Obligated Group have been eliminated in the supplemental summarized combined financial information. The Obligated Group’s investment balances in subsidiary non-guarantors have been excluded from the supplemental combined financial information. Significant intercompany balances and activity for the Obligated Group with other related parties, including subsidiary non-guarantors (referred to as “affiliates”), are presented separately in the accompanying supplemental summarized financial information.

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Summarized combined Balance Sheet and Income Statement information for the Obligated Group is as follows (in thousands):

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Other Matters

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Recent Accounting Pronouncements

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See Note 2—Summary of Significant Accounting Policies in Part II, Item 8.—Financial Statements and

Supplementary Data.

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Critical Accounting Estimates

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The preparation of our financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. We analyze our estimates based on our historical experience and various other assumptions that we believe to be reasonable under the circumstances. However, actual results could differ from our

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estimates. The following is a discussion of our critical accounting estimates. Management considers an accounting estimate to be critical if:

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For a summary of all our significant accounting policies, see Note 2—Summary of Significant Accounting Policies in Part II, Item 8.—Financial Statements and Supplementary Data.

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Depreciation of Property, Plant and Equipment. The drilling and drilling services industries are very capital intensive. Property, plant and equipment represented 55% of our total assets as of December 31, 2023, and depreciation and amortization constituted 22% of our total costs and other deductions in 2023.

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Depreciation for our primary operating assets, drilling rigs, is calculated based on the units-of-production method. For each day a rig is operating, we depreciate it over an approximate 4,927-day period, with the exception of our jackup rigs which are depreciated over an 8,030-day period, in each case after provision for salvage value. For each day a rig asset is not operating, it is depreciated over an assumed depreciable life of 20 years, with the exception of our jackup rigs, where a 30-year depreciable life is typically used, after provision for salvage value.

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Depreciation on our buildings, oilfield hauling and mobile equipment, aircraft equipment, and other machinery and equipment is computed using the straight-line method over the estimated useful life of the asset after provision for salvage value (buildings—10 to 30 years; aircraft equipment—5 to 20 years; oilfield hauling and mobile equipment and other machinery and equipment—3 to 10 years).

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These depreciation periods and the salvage values of our property, plant and equipment were determined through an analysis of the useful lives of our assets and based on our experience with the salvage values of these assets. Periodically, we review our depreciation periods and salvage values for reasonableness given current conditions. Depreciation of property, plant and equipment is therefore based upon estimates of the useful lives and salvage value of those assets. Estimation of these items requires significant management judgment. Accordingly, management believes that accounting estimates related to depreciation expense recorded on property, plant and equipment are critical.

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There have been no factors related to the performance of our portfolio of assets, changes in technology or other factors indicating that these estimates do not continue to be appropriate. Accordingly, for the years ended December 31, 2023, 2022 and 2021, no significant changes have been made to the depreciation rates applied to property, plant and equipment, the underlying assumptions related to estimates of depreciation, or the methodology applied. However, certain events could occur that would materially affect our estimates and assumptions related to depreciation. Unforeseen changes in operations or technology could substantially alter management’s assumptions regarding our ability to realize the return on our investment in operating assets and therefore affect the useful lives and salvage values of our assets.

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Impairment of Long-Lived Assets. As discussed above, the drilling and drilling services industries are very capital intensive. We review our assets for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the estimated undiscounted future cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to the extent the carrying amount of the long-lived asset exceeds its estimated fair value determined utilizing either a discounted cash flows or market approach model. Management considers a number of factors such as estimated future cash flows from the assets, appraisals and current market value analysis in determining fair value. The determination of future cash flows requires the estimation of utilization, dayrates, operating margins, sustaining capital and remaining economic life. Such estimates can change based on market conditions, technological advances in the industry or changes in regulations governing the industry. The appraisals require estimation based on location, working status, asset condition and market conditions. Significant and unanticipated changes to the assumptions could result in future impairments. A significantly prolonged period of lower oil and natural gas prices could continue to adversely affect the demand for and prices of our services, which could result in future impairment charges. As the determination of whether impairment charges should be recorded on our long-lived assets is subject to significant management judgment, and an impairment of these assets could result in a

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material charge on our consolidated statements of income (loss), management believes that accounting estimates related to impairment of long-lived assets are critical.

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Assumptions in the determination of future cash flows are made with the involvement of management personnel at the operational level where the most specific knowledge of market conditions and other operating factors exists. For 2023, 2022 and 2021, no significant changes have been made to the methodology utilized to determine future cash flows.

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For an asset classified as held for sale, we consider the asset impaired when its carrying amount exceeds fair value less its cost to sell. Fair value is determined by calculating the expected sales price less any costs to sell.

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Impairment of Goodwill and Intangible Assets. We review goodwill and intangible assets with indefinite lives for impairment annually during the second quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the carrying amount of such goodwill and intangible assets may exceed their fair value. We perform our impairment tests for goodwill for all our reporting units within our reportable segments. Our business consists of U.S. Drilling, Canada Drilling, International Drilling, Drilling Solutions and Rig Technologies reportable segments. Our Rig Technologies reportable segment includes our Canrig, RDS and 2TD reporting units. We initially assess goodwill for impairment based on qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one of our reporting units is greater than its carrying amount. If the carrying amount exceeds the fair value, an impairment charge will be recognized in an amount equal to the excess; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

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Our estimated fair values of our reporting units incorporate judgment and the use of estimates by management. The fair values calculated in these impairment tests were determined using discounted cash flow models, which require the use of significant unobservable inputs, representative of a Level 3 fair value measurement. Our cash flow models involve assumptions based on our utilization of rigs or other oil and gas service equipment, revenues and earnings from affiliates, as well as direct costs, general and administrative costs, depreciation, applicable income taxes, capital expenditures and working capital requirements. Our fair value estimates of these reporting units are sensitive to varying dayrates, utilization, and costs. A significantly prolonged period of lower oil and natural gas prices, other than those assumed in developing our forecasts, or changes in laws and regulations could adversely affect the demand for and prices of our services, which could in turn result in future goodwill and other intangible asset impairment charges for these reporting units due to the potential impact on our estimate of our future operating results. Our discounted cash flow projections for each reporting unit were based on financial forecasts. The future cash flows were discounted to present value using discount rates determined to be appropriate for each reporting unit. Terminal values for each reporting unit were calculated using a Gordon Growth methodology with a long-term growth rate of approximately 2%.

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Another factor in determining whether impairment has occurred is the relationship between our market capitalization and our book value. As part of our annual review, we compared the sum of our reporting units’ estimated fair value, which included the estimated fair value of non-operating assets and liabilities, less debt, to our market capitalization and assessed the reasonableness of our estimated fair value. Any of the above-mentioned factors may cause us to re-evaluate goodwill during any quarter throughout the year.

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Income Taxes. We operate in a number of countries and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We are currently contesting tax assessments in a number of countries and may contest future assessments. We believe the ultimate resolution of the outstanding assessments, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments.

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Audit claims of approximately $144.9 million attributable to income tax have been assessed against us. We have contested, or intend to contest, these assessments, including through litigation if necessary, and we believe the ultimate resolution, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. Tax authorities may issue additional assessments or pursue legal actions as a result of tax audits and we cannot predict or provide assurance as to the ultimate outcome of such assessments and legal actions.

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Applicable income and withholding taxes have not been provided on undistributed earnings of our subsidiaries. We do not intend to repatriate such undistributed earnings except for distributions upon which incremental income and withholding taxes would not be material.

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In certain jurisdictions we have recognized deferred tax assets and liabilities. Judgment and assumptions are required in determining whether deferred tax assets will be fully or partially utilized. When we estimate that all or some portion of certain deferred tax assets such as net operating loss carryforwards will not be utilized, we establish a valuation allowance for the amount ascertained to be unrealizable. We continually evaluate strategies that could allow for future utilization of our deferred assets. Any change in the ability to utilize such deferred assets will be accounted for in the period of the event affecting the valuation allowance. If facts and circumstances cause us to change our expectations regarding future tax consequences, the resulting adjustments could have a material effect on our financial results or cash flow.

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Litigation and Self-Insurance Reserves. Our operations are subject to many hazards inherent in the drilling and drilling services industries, including blowouts, cratering, explosions, fires, loss of well control, loss of or damage to the wellbore or underground reservoir, damaged or lost drilling equipment and damage or loss from inclement weather or natural disasters. Any of these and other hazards could result in personal injury or death, damage to or destruction of equipment and facilities, suspension of operations, environmental and natural resources damage and damage to the property of others. Our offshore operations are also subject to the hazards of marine operations including capsizing, grounding, collision and other damage from hurricanes and heavy weather or sea conditions and unsound ocean bottom conditions. Our operations are subject to risks of war or acts of terrorism, civil disturbances and other political events.

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Accidents may occur, we may be unable to obtain desired contractual indemnities, and our insurance may prove inadequate in certain cases. There is no assurance that our insurance or indemnification agreements will adequately protect us against liability from all the consequences of the hazards described above. Moreover, our insurance coverage generally provides that we assume a portion of the risk in the form of a deductible or self-insured retention.

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Based on the risks discussed above, it is necessary for us to estimate the level of our liability related to insurance and record reserves for these amounts in our consolidated financial statements. Reserves related to self-insurance are based on the facts and circumstances specific to the claims and our past experience with similar claims. The actual outcome of self-insured claims could differ significantly from estimated amounts. We maintain actuarially determined accruals in our consolidated balance sheets to cover self-insurance retentions for workers’ compensation, employers’ liability, general liability and automobile liability claims. These accruals are based on certain assumptions developed utilizing historical data to project future losses. Loss estimates in the calculation of these accruals are adjusted based upon actual claim settlements and reported claims. These loss estimates and accruals recorded in our financial statements for claims have historically been reasonable in light of the actual amount of claims paid.

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Because the determination of our liability for self-insured claims is subject to significant management judgment and in certain instances is based on actuarially estimated and calculated amounts, and because such liabilities could be material in nature, management believes that accounting estimates related to self-insurance reserves are critical.

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During 2023, 2022 and 2021, no significant changes were made to the methodology used to estimate insurance reserves. For purposes of earnings sensitivity analysis, if the December 31, 2023 reserves were adjusted by 10%, total costs and other deductions would change by $8.7 million, or 0.30%.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following discussion and analysis of our financial condition and results of operations is based on, and should be read in conjunction with, our consolidated financial statements and the related notes thereto included under Part II, Item 8.—Financial Statements and Supplementary Data. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A.—Risk Factors and elsewhere in this annual report. See “Forward-Looking Statements.”

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Management Overview

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We are a leading provider of advanced technology for the energy industry. With operations in over 15 countries, Nabors has established a global network of people, technology and equipment to deploy solutions that deliver safe, efficient and sustainable energy production. By leveraging its core competencies, particularly in drilling, engineering, automation, data science and manufacturing, Nabors aims to innovate the future of energy and enable the transition to a lower carbon world.

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Outlook

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The demand for our services and products is a function of the level of spending by oil and gas companies for exploration, development and production activities. The level of exploration, development and production activities is to a large extent tied to the prices of oil and natural gas, which fluctuate significantly and tend to be highly sensitive to supply and demand cycles. Additionally, some oil and gas companies may limit their capital spending to a percentage of their operating cash flows.

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During 2020, global oil markets experienced unprecedented volatility primarily as a result of the advent of the COVID-19 pandemic. As a result, we experienced a significant reduction in demand for our services throughout 2020 and into 2021, both in the US and in many international markets. The US drilling rig market began to stabilize during the second half of 2020 and has improved at a measured rate since 2020 through 2022. We expect continued modest increases in activity throughout 2023 for the US market. In our International markets since 2020, we have seen a substantial resumption of overall activity to near pre-COVID-19 levels. In certain key markets, activity has been restored to pre-COVID levels.

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More recently, several global commodity markets, including oil and gas, have been impacted by the effects of the war in Ukraine. These consequences include severe economic sanctions against the Russian government as well as certain Russian businesses and individuals, in addition to a reorientation of the global sources of oil and gas supply and a significant increase in the related commodity prices. Government actions, as well as those by large producers, also continue to impact energy markets. The ultimate outcome of these events and the impact on our business remains uncertain.

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Recent Developments

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2022 Credit Agreement

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On January 21, 2022, we entered into a revolving credit agreement between Nabors Delaware, the guarantors from time to time party thereto, the issuing banks (the “Issuing Banks”) and other lenders party thereto (the “Lenders”) and Citibank, N.A., as administrative agent (the “2022 Credit Agreement”). The 2022 Credit Agreement replaced the 2018 Revolving Credit Facility. Under the 2022 Credit Agreement, the Lenders have committed to provide up to an aggregate principal amount at any time outstanding not in excess of $350.0 million (with an accordion feature for an additional $100.0 million subject to lender consent) to Nabors Delaware under a secured revolving credit facility, including sub-facilities provided by certain of the Lenders for letters of credit in an aggregate principal amount at any time outstanding not in excess of $100.0 million. The facility matures on the earlier of (a) January 21, 2026 and (b) (i) to the extent any principal amount of Nabors Delaware’s existing 5.5% senior notes due 2023 and 5.75% senior notes due 2025 remains outstanding on the date that is 90 days prior to the applicable maturity date for such indebtedness, then such 90th day or (ii) to the extent 50% or more of the outstanding (as of the closing date) aggregate principal amount of the 0.75% senior

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exchangeable notes due 2024 remains outstanding and not refinanced or defeased on the date that is 90 days prior to the maturity date for such indebtedness, then such 90th day.

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Financial Results

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Comparison of the years ended December 31, 2022 and 2021

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Operating revenues in 2022 totaled $2.7 billion, representing an increase of $636.2 million, or 32%, from 2021. All of our operating segments, with the exception of Canada Drilling due to its sale in 2021, experienced an increase in operating revenues over this period. For a more detailed description of operating results see “—Segment Results of Operations,” below.

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Net loss from continuing operations attributable to Nabors common shareholders totaled $350.3 million for 2022 ($40.52 per diluted share) compared to a net loss from continuing operations attributable to Nabors common shareholders of $572.9 million ($76.58 per diluted share) in 2021, or a $222.7 million decrease in the net loss. The majority of the decrease in net loss is attributable to improved market conditions, which has resulted in a $255.8 million improvement in adjusted operating income from the prior year. Results from 2022 included approximately $95.9 million in mark-to-market losses on warrants, which was offset by the absence of any impairments or purchase of technology, both of which negatively impacted 2021 by approximately $81.5 million.

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General and administrative expenses in 2022 totaled $228.4 million, representing an increase of $14.9 million, or 7% from 2021. This is reflective of increases in workforce costs and general operating costs as market conditions have improved and operating levels have increased.

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Research and engineering expenses in 2022 totaled $49.9 million, representing an increase of $14.8 million, or 42%, from 2021. This is primarily reflective of an increase in research and development activities, along with increased engineering support costs for the higher general operating activity levels, as market conditions have improved.

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Depreciation and amortization expense in 2022 was $665.1 million, representing a decrease of $28.3 million, or 4%, from 2021. The decrease is attributable to the combination of (a) a reduction in depreciation as a result of the many assets that have recently reached the end of their useful lives, (b) limited capital expenditures over recent years, and (c) the sale of Canada Drilling assets in July 2021.

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Segment Results of Operations

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Our business consists of five reportable segments: U.S. Drilling, Canada Drilling, International Drilling, Drilling Solutions and Rig Technologies.

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Management evaluates the performance of our reportable segments using adjusted operating income (loss), which is our segment performance measure, because we believe that this financial measure reflects our ongoing profitability and performance. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance. Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), (gain)/loss on debt buybacks and exchanges, impairments and other charges and other, net. A reconciliation of adjusted operating income to net income (loss) from continuing operations before income taxes can be found in Note 18—Segment Information in Part II, Item 8.—Financial Statements and Supplementary Data.

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The following tables set forth certain information with respect to our reportable segments and rig activity:

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U.S. Drilling

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Operating revenues increased by $431.0 million or 64% in 2022 compared to 2021. This increase was due to a 37% increase in the average rigs working, reflecting increased drilling activity as market conditions and demand for our drilling services have rebounded and increased since the prior year. The increase is also attributable to an increase in day rates, as pricing for our services has improved during 2022.

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Canada Drilling

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We had no operating revenues in Canada Drilling in 2022 due to the sale of the Canada Drilling assets in July 2021. In 2021, Canada Drilling revenues were $39.3 million.

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International Drilling

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Operating revenues increased by $156.1 million or 15% in 2022 compared to 2021. This increase was due to a 9% increase in the average rigs working, reflecting increased drilling activity as market conditions and demand for our drilling services have rebounded and increased since the prior year. The increase is also partially attributable to an increase in day rates, as pricing for our services has improved.

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Drilling Solutions

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Operating revenues increased by $70.9 million or 41% in 2022 compared to 2021 as market conditions and demand for our services have rebounded and drilling activity has increased since the prior year.

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Rig Technologies

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Operating revenues increased by $45.9 million or 31% in 2022 compared to 2021 as market conditions and demand for our services have improved since the prior year.

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Other Financial Information

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Interest expense

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Interest expense for 2022 was $177.9 million, representing an increase of $6.4 million, or 4%, compared to 2021. The increase was primarily due to the issuance in November 2021 of $700 million in 7.375% senior priority guaranteed notes due May 2027, partially offset by a reduction of over $400 million to our overall debt levels since December 31, 2020.

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Gain on debt buybacks and exchanges

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Gain on debt buybacks and exchanges in 2022 was $4.6 million, representing a decrease of $8.8 million compared to 2021. The decrease is primarily attributable to fewer open market purchases of debt in 2022, as the debt discount levels have reduced.

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Impairments and other charges

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During the year ended December 31, 2021, we recognized impairments and other charges of approximately $66.7 million. The charges was primarily due to $58.5 million of impairments recognized in 2021 attributable to the sale of our Canada drilling assets. Also, we recognized $6.2 million in severance and transaction related costs in 2021 as the company was responding to the challenging industry environment.

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Other, net

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Other, net for the year ended December 31, 2022 was a loss of $131.7 million, compared to $53.4 million of loss during 2021. The increase was primarily due to an additional $101.0 million of loss recognized in 2022 related to common stock warrant valuation (see Note 12 — Shareholders’ Equity in Part II, Item 8.—Financial Statements and Supplementary Data for discussion of the common stock warrants). This was offset by a decrease of $16.5 million in losses from sales and retirements of assets recognized between 2021 and 2022.

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Income taxes

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Our worldwide income tax expense for 2022 was $61.5 million compared to $55.6 million for 2021. The increase in tax expense was primarily attributable to changes in the operating income and the geographic mix of our pre-tax earnings (losses) in the jurisdictions in which we operate, partially offset by tax expense recorded in 2021 attributable to a liability for uncertain tax positions of $26.3 million.

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Liquidity and Capital Resources

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Financial Condition and Sources of Liquidity

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Our primary sources of liquidity are cash and investments, availability under the 2022 Credit Agreement and cash generated from operations. As of December 31, 2022, we had cash and short-term investments of $452.3 million and working capital of $404.2 million. As of December 31, 2021, we had cash and short-term investments of $991.5 million and working capital of $1.0 billion.

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At December 31, 2022, we had no borrowings outstanding under the 2022 Credit Agreement, which has a total borrowing capacity of $350.0 million.

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The 2022 Credit Agreement requires us to maintain an interest coverage ratio (EBITDA/interest expense), which increases on a quarterly basis, and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 90% of the consolidated property, plant and equipment of the Company. Additionally, the Company is subject to certain covenants (which are subject to certain exceptions) and include, among others, (a) a covenant restricting our ability to incur liens (subject to the additional liens basket of up to $150.0 million), (b) a covenant restricting our ability to pay dividends or make other distributions with respect to its capital stock and to repurchase certain indebtedness, and (c) a covenant restricting the ability of the Company’s subsidiaries to incur debt

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(subject to the grower basket of up to $100.0 million). We had $66.2 million of letters of credit outstanding under the 2022 Credit Agreement.

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As of the date of this report, we were in compliance with all covenants under the 2022 Credit Agreement. If we fail to perform our obligations under the covenants, the revolving credit commitments under the 2022 Credit Agreement could be terminated, and any outstanding borrowings under the facilities could be declared immediately due and payable. If necessary, we have the ability to manage our covenant compliance by taking certain actions including reductions in discretionary capital or other types of controllable expenditures, monetization of assets, amending or renegotiating the revolving credit agreement, accessing capital markets through a variety of alternative methods, or any combination of these alternatives. We expect to remain in compliance with all covenants under the 2022 Credit Agreement during the twelve month period following the date of this report based on our current operational and financial projections. However, we can make no assurance of continued compliance if our current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.

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Our ability to access capital markets or to otherwise obtain sufficient financing may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies in the United States and our historical ability to access these markets as needed. While there can be no assurances that we will be able to access these markets in the future, we believe that we will be able to access capital markets or otherwise obtain financing in order to satisfy any payment obligation that might arise upon maturity, exchange or purchase of our notes and our debt facilities, loss of availability of our revolving credit facilities and our A/R Agreements (see—Accounts Receivable Purchase and Sales Agreements, below), and that any cash payment due, in addition to our other cash obligations, would not ultimately have a material adverse impact on our liquidity or financial position. The major U.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future, increase the cost of future debt, and potentially require us to post letters of credit for certain obligations. See Part I, Item 1A.—Risk Factors—A downgrade in our credit rating could negatively impact our cost of and ability to access capital markets or other financing sources.

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We had 18 letter-of-credit facilities with various banks outstanding as of December 31, 2022. Availability under these facilities was as follows:

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We are a holding company and therefore rely exclusively on repayments of interest and principal on intercompany loans that we have made to our operating subsidiaries and income from dividends and other cash flows from our operating subsidiaries. There can be no assurance that our operating subsidiaries will generate sufficient net income to pay us dividends or sufficient cash flows to make payments of interest and principal to us. See Part I., Item 1A.—Risk Factors—As a holding company, we depend on our operating subsidiaries and investments to meet our financial obligations.

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Accounts Receivable Purchase and Sales Agreements

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On September 13, 2019, we entered into an accounts receivables sales agreement (the “A/R Sales Agreement”) and an accounts receivables purchase agreement (the “A/R Purchase Agreement” and, together with the A/R Sales Agreement, the “A/R Agreements”), whereby the originators, all of whom are our subsidiaries, sold or contributed, and will on an ongoing basis continue to sell or contribute, certain of their domestic trade accounts receivables to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”). The SPE in turn, sells, transfers, conveys and assigns to third-party financial institutions (“Purchasers”), all the rights, title and interest in and to its pool of eligible receivables.

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On July 13, 2021, we entered into the First Amendment to the A/R Purchase Agreement which, among other things, reduced the commitments of the third-party financial institutions (the “Purchasers”) from $250 million to $150 million.

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On June 27, 2022, we entered into the Third Amendment to the A/R Purchase Agreement which extended the term of the Purchase Agreement to August 13, 2024 and increased the commitments of the Purchasers from $150 million to $250 million. Subject to Purchaser approval, the A/R Purchase Agreement allows for purchase commitments to be increased to $300 million. The expiration of the A/R Purchase Agreement can be accelerated to June 17, 2023 if any of the 5.1% Senior Notes remain outstanding as of such date; or, to October 17, 2023 if 50% or more of the outstanding aggregate principal amount of the 0.75% Senior Exchangeable Notes remain outstanding and not refinanced as of such date.

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The amount available for purchase under the A/R Agreements fluctuates over time is based on the total amount of eligible receivables generated during the normal course of business after excluding excess concentrations and certain other ineligible receivables. The maximum purchase commitment of the Purchasers under the A/R Agreements is approximately $250.0 million and the amount of receivables purchased by the third-party Purchasers as of December 31, 2022 was $208.0 million.

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The originators, Nabors Delaware, the SPE, and the Company provide representations, warranties, covenants and indemnities under the A/R Agreements and the Indemnification Guarantee. See further details at Note 4—Accounts Receivable Purchase and Sales Agreements.

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Other Indebtedness

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See Note 10, Debt, , in Part II, Item 8.—Financial Statements and Supplementary Data, for further details about our financing arrangements, including our debt securities.

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Future Cash Requirements

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Our current cash and investments, projected cash flows from operations, proceeds from equity or debt issuances and the facilities under our 2022 Credit Agreement are expected to adequately finance our purchase commitments, capital expenditures, acquisitions, scheduled debt service requirements, and all other expected cash requirements for the foreseeable future including the repayment of the $52.1 million of outstanding 5.10% senior notes due September 2023. However, we can make no assurances that our current operational and financial projections will prove to be correct, especially in light of the effects the Russia/Ukraine Conflict, global inflationary pressures, including increasing interest rates, and the COVID-19 pandemic has had on oil and natural gas prices and, in turn, our business. A sustained period of highly depressed oil and natural gas prices could have a significant effect on our customers’ capital expenditure spending and therefore our operations, cash flows and liquidity.

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Purchase commitments outstanding on December 31, 2022 totaled approximately $247.3 million, primarily for rig-related enhancements, sustaining capital expenditures, operating expenses, and purchases of inventory. $247.2 million of the outstanding commitments are expected to be paid in 2023. Purchase commitments include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the approximate timing of the transaction. We can reduce planned expenditures if necessary or increase them if market conditions and new business opportunities warrant it. The level of our outstanding purchase commitments and our expected level of capital expenditures for 2023 represent a number of capital programs that are currently underway or planned.

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As of December 31, 2022, we had approximately $2.5 billion of net book value of long-term debt outstanding with $2.6 billion in aggregate principal. We have expected aggregate future interest payments of $616.0 million related to the outstanding debt with $156.0 million due in the next twelve months. See Note 10—Debt in Part II, Item 8.—Financial Statements and Supplementary Data for additional details. Our obligations for operating leases total $43.2 million with $8.9 million of the obligations coming due in the upcoming year. See Note 20—Leases in Part II, Item 8.—Financial Statements and Supplementary Data for additional details.

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We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt securities, both in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors and may involve material amounts.

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We are a party to transactions, agreements or other contractual arrangements defined as “off-balance sheet arrangements” that could have a material future effect on our financial position, results of operations, liquidity and capital resources. The most significant of these off-balance sheet arrangements include the A/R Agreements (see —Accounts Receivable Purchase and Sales Agreements, above) and certain agreements and obligations under which we provide financial or performance assurance to third parties. Certain of these financial or performance assurances serve as guarantees, including standby letters of credit issued on behalf of insurance carriers in conjunction with our workers’ compensation insurance program and other financial surety instruments such as bonds. In addition, we have provided indemnifications, which serve as guarantees, to some third parties. These guarantees include indemnification provided by us to our share transfer agent and our insurance carriers. We are not able to estimate the potential future maximum payments that might be due under our indemnification guarantees, if any. Management believes the likelihood that we would be required to perform or otherwise incur any material losses associated with any of these guarantees is remote.

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The following table summarizes the total maximum amount of financial guarantees issued by Nabors:

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Cash Flows

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Our cash flows depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Sustained decreases in the price of oil or natural gas could have a material impact on these activities and could also materially affect our cash flows. Certain sources and uses of cash, such as the level of discretionary capital expenditures or acquisitions, purchases and sales of investments, loans, issuances and repurchases of debt and of our common shares are within our control and are adjusted as necessary based on market conditions. We discuss our 2022 and 2021 cash flows below.

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Operating Activities. Net cash provided by operating activities totaled $501.1 million during 2022, compared to net cash provided of $428.8 million during 2021. Operating cash flows are our primary source of capital and liquidity.  Changes in working capital items such as collection of receivables, other deferred revenue arrangements and payments of operating payables are significant factors affecting operating cash flows. Changes in working capital items provided $48.3 million in cash flows during 2022 and provided $188.1 million in cash flows during 2021. As is common in periods of growth for companies, as our businesses grew in 2022 we experienced a need for increased working capital, which caused the decrease in cash provided from this source.

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Investing Activities. Net cash used for investing activities totaled $368.7 million during 2022 compared to net cash used of $117.2 million in 2021. Our primary use of cash for investing activities is for capital expenditures related to rig-related enhancements, new construction and equipment, and sustaining capital expenditures. During 2022 and 2021, we used cash for capital expenditures totaling $373.4 million and $234.0 million, respectively.

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We received $26.7 million in proceeds from sales of assets during 2022 compared to $124.3 million in 2021. The 2021 total was primarily due to the sale of our Canada drilling assets in July 2021.

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Financing Activities. Net cash used for financing activities totaled $661.5 million during 2022. During 2022, we reduced $460.0 million in amounts borrowed under our revolving credit facilities and repaid $182.6 million on our senior notes. Additionally, we had distributions of $10.3 million from our SANAD joint venture to our partner.

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Net cash provided by financing activities totaled $488.4 million during 2021. During 2021, we received net proceeds of $700.0 million from the issuance of long-term debt and received $276.0 million from the public offering of NETC (accounted for as restricted cash held in trust).  Partially offsetting these activities, we reduced $212.5 million in amounts borrowed under our revolving credit facilities and repaid $187.0 million on our senior notes. Additionally, we paid dividends totaling $7.3 million to our preferred shareholders and made distributions of $58.5 million from our SANAD joint venture to our partner.

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Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries

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Nabors Delaware is an indirect, wholly owned subsidiary of Nabors. Nabors fully and unconditionally guarantees the due and punctual payment of the principal of, premium, if any, and interest on Nabors Delaware’s registered notes, which are its (a) 5.10% Senior Notes due 2023 (the “5.10% 2023 Notes”) and (b) 5.75% Senior Notes due 2025 (the “2025 Notes” and, together with the 5.10% 2023 Notes, the “Registered Notes”), and any other obligations of Nabors Delaware under the Registered Notes when and as they become due and payable, whether at maturity, upon redemption, by acceleration or otherwise, if Nabors Delaware is unable to satisfy these obligations. Nabors’ guarantee of Nabors Delaware’s obligations under the Registered Notes are its unsecured and unsubordinated obligation and have the same ranking with respect to Nabors’ indebtedness as the Registered Notes have with respect to Nabors Delaware’s indebtedness. In the event that Nabors is required to withhold or deduct on account of any Bermudian taxes due from any payment made under or with respect to its guarantees, subject to certain exceptions, Nabors will pay additional amounts so that the net amount received by each holder of Registered Notes will equal the amount that such holder would have received if the Bermudian taxes had not been required to be withheld or deducted.

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The following summarized financial information is included so that separate financial statements of Nabors Delaware are not required to be filed with the SEC. The condensed consolidating financial statements present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.

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In lieu of providing separate financial statements for issuers and guarantors (the “Obligated Group”), we have presented the accompanying supplemental summarized combined balance sheet and income statement information for the Obligated Group based on Rule 13-01 of the SEC’s Regulation S-X that we early adopted effective April 1, 2020.

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All significant intercompany items among the Obligated Group have been eliminated in the supplemental summarized combined financial information. The Obligated Group’s investment balances in subsidiary non-guarantors have been excluded from the supplemental combined financial information. Significant intercompany balances and activity for the Obligated Group with other related parties, including subsidiary non-guarantors (referred to as “affiliates”), are presented separately in the accompanying supplemental summarized financial information.

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Summarized combined Balance Sheet and Income Statement information for the Obligated Group is as follows (in thousands):

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Other Matters

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Recent Accounting Pronouncements

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See Note 2—Summary of Significant Accounting Policies in Part II, Item 8.—Financial Statements and

Supplementary Data.

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Critical Accounting Estimates

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The preparation of our financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. We analyze our estimates based on our historical experience and various other assumptions that we believe to be reasonable under the circumstances. However, actual results could differ from our estimates. The following is a discussion of our critical accounting estimates. Management considers an accounting estimate to be critical if:

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For a summary of all our significant accounting policies, see Note 2—Summary of Significant Accounting Policies in Part II, Item 8.—Financial Statements and Supplementary Data.

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Depreciation of Property, Plant and Equipment. The drilling and drilling services industries are very capital intensive. Property, plant and equipment represented 64% of our total assets as of December 31, 2022, and depreciation and amortization constituted 23% of our total costs and other deductions in 2022.

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Depreciation for our primary operating assets, drilling rigs, is calculated based on the units-of-production method. For each day a rig is operating, we depreciate it over an approximate 4,927-day period, with the exception of our jackup rigs which are depreciated over an 8,030-day period, in each case after provision for salvage value. For each day a rig asset is not operating, it is depreciated over an assumed depreciable life of 20 years, with the exception of our jackup rigs, where a 30-year depreciable life is typically used, after provision for salvage value.

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Depreciation on our buildings, oilfield hauling and mobile equipment, aircraft equipment, and other machinery and equipment is computed using the straight-line method over the estimated useful life of the asset after provision for salvage value (buildings—10 to 30 years; aircraft equipment—5 to 20 years; oilfield hauling and mobile equipment and other machinery and equipment—3 to 10 years).

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These depreciation periods and the salvage values of our property, plant and equipment were determined through an analysis of the useful lives of our assets and based on our experience with the salvage values of these assets. Periodically, we review our depreciation periods and salvage values for reasonableness given current conditions. Depreciation of property, plant and equipment is therefore based upon estimates of the useful lives and salvage value of those assets. Estimation of these items requires significant management judgment. Accordingly, management believes that accounting estimates related to depreciation expense recorded on property, plant and equipment are critical.

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There have been no factors related to the performance of our portfolio of assets, changes in technology or other factors indicating that these estimates do not continue to be appropriate. Accordingly, for the years ended December 31, 2022, 2021 and 2020, no significant changes have been made to the depreciation rates applied to property, plant and equipment, the underlying assumptions related to estimates of depreciation, or the methodology applied. However, certain events could occur that would materially affect our estimates and assumptions related to depreciation. Unforeseen changes in operations or technology could substantially alter management’s assumptions regarding our ability to realize the return on our investment in operating assets and therefore affect the useful lives and salvage values of our assets.

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Impairment of Long-Lived Assets. As discussed above, the drilling and drilling services industries are very capital intensive. We review our assets for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the estimated undiscounted future cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to the extent the carrying amount of the long-lived asset exceeds its estimated fair value determined utilizing either a discounted cash flows or market approach model. Management considers a number of factors such as estimated future cash flows from the assets, appraisals and current market value analysis in determining fair value. The determination of future cash flows requires the estimation of utilization, dayrates, operating margins, sustaining capital and remaining economic life. Such estimates can change based on market conditions, technological advances in the industry or changes in regulations governing the industry. The appraisals require estimation based on location, working status, asset condition and market conditions. Significant and unanticipated changes to the assumptions could result in future impairments. A significantly prolonged period of lower oil and natural gas prices could continue to adversely affect the demand for and prices of our services, which could result in future impairment charges. As the determination of whether impairment charges should be recorded on our long-lived assets is subject to significant management judgment, and an impairment of these assets could result in a material charge on our consolidated statements of income (loss), management believes that accounting estimates related to impairment of long-lived assets are critical.

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Assumptions in the determination of future cash flows are made with the involvement of management personnel at the operational level where the most specific knowledge of market conditions and other operating factors exists. For 2022, 2021 and 2020, no significant changes have been made to the methodology utilized to determine future cash flows.

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For an asset classified as held for sale, we consider the asset impaired when its carrying amount exceeds fair value less its cost to sell. Fair value is determined by calculating the expected sales price less any costs to sell.

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Impairment of Goodwill and Intangible Assets. We review goodwill and intangible assets with indefinite lives for impairment annually during the second quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the carrying amount of such goodwill and intangible assets may exceed their fair value. We perform our impairment tests for goodwill for all our reporting units within our reportable segments. Our business consists of U.S. Drilling, Canada Drilling, International Drilling, Drilling Solutions and Rig Technologies reportable segments. Our Rig Technologies reportable segment includes our Canrig, RDS and 2TD reporting units. We initially assess goodwill for impairment based on qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one of our reporting units is greater than its carrying amount. If the carrying amount exceeds the fair value, an impairment charge will be recognized in an amount equal to the excess; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

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Due to industry conditions and the corresponding impact on future expectations of demand for our products and services, including the effect on our stock price, we determined a triggering event had occurred and performed a quantitative impairment assessment of our goodwill as of March 31, 2020. Based on the results of our goodwill test performed in the first quarter of 2020, we recognized additional impairment charges to write off the remaining goodwill balances attributable to our Drilling Solutions and Rig Technologies operating segments of $11.4 million and $16.4 million, respectively, in the quarter ended March 31, 2020.

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We also reviewed our intangible assets for impairment in the first quarter of 2020. The fair value of our intangible assets is determined using discounted cash flow models. Based on our updated projections of future cash flows, the fair value of our intangible assets did not support the carrying value. As such, we recognized an impairment of $83.6 million to write off all remaining intangible assets in the quarter ended March 31, 2020.

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Our estimated fair values of our reporting units incorporate judgment and the use of estimates by management. The fair values calculated in these impairment tests were determined using discounted cash flow models, which require the use of significant unobservable inputs, representative of a Level 3 fair value measurement. Our cash flow models involve assumptions based on our utilization of rigs or other oil and gas service equipment, revenues and earnings from affiliates, as well as direct costs, general and administrative costs, depreciation, applicable income taxes, capital expenditures and working capital requirements. Our fair value estimates of these reporting units are sensitive to varying dayrates, utilization, and costs. A significantly prolonged period of lower oil and natural gas prices, other than those assumed in developing our forecasts, or changes in laws and regulations could adversely affect the demand for and prices of our services, which could in turn result in future goodwill and other intangible asset impairment charges for

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these reporting units due to the potential impact on our estimate of our future operating results. Our discounted cash flow projections for each reporting unit were based on financial forecasts. The future cash flows were discounted to present value using discount rates determined to be appropriate for each reporting unit. Terminal values for each reporting unit were calculated using a Gordon Growth methodology with a long-term growth rate of approximately 2%.

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Another factor in determining whether impairment has occurred is the relationship between our market capitalization and our book value. As part of our annual review, we compared the sum of our reporting units’ estimated fair value, which included the estimated fair value of non-operating assets and liabilities, less debt, to our market capitalization and assessed the reasonableness of our estimated fair value. Any of the above-mentioned factors may cause us to re-evaluate goodwill during any quarter throughout the year.

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Income Taxes. We operate in a number of countries and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We are currently contesting tax assessments in a number of countries and may contest future assessments. We believe the ultimate resolution of the outstanding assessments, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments.

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Audit claims of approximately $216.9 million attributable to income tax have been assessed against us. We have contested, or intend to contest, these assessments, including through litigation if necessary, and we believe the ultimate resolution, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. Tax authorities may issue additional assessments or pursue legal actions as a result of tax audits and we cannot predict or provide assurance as to the ultimate outcome of such assessments and legal actions.

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Applicable income and withholding taxes have not been provided on undistributed earnings of our subsidiaries. We do not intend to repatriate such undistributed earnings except for distributions upon which incremental income and withholding taxes would not be material.

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In certain jurisdictions we have recognized deferred tax assets and liabilities. Judgment and assumptions are required in determining whether deferred tax assets will be fully or partially utilized. When we estimate that all or some portion of certain deferred tax assets such as net operating loss carryforwards will not be utilized, we establish a valuation allowance for the amount ascertained to be unrealizable. We continually evaluate strategies that could allow for future utilization of our deferred assets. Any change in the ability to utilize such deferred assets will be accounted for in the period of the event affecting the valuation allowance. If facts and circumstances cause us to change our expectations regarding future tax consequences, the resulting adjustments could have a material effect on our financial results or cash flow.

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Litigation and Self-Insurance Reserves. Our operations are subject to many hazards inherent in the drilling and drilling services industries, including blowouts, cratering, explosions, fires, loss of well control, loss of or damage to the wellbore or underground reservoir, damaged or lost drilling equipment and damage or loss from inclement weather or natural disasters. Any of these and other hazards could result in personal injury or death, damage to or destruction of equipment and facilities, suspension of operations, environmental and natural resources damage and damage to the property of others. Our offshore operations are also subject to the hazards of marine operations including capsizing, grounding, collision and other damage from hurricanes and heavy weather or sea conditions and unsound ocean bottom conditions. Our operations are subject to risks of war or acts of terrorism, civil disturbances and other political events.

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Accidents may occur, we may be unable to obtain desired contractual indemnities, and our insurance may prove inadequate in certain cases. There is no assurance that our insurance or indemnification agreements will adequately protect us against liability from all the consequences of the hazards described above. Moreover, our insurance coverage generally provides that we assume a portion of the risk in the form of a deductible or self-insured retention.

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Based on the risks discussed above, it is necessary for us to estimate the level of our liability related to insurance and record reserves for these amounts in our consolidated financial statements. Reserves related to self-insurance are based on the facts and circumstances specific to the claims and our past experience with similar claims. The actual outcome of self-insured claims could differ significantly from estimated amounts. We maintain actuarially determined accruals in our consolidated balance sheets to cover self-insurance retentions for workers’ compensation, employers’ liability, general liability and automobile liability claims. These accruals are based on certain assumptions developed

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utilizing historical data to project future losses. Loss estimates in the calculation of these accruals are adjusted based upon actual claim settlements and reported claims. These loss estimates and accruals recorded in our financial statements for claims have historically been reasonable in light of the actual amount of claims paid.

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Because the determination of our liability for self-insured claims is subject to significant management judgment and in certain instances is based on actuarially estimated and calculated amounts, and because such liabilities could be material in nature, management believes that accounting estimates related to self-insurance reserves are critical.

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During 2022, 2021 and 2020, no significant changes were made to the methodology used to estimate insurance reserves. For purposes of earnings sensitivity analysis, if the December 31, 2022 reserves were adjusted by 10%, total costs and other deductions would change by $10.8 million, or 0.37%.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following discussion and analysis of our financial condition and results of operations is based on, and should be read in conjunction with, our consolidated financial statements and the related notes thereto included under Part II, Item 8.—Financial Statements and Supplementary Data. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A.—Risk Factors and elsewhere in this annual report. See “Forward-Looking Statements.”

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Management Overview

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We own and operate one of the world’s largest land-based drilling rig fleets, and also provide offshore rigs in the United States and numerous international markets. Our business is comprised of our global land-based and offshore drilling rig operations and other rig related services and technologies. These services include tubular services, wellbore placement solutions, directional drilling, measurement-while-drilling, logging-while-drilling systems and services, equipment manufacturing, rig instrumentation and optimization software.

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Outlook

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The demand for our services is a function of the level of spending by oil and gas companies for exploration, development and production activities. The primary driver of customer spending is their cash flow and earnings, which are largely driven by oil and natural gas prices and customers’ production volumes. The oil and natural gas markets have traditionally been volatile and tend to be highly sensitive to supply and demand cycles.

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During 2020, the oil markets experienced unprecedented volatility. The COVID-19 outbreak, and its development into a pandemic, along with policies and actions taken by governments and behaviors of companies and customers around the world, had a significant negative impact on demand for oil and our services, which negatively impacted our operating results and cash flow throughout 2020 and into 2021. The Lower-48 drilling rig market began to stabilize during the second half of 2020 and has continued to improve at a measured rate throughout 2021. We expect continued measured but steady increases in activity throughout 2022 for the Lower-48 market. Our International markets also experienced factors and conditions that led to similar reductions in activity throughout 2020, but the impact varied considerably from country to country. As government-imposed restrictions continue to ease, we expect our international activity to generally increase through the next year.

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Recent Developments

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Common stock warrants

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On May 27, 2021, the Board declared a distribution to holders of the Company’s common shares of warrants to purchase its common shares (the “Warrants”). Holders of Nabors common shares received two-fifths of a warrant per common share held as of the record date (rounded down for any fractional warrant). Nabors issued approximately 3.2 million warrants on June 11, 2021 to shareholders of record as of June 4, 2021.

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Each Warrant represents the right to purchase one common share at an initial exercise price of $166.66667 per Warrant, subject to certain adjustments (the “Exercise Price”). In addition, Warrants submitted for exercise may be eligible to receive an additional one-third common share due to the incentive share component. The incentive share is an extra amount of common shares that Nabors will award when the volume weighted average price of Nabors’ common shares on the day before any Warrant holder exercises its Warrants multiplied by three is at least 6% higher than the sum of the volume weighted average prices of Nabors’ common shares on each of the second, third and fourth days before any Warrant holder exercises its Warrants. Payment for common shares on exercise of Warrants may be in (i) cash or (ii) “Designated Notes,” which the Company initially defines as (a) Nabors Delaware’s (i) 5.10% Notes due 2023, (ii) 0.75% Exchangeable Notes due 2024, (iii) 5.75% Notes due 2025, and (b) the Company’s 7.25% Notes due 2026, subject to compliance with applicable procedures with respect to the delivery of the Warrants and Designated Notes. The Exercise Price and the number of common shares issuable upon exercise are subject to anti-dilution adjustments, including for share dividends, splits, subdivisions, spin-offs, consolidations, reclassifications, combinations, noncash distributions, cash dividends (other than regular quarterly cash dividends not exceeding a permitted threshold amount),

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certain pro rata repurchases and similar transactions, including certain issuances of common shares (or securities exercisable or convertible into or exchangeable for common shares) at a price (or having a conversion price) that is less than 95% of the market price of the common shares. The Warrants expire on June 11, 2026, but the expiration date may be accelerated at any time by the Company upon 20-days’ prior notice. The Company has listed the Warrants on the over-the-counter market.

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Canada Asset Sale

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During the second quarter of 2021, Nabors entered into an agreement to sell the assets of its Canada Drilling segment for $117.5 million CAD (or approximately $94.0 million USD). The sale closed during July 2021.

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7.375% Senior Priority Guaranteed Notes Due May 2027

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In November 2021, Nabors issued $700.0 million in aggregate principal amount of 7.375% senior priority guaranteed notes, which are fully and unconditionally guaranteed by Nabors and certain of Nabors’ indirect wholly-owned subsidiaries. Interest on the notes is payable May 15 and November 15 of each year, beginning May 15, 2022. The notes will mature on May 15, 2027. The remaining proceeds are available for general corporate purposes, including repaying outstanding debt.

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Nabors Energy Transition Corporation

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In November 2021, Nabors Energy Transition Corporation (“NETC”), a special purpose acquisition company, commonly referred to as a “SPAC”, co-sponsored by Nabors, completed its initial public offering of 27,600,000 units at $10.00 per unit, generating gross proceeds of approximately $276.0 million. Simultaneously with the closing of the IPO, NETC completed the private sale of an aggregate of 13,730,000 warrants for an aggregate value of $13,730,000. NETC was formed for the sole purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses with significant growth potential and to create value by supporting the company in the public markets. NETC intends to identify solutions, opportunities, companies or technologies that focus on advancing the energy transition; specifically ones that facilitate, improve or complement the reduction of carbon or greenhouse gas emissions while satisfying growing energy consumption across markets globally.

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Financial Results

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Comparison of the years ended December 31, 2021 and 2020

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Operating revenues in 2021 totaled $2.0 billion, representing a decrease of $116.5 million from 2020. The primary driver was a decrease in international activity due to the continued impact on our international businesses brought on by the COVID-19 outbreak and the resultant measures put in place by some countries in response to it. This decrease in activity is evidenced by the 10% decline in average rigs working within our International Drilling operating segment. For a more detailed description of operating results see —Segment Results of Operations, below.

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Net loss from continuing operations attributable to Nabors common shareholders totaled $572.9 million for 2021 ($76.58 per diluted share) compared to a net loss from continuing operations attributable to Nabors common shareholders of $820.3 million ($118.69 per diluted share) in 2020, or a $247.3 million decrease in the net loss. This decrease in the net loss is primarily due to (i) a $344 million reduction in asset impairment charges required in 2021 as compared to $410 million in impairment charges required in 2020, as a result of dramatic decline in market conditions and activity brought about by (a) the outbreak of COVID-19, and (b) unprecedented volatility in the oil market, both of which led to a significant decline in oil prices resulting from oversupply and demand weakness in early 2020, (ii) a $78 million improvement in adjusted operating income (loss) primarily due to a reduced amount of depreciation as a result of impairments taken in recent years and (iii) a $35 million reduction in interest expense as a result of our debt reduction objectives over the past few years. These improvements to the net loss were partially offset by a $215 million reduction in gains from retirement of debt, which was mostly attributable to the Exchange Transactions that were completed during 2020.

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General and administrative expenses in 2021 totaled $213.6 million, representing an increase of $10.0 million, or 5% from 2020. This is reflective of temporary workforce cost reductions taken in the prior year due to industry market conditions combined with a moderate increase in workforce as market conditions have improved.

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Research and engineering expenses in 2021 totaled $35.2 million, representing an increase of $1.6 million, or 5%, from 2020. This is reflective of temporary workforce cost reductions taken in the prior year due to industry market conditions combined with a moderate increase in workforce as market conditions have improved.

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Depreciation and amortization expense in 2021 was $693.4 million, representing a decrease of $160.3 million, or 18%, from 2020. The decrease is attributable to the combination of many assets recently reaching the end of their useful lives, limited capital expenditures over recent years and the impact from impairment charges and retirement provisions recorded in 2020.

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Segment Results of Operations

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Our business consists of five reportable segments: U.S. Drilling, Canada Drilling, International Drilling, Drilling Solutions and Rig Technologies.

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Management evaluates the performance of our reportable segments using adjusted operating income (loss), which is our segment performance measure, because we believe that this financial measure reflects our ongoing profitability and performance. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance. Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), (gain)/loss on debt buybacks and exchanges, impairments and other charges and other, net. A reconciliation of adjusted operating income to net income (loss) from continuing operations before income taxes can be found in Note 18—Segment Information in Part II, Item 8. —Financial Statements and Supplementary Data.

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The following tables set forth certain information with respect to our reportable segments and rig activity:

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U.S. Drilling

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Operating revenues decreased by $43.4 million or 6% in 2021 compared to 2020 primarily due to decreases in pricing for our services. Activity declined throughout 2020 due to market conditions, but has steadily improved throughout 2021, beginning in late 2020, resulting in a 4% increase in the number of average rigs working in 2021 as compared to 2020. The impact from pricing lags activity due to the nature of our drilling contracts, so the average revenue per operating day in 2021 was lower than 2020, as pricing continues to recover with sustained higher activity. The reduction in revenues was partially offset by cost cutting initiatives and a reduction in depreciation expense.

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Canada Drilling

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Operating revenues decreased by $15.4 million or 28% in 2021 compared to 2020 primarily due to the sale of the Canada Drilling assets in July 2021.

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International Drilling

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Operating revenues decreased by $88.5 million or 8% in 2021 compared to 2020 primarily due to reduced activity, as reflected in the 10% decrease in the average number of rigs working, as certain countries implemented measures to counter COVID-19. The reduction in revenues was partially offset by cost reductions related to the drop in activity and a reduction in depreciation expense.

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Drilling Solutions

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Operating revenues increased by $22.6 million or 15% in 2021 compared to 2020 primarily due to the increase in market activity and additional product offerings across the U.S. during 2021, relative to the prior year. The decline in activity for this segment in 2020 was more pronounced than the decline in our drilling segments, due to the nature of its operating contracts. As market conditions improved in 2021, this also allowed for a more pronounced rebound relative to our drilling segments.

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Rig Technologies

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Operating revenues increased by $17.7 million or 13% in 2021 compared to 2020 due to an increase in activity in the U.S. In addition, this segment experienced a reduction in depreciation expense similar to our other operating segments, and implemented significant cost reduction measures.

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Other Financial Information

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Interest expense

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Interest expense for 2021 was $171.5 million, representing a decrease of $34.8 million, or 17%, compared to 2020. The decrease was primarily due to debt restructuring and exchange transactions in the fourth quarter of 2020 and the first quarter of 2021, along with reductions in overall debt levels from our cash flows, which have contributed to reduced interest expense.

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Gain on debt buybacks and exchanges

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Gain on debt buybacks and exchanges in 2021 was $13.4 million, representing a decrease of $214.9 million compared to 2020. Approximately $161.8 million of this amount is due to the debt exchanges completed in the fourth quarter of 2020. The remaining change is primarily attributable to fewer open market purchases of debt in 2021, as the discount levels have reduced.

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Impairments and other charges

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During the year ended December 31, 2021, we recognized impairments and other charges of approximately $66.7 million, representing a decrease of $343.9 million compared to the prior year. The decrease was primarily due to a $344 million reduction in asset impairment charges required in 2021, as compared to $410 million in impairment charges required in 2020, as a result of the dramatic decline in market conditions and activity brought about by (a) the outbreak of COVID-19, and (b) unprecedented volatility in the oil market leading to a significant decline in oil prices resulting from oversupply and demand weakness in early 2020. In response to the market conditions, in 2020 we recognized charges which included impairment charges, and retirement provisions of long-lived assets of $260.5 million comprised of underutilized rigs and drilling-related equipment across all our operating segments. We also recognized $111.4 million in impairments to our remaining goodwill and intangible asset balances in our Drilling Solutions and Rig Technologies operating segments. Of the $66.7 million in 2021 impairments, $58.5 million is attributable to the sale of our Canada drilling assets.

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Other, net

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Other, net for 2021 was $53.4 million of loss, compared to $28.6 million of loss during 2020. The $24.8 million difference between periods was primarily due to $14.7 million related to costs incurred during 2021 on our energy transition initiatives, including the purchase of certain development stage technologies that were expensed and an $11.5 million increase in losses from sales and retirements of assets.

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Income taxes

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Our worldwide income tax expense for 2021 was $55.6 million compared to $57.3 million for 2020. The relatively small decrease in tax expense was primarily attributable to higher tax expense on a gain related to our debt exchange recognized in 2020, partially offset by an increase in tax expense attributable to a recorded liability for uncertain tax positions of $26.3 million in 2021, as well as changes in the operating income and the geographic mix of our pre-tax earnings (losses) in the jurisdictions in which we operate.

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Liquidity and Capital Resources

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Financial Condition and Sources of Liquidity

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Our primary sources of liquidity are cash and investments, availability under our revolving credit facility and cash generated from operations. As of December 31, 2021, we had cash and short-term investments of $991.5 million and working capital of $1.0 billion. As of December 31, 2020, we had cash and short-term investments of $481.7 million and working capital of $616.0 million.

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At December 31, 2021, we had $460.0 million of borrowings outstanding under the 2018 Revolving Credit Facility, which had a total borrowing capacity of $524.1 million. The 2018 Revolving Credit Facility required us to maintain “minimum liquidity” of no less than $160.0 million at all times, and an asset to debt coverage ratio of at least 4.25:1 as of the end of each calendar quarter. Minimum liquidity was defined to mean, generally, a consolidated cash balance consisting of (a) the aggregate amount of unrestricted cash and cash equivalents maintained in a deposit account U.S. or Canadian branch of a commercial bank, plus (b) the lesser of $75 million or an amount equal to 75% of the aggregate amount of unrestricted cash and cash equivalents held in deposit account of a commercial bank outside of the U.S. or Canada, plus (c) available commitments under the 2018 Revolving Credit Facility. The asset to debt coverage ratio applied only during the period which Nabors Delaware failed to maintain an investment grade rating from at least two rating agencies, which was the case as of the date of this report. As of December 31, 2021, and through and including January 21, 2022, we were in compliance with all covenants under the 2018 Revolving Credit Facility. We also had $62.7 million of letters of credit outstanding under the 2018 Revolving Credit Facility.

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On January 21, 2022, we entered into a revolving credit agreement between Nabors Delaware, the guarantors from time to time party thereto, the issuing banks and other lenders party thereto and Citibank, N.A., as administrative agent (the “2022 Credit Agreement”). Under the 2022 Credit Agreement, the Lenders (as defined below) have committed to provide up to an aggregate principal amount at any time outstanding not in excess of $350.0 million (with an accordion feature for an additional $100.0 million) to Nabors Delaware under a secured revolving credit facility, including sub-

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facilities provided by certain of the lenders for letters of credit in an aggregate principal amount at any time outstanding not in excess of $100.0 million. The 2022 Credit Agreement replaces the 2018 Revolving Credit Facility.

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The 2022 Credit Agreement permits the incurrence of additional indebtedness secured by liens, which may include liens on the collateral securing the facility, in an amount up to $150.0 million as well as a grower basket for term loans in an amount not to exceed $100.0 million secured by liens not on the collateral. The Company is required to maintain an interest coverage ratio (EBITDA/interest expense), which increases on a quarterly basis, and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 90% of the consolidated property, plant and equipment of the Company. The facility matures on the earlier of (a) January 21, 2026 and (b) (i) to the extent any principal amount of Nabors Delaware’s existing 5.1% senior notes due 2023, 5.5% senior notes due 2023 and 5.75% senior notes due 2025 remains outstanding on the date that is 90 days prior to the applicable maturity date for such indebtedness, then such 90th day or (ii) to the extent 50% or more of the outstanding (as of the closing date) aggregate principal amount of the 0.75% senior exchangeable notes due 2024 remains outstanding and not refinanced or defeased on the date that is 90 days prior to the maturity date for such indebtedness, then such 90th day.

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Additionally, the Company is subject to certain covenants, which are subject to certain exceptions and include, among others, (i) a covenant restricting our ability to incur liens (subject to the additional liens basket of up to $150.0 million), (ii) a covenant restricting its ability to pay dividends or make other distributions with respect to its capital stock and to repurchase certain indebtedness and (iii) a covenant restricting the ability of the Company’s subsidiaries to incur debt (subject to the grower basket of up to $100.0 million).

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If we fail to perform our obligations under the covenants, the revolving credit commitments under the 2022 Credit Agreement could be terminated, and any outstanding borrowings under the facilities could be declared immediately due and payable. If necessary, we have the ability to manage our covenant compliance by taking certain actions including reductions in discretionary capital or other types of controllable expenditures, monetization of assets, amending or renegotiating the revolving credit agreement, accessing capital markets through a variety of alternative methods, or any combination of these alternatives. We expect to remain in compliance with all covenants under the 2022 Credit Agreement during the twelve month period following the date of this report based on our current operational and financial projections. However, we can make no assurance of continued compliance if our current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.

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Our ability to access capital markets or to otherwise obtain sufficient financing may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies in the United States and our historical ability to access these markets as needed. While there can be no assurances that we will be able to access these markets in the future, we believe that we will be able to access capital markets or otherwise obtain financing in order to satisfy any payment obligation that might arise upon maturity, exchange or purchase of our notes and our debt facilities, loss of availability of our revolving credit facilities and our A/R Agreement (see—Accounts Receivable Sales Agreement, below), and that any cash payment due, in addition to our other cash obligations, would not ultimately have a material adverse impact on our liquidity or financial position. The major U.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future, increase the cost of future debt, and potentially require us to post letters of credit for certain obligations. See Part I, Item 1A.—Risk Factors—A downgrade in our credit rating could negatively impact our cost of and ability to access capital markets or other financing sources.

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We had 18 letter-of-credit facilities with various banks outstanding as of December 31, 2021. Availability under these facilities was as follows:

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We are a holding company and therefore rely exclusively on repayments of interest and principal on intercompany loans that we have made to our operating subsidiaries and income from dividends and other cash flows from our operating subsidiaries. There can be no assurance that our operating subsidiaries will generate sufficient net income to

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pay us dividends or sufficient cash flows to make payments of interest and principal to us. See Part I., Item 1A.—Risk Factors—As a holding company, we depend on our operating subsidiaries and investments to meet our financial obligations.

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Accounts Receivable Sales Agreement

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On September 13, 2019, we entered into an A/R Facility consisting of a Receivables Sales Agreement and a Receivables Purchase Agreement, whereby the originators sold or contributed, and will on an ongoing basis continue to sell or contribute, certain of their domestic trade accounts receivables to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”). The SPE would in turn, sell, transfer, convey and assign to third-party Purchasers, all the rights, title and interest in and to its pool of eligible receivables.

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On July 13, 2021, we entered into the First Amendment to the Receivables Purchase Agreement which extends the term of the A/R Facility by two years, to August 13, 2023. However, the expiration of the agreement could be accelerated to July 19, 2022, if any of the 5.5% Senior Notes due 2023 of Nabors Delaware remain outstanding as of such date. The amendment also reduced the commitments of the Purchasers from $250 million to $150 million, with the possibility of being increased up to $200 million.

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The amount available for purchase under the A/R Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business after excluding excess concentrations and certain other ineligible receivables. The maximum purchase commitment of the Purchasers under the A/R Facility is approximately $150.0 million and the amount of receivables purchased by the Purchasers as of December 31, 2021 was $73.0 million.

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The originators, Nabors Delaware, the SPE, and the Company provide representations, warranties, covenants and indemnities under the A/R Facility and the indemnification guarantee. See further details at Note 4—Accounts Receivable Sales Agreement.

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Future Cash Requirements

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Our current cash and investments, projected cash flows from operations, proceeds from equity or debt issuances and the facilities under our 2022 Credit Agreement are expected to adequately finance our purchase commitments, capital expenditures, acquisitions, scheduled debt service requirements, and all other expected cash requirements for the next 12 months including the $24.4 million outstanding of the 5.50% senior notes due January 2023. However, we can make no assurances that our current operational and financial projections will prove to be correct, especially in light of the effects the COVID-19 pandemic has on oil and natural gas prices and, in turn, our business. A sustained period of highly depressed oil and natural gas prices could have a significant effect on our customers’ capital expenditure spending and therefore our operations, cash flows and liquidity.

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Purchase commitments outstanding at December 31, 2021 totaled approximately $269.1 million, primarily for rig-related enhancements, sustaining capital expenditures, operating expenses, and purchases of inventory. $238.1 million of the outstanding commitments are expected to be paid in the next 12 months. Purchase commitments include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the approximate timing of the transaction. We can reduce planned expenditures if necessary or increase them if market conditions and new business opportunities warrant it. The level of our outstanding purchase commitments and our expected level of capital expenditures over the next 12 months represent a number of capital programs that are currently underway or planned.

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As of December 31, 2021, we had approximately $3.3 billion of long-term debt outstanding with $3.3 billion in aggregate principal. We have expected aggregate future interest payments of $861.5 million related to the outstanding debt with $182.1 million due in the next twelve months. See Note 10—Debt in Part II, Item 8.—Financial Statements and Supplementary Data for additional details. Our obligations for operating leases total $32.2 million with $7.1 million of the obligations coming due in the upcoming year. See Note 20—Leases in Part II, Item 8.—Financial Statements and Supplementary Data for additional details.

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We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, both in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or

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exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors and may involve material amounts.

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We are a party to transactions, agreements or other contractual arrangements defined as “off-balance sheet arrangements” that could have a material future effect on our financial position, results of operations, liquidity and capital resources. The most significant of these off-balance sheet arrangements include the A/R Agreement (see —Accounts Receivable Sale Agreement, above) and certain agreements and obligations under which we provide financial or performance assurance to third parties. Certain of these financial or performance assurances serve as guarantees, including standby letters of credit issued on behalf of insurance carriers in conjunction with our workers’ compensation insurance program and other financial surety instruments such as bonds. In addition, we have provided indemnifications, which serve as guarantees, to some third parties. These guarantees include indemnification provided by us to our share transfer agent and our insurance carriers. We are not able to estimate the potential future maximum payments that might be due under our indemnification guarantees. Management believes the likelihood that we would be required to perform or otherwise incur any material losses associated with any of these guarantees is remote.

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The following table summarizes the total maximum amount of financial guarantees issued by Nabors:

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Cash Flows

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Our cash flows depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Sustained decreases in the price of oil or natural gas could have a material impact on these activities, and could also materially affect our cash flows. Certain sources and uses of cash, such as the level of discretionary capital expenditures or acquisitions, purchases and sales of investments, loans, issuances and repurchases of debt and of our common shares are within our control and are adjusted as necessary based on market conditions. We discuss our 2021 and 2020 cash flows below.

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Operating Activities. Net cash provided by operating activities totaled $428.8 million during 2021, compared to net cash provided of $349.8 million during 2020. Operating cash flows are our primary source of capital and liquidity.  Changes in working capital items such as collection of receivables, other deferred revenue arrangements and payments of operating payables are significant factors affecting operating cash flows. Changes in working capital items provided $188.1 million in cash flows during 2021 and used $8.4 million in cash flows during 2020 resulting in the increased operating cash flow for 2021 which more than offset the reduction in net income in 2021.

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Investing Activities. Net cash used for investing activities totaled $117.2 million during 2021 compared to net cash used of $165.5 million in 2020. Our primary use of cash for investing activities is for capital expenditures related to rig-related enhancements, new construction and equipment, as well as sustaining capital expenditures. During 2021 and 2020, we used cash for capital expenditures totaling $234.0 million and $195.5 million, respectively.

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We received $124.3 million in proceeds from insurance claims and sales of assets during 2021 compared to $27.4 million in 2020. The increase was primarily due to the sale of our Canada drilling assets in July 2021.

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Financing Activities. Net cash provided by financing activities totaled $448.4 million during 2021. During 2021, we received net proceeds of $700.0 million from the issuance of long-term debt and received $260.0 million from the public offering of NETC.  Partially offsetting these activities, we reduced $212.5 million in amounts borrowed under our revolving credit facilities and repaid $174.1 million on our senior notes. Additionally, we paid dividends totaling $7.3 million to our preferred shareholders and had distributions of $58.5 million from our SANAD joint venture to our partner.

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Net cash used for financing activities totaled $148.0 million during 2020. During 2020, we received net proceeds of $317.5 million in amounts borrowed under our revolving credit facilities, partially offset by a $1.3 billion repayment on our senior notes. Additionally, we paid dividends totaling $22.5 million to our common and preferred shareholders.

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Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries

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Nabors Delaware is an indirect, wholly owned subsidiary of Nabors. Nabors fully and unconditionally guarantees the due and punctual payment of the principal of, premium, if any, and interest on Nabors Delaware’s registered notes, which are its (i) 5.10% Senior Notes due 2023 (the “2023 Notes”), (ii) 5.50% Senior Notes due 2023 (the “5.50% 2023 Notes”) and (iii) 5.75% Senior Notes due 2025 (the “2025 Notes” and, together with the 2023 Notes and the 5.50% 2023 Notes, the “Registered Notes”), and any other obligations of Nabors Delaware under the Registered Notes when and as they become due and payable, whether at maturity, upon redemption, by acceleration or otherwise, if Nabors Delaware is unable to satisfy these obligations. Nabors’ guarantee of Nabors Delaware’s obligations under the Registered Notes are its unsecured and unsubordinated obligation and have the same ranking with respect to Nabors’ indebtedness as the Registered Notes have with respect to Nabors Delaware’s indebtedness. In the event that Nabors is required to withhold or deduct on account of any Bermudian taxes due from any payment made under or with respect to its guarantees, subject to certain exceptions, Nabors will pay additional amounts so that the net amount received by each holder of Registered Notes will equal the amount that such holder would have received if the Bermudian taxes had not been required to be withheld or deducted.

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The following summarized financial information is included so that separate financial statements of Nabors Delaware are not required to be filed with the SEC. The condensed consolidating financial statements present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.

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In lieu of providing separate financial statements for issuers and guarantors (the “Obligated Group”), we have presented the accompanying supplemental summarized combined balance sheet and income statement information for the Obligated Group based on Rule 13-01 of the SEC’s Regulation S-X that we early adopted effective April 1, 2020.

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All significant intercompany items among the Obligated Group have been eliminated in the supplemental summarized combined financial information. The Obligated Group’s investment balances in subsidiary non-guarantors have been excluded from the supplemental combined financial information. Significant intercompany balances and activity for the Obligated Group with other related parties, including subsidiary non-guarantors (referred to as “affiliates”), are presented separately in the accompanying supplemental summarized financial information.

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Summarized combined Balance Sheet and Income Statement information for the Obligated Group is as follows (in thousands):

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Other Matters

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Recent Accounting Pronouncements

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See Note 2—Summary of Significant Accounting Policies in Part II, Item 8.—Financial Statements and

Supplementary Data.

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Critical Accounting Estimates

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The preparation of our financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. We analyze our estimates based on our historical experience and various other assumptions that we believe to be reasonable under the circumstances. However, actual results could differ from our estimates. The following is a discussion of our critical accounting estimates. Management considers an accounting estimate to be critical if:

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For a summary of all our significant accounting policies, see Note 2—Summary of Significant Accounting Policies in Part II, Item 8.—Financial Statements and Supplementary Data.

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Depreciation of Property, Plant and Equipment. The drilling and drilling services industries are very capital intensive. Property, plant and equipment represented 61% of our total assets as of December 31, 2021, and depreciation and amortization constituted 28% of our total costs and other deductions in 2021.

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Depreciation for our primary operating assets, drilling rigs, is calculated based on the units-of-production method. For each day a rig is operating, we depreciate it over an approximate 4,927-day period, with the exception of our jackup rigs which are depreciated over an 8,030-day period, in each case after provision for salvage value. For each day a rig asset is not operating, it is depreciated over an assumed depreciable life of 20 years, with the exception of our jackup rigs, where a 30-year depreciable life is typically used, after provision for salvage value.

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Depreciation on our buildings, oilfield hauling and mobile equipment, aircraft equipment, and other machinery and equipment is computed using the straight-line method over the estimated useful life of the asset after provision for salvage value (buildings—10 to 30 years; aircraft equipment—5 to 20 years; oilfield hauling and mobile equipment and other machinery and equipment—3 to 10 years).

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These depreciation periods and the salvage values of our property, plant and equipment were determined through an analysis of the useful lives of our assets and based on our experience with the salvage values of these assets. Periodically, we review our depreciation periods and salvage values for reasonableness given current conditions. Depreciation of property, plant and equipment is therefore based upon estimates of the useful lives and salvage value of those assets. Estimation of these items requires significant management judgment. Accordingly, management believes that accounting estimates related to depreciation expense recorded on property, plant and equipment are critical.

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There have been no factors related to the performance of our portfolio of assets, changes in technology or other factors indicating that these estimates do not continue to be appropriate. Accordingly, for the years ended December 31, 2021, 2020 and 2019, no significant changes have been made to the depreciation rates applied to property, plant and equipment, the underlying assumptions related to estimates of depreciation, or the methodology applied. However, certain events could occur that would materially affect our estimates and assumptions related to depreciation. Unforeseen changes in operations or technology could substantially alter management’s assumptions regarding our ability to realize the return on our investment in operating assets and therefore affect the useful lives and salvage values of our assets.

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Impairment of Long-Lived Assets. As discussed above, the drilling and drilling services industries are very capital intensive. We review our assets for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the estimated undiscounted future cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to the extent the carrying amount of the long-lived asset exceeds its estimated fair value determined utilizing either a discounted cash flows or market approach model. Management considers a number of factors such as estimated future cash flows from the assets, appraisals and current market value analysis in determining fair value. The determination of future cash flows requires the estimation of utilization, dayrates, operating margins, sustaining capital and remaining economic life. Such estimates can change based on market conditions, technological advances in the industry or changes in regulations governing the industry. The appraisals require estimation based on location, working status, asset condition and market conditions. Significant and unanticipated changes to the assumptions could result in future impairments. A significantly prolonged period of lower oil and natural gas prices could continue to adversely affect the demand for and prices of our services, which could result in future impairment charges. As the determination of whether impairment charges should be recorded on our long-lived assets is subject to significant management judgment, and an impairment of these assets could result in a material charge on our consolidated statements of income (loss), management believes that accounting estimates related to impairment of long-lived assets are critical.

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Assumptions in the determination of future cash flows are made with the involvement of management personnel at the operational level where the most specific knowledge of market conditions and other operating factors exists. For 2021, 2020 and 2019, no significant changes have been made to the methodology utilized to determine future cash flows.

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For an asset classified as held for sale, we consider the asset impaired when its carrying amount exceeds fair value less its cost to sell. Fair value is determined by calculating the expected sales price less any costs to sell.

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Impairment of Goodwill and Intangible Assets. We review goodwill and intangible assets with indefinite lives for impairment annually during the second quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the carrying amount of such goodwill and intangible assets may exceed their fair value. We perform our impairment tests for goodwill for all our reporting units within our reportable segments. Our business consists of U.S. Drilling, Canada Drilling, International Drilling, Drilling Solutions and Rig Technologies reportable segments. Our Rig Technologies reportable segment includes our Canrig, RDS and 2TD reporting units. We initially assess goodwill for impairment based on qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one of our reporting units is greater than its carrying amount. If the carrying amount exceeds the fair value, an impairment charge will be recognized in an amount equal to the excess; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

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Due to industry conditions and the corresponding impact on future expectations of demand for our products and services, including the effect on our stock price, we determined a triggering event had occurred and performed a quantitative impairment assessment of our goodwill as of March 31, 2020. Based on the results of our goodwill test performed in the first quarter of 2020, we recognized additional impairment charges to write off the remaining goodwill balances attributable to our Drilling Solutions and Rig Technologies operating segments of $11.4 million and $16.4 million, respectively, in the quarter ended March 31, 2020.

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We also reviewed our intangible assets for impairment in the first quarter of 2020. The fair value of our intangible assets is determined using discounted cash flow models. Based on our updated projections of future cash flows, the fair value of our intangible assets did not support the carrying value. As such, we recognized an impairment of $83.6 million to write off all remaining intangible assets in the quarter ended March 31, 2020.

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Our estimated fair values of our reporting units incorporate judgment and the use of estimates by management. The fair values calculated in these impairment tests were determined using discounted cash flow models, which require the use of significant unobservable inputs, representative of a Level 3 fair value measurement. Our cash flow models involve assumptions based on our utilization of rigs or other oil and gas service equipment, revenues and earnings from affiliates, as well as direct costs, general and administrative costs, depreciation, applicable income taxes, capital expenditures and working capital requirements. Our fair value estimates of these reporting units are sensitive to varying dayrates, utilization, and costs. A significantly prolonged period of lower oil and natural gas prices, other than those assumed in developing our forecasts, or changes in laws and regulations could adversely affect the demand for and prices of our services, which could in turn result in future goodwill and other intangible asset impairment charges for

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these reporting units due to the potential impact on our estimate of our future operating results. Our discounted cash flow projections for each reporting unit were based on financial forecasts. The future cash flows were discounted to present value using discount rates determined to be appropriate for each reporting unit. Terminal values for each reporting unit were calculated using a Gordon Growth methodology with a long-term growth rate of approximately 2%.

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Another factor in determining whether impairment has occurred is the relationship between our market capitalization and our book value. As part of our annual review, we compared the sum of our reporting units’ estimated fair value, which included the estimated fair value of non-operating assets and liabilities, less debt, to our market capitalization and assessed the reasonableness of our estimated fair value. Any of the above-mentioned factors may cause us to re-evaluate goodwill during any quarter throughout the year.

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Income Taxes. We operate in a number of countries and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We are currently contesting tax assessments in a number of countries and may contest future assessments. We believe the ultimate resolution of the outstanding assessments, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments.

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Audit claims of approximately $128.6 million attributable to income tax have been assessed against us. We have contested, or intend to contest, these assessments, including through litigation if necessary, and we believe the ultimate resolution, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. Tax authorities may issue additional assessments or pursue legal actions as a result of tax audits and we cannot predict or provide assurance as to the ultimate outcome of such assessments and legal actions.

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Applicable income and withholding taxes have not been provided on undistributed earnings of our subsidiaries. We do not intend to repatriate such undistributed earnings except for distributions upon which incremental income and withholding taxes would not be material.

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In certain jurisdictions we have recognized deferred tax assets and liabilities. Judgment and assumptions are required in determining whether deferred tax assets will be fully or partially utilized. When we estimate that all or some portion of certain deferred tax assets such as net operating loss carryforwards will not be utilized, we establish a valuation allowance for the amount ascertained to be unrealizable. We continually evaluate strategies that could allow for future utilization of our deferred assets. Any change in the ability to utilize such deferred assets will be accounted for in the period of the event affecting the valuation allowance. If facts and circumstances cause us to change our expectations regarding future tax consequences, the resulting adjustments could have a material effect on our financial results or cash flow.

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Litigation and Self-Insurance Reserves. Our operations are subject to many hazards inherent in the drilling and drilling services industries, including blowouts, cratering, explosions, fires, loss of well control, loss of or damage to the wellbore or underground reservoir, damaged or lost drilling equipment and damage or loss from inclement weather or natural disasters. Any of these and other hazards could result in personal injury or death, damage to or destruction of equipment and facilities, suspension of operations, environmental and natural resources damage and damage to the property of others. Our offshore operations are also subject to the hazards of marine operations including capsizing, grounding, collision and other damage from hurricanes and heavy weather or sea conditions and unsound ocean bottom conditions. Our operations are subject to risks of war or acts of terrorism, civil disturbances and other political events.

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Accidents may occur, we may be unable to obtain desired contractual indemnities, and our insurance may prove inadequate in certain cases. There is no assurance that our insurance or indemnification agreements will adequately protect us against liability from all the consequences of the hazards described above. Moreover, our insurance coverage generally provides that we assume a portion of the risk in the form of a deductible or self-insured retention.

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Based on the risks discussed above, it is necessary for us to estimate the level of our liability related to insurance and record reserves for these amounts in our consolidated financial statements. Reserves related to self-insurance are based on the facts and circumstances specific to the claims and our past experience with similar claims. The actual outcome of self-insured claims could differ significantly from estimated amounts. We maintain actuarially determined accruals in our consolidated balance sheets to cover self-insurance retentions for workers’ compensation, employers’ liability, general liability and automobile liability claims. These accruals are based on certain assumptions developed

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utilizing historical data to project future losses. Loss estimates in the calculation of these accruals are adjusted based upon actual claim settlements and reported claims. These loss estimates and accruals recorded in our financial statements for claims have historically been reasonable in light of the actual amount of claims paid.

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Because the determination of our liability for self-insured claims is subject to significant management judgment and in certain instances is based on actuarially estimated and calculated amounts, and because such liabilities could be material in nature, management believes that accounting estimates related to self-insurance reserves are critical.

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During 2021, 2020 and 2019, no significant changes were made to the methodology used to estimate insurance reserves. For purposes of earnings sensitivity analysis, if the December 31, 2021 reserves were adjusted by 10%, total costs and other deductions would change by $11.3 million, or .45%.

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