NABORS INDUSTRIES LTD. We often discuss expectations regarding our future markets, demand for our products and services, and our performance in our annual, quarterly and current reports, press releases, and other written and oral statements. Statements relating to matters that are not historical facts are "forward-looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These "forward-looking statements" are based on an analysis of currently available competitive, financial and economic data and our operating plans. They are inherently uncertain and investors should recognize that events and actual results could turn out to be significantly different from our expectations. By way of illustration, when used in this document, words such as "anticipate," "believe," "expect," "plan," "intend," "estimate," "project," "will," "should," "could," "may," "predict" and similar expressions are intended to identify forward-looking statements.
You should consider the following key factors when evaluating these forward-looking statements:
? The COVID-19 pandemic and its impact on our operations as well as oil and gas
markets and prices;
? fluctuations and volatility in worldwide prices of and demand for oil and
natural gas;
? fluctuations in levels of oil and natural gas exploration and development
activities;
? fluctuations in the demand for our services;
? competitive and technological changes and other developments in the oil and gas
and oilfield services industries;
? our ability to renew customer contracts in order to maintain competitiveness;
? the existence of operating risks inherent in the oil and gas and oilfield
services industries; ? the possibility of the loss of one or a number of our large customers;
? the impact of long-term indebtedness and other financial commitments on our
financial and operating flexibility;
our access to and the cost of capital, including the impact of a downgrade in
? our credit rating, covenant restrictions, availability under our revolving
credit facility, and future issuances of debt or equity securities;
? our dependence on our operating subsidiaries and investments to meet our
financial obligations;
? our ability to retain skilled employees;
? our ability to complete, and realize the expected benefits of, strategic
transactions;
? changes in tax laws and the possibility of changes in other laws and
regulations;
? the possibility of political or economic instability, civil disturbance, war or
acts of terrorism in any of the countries in which we do business;
? the possibility of changes to
imposition of trade embargoes or sanctions; and
? general economic conditions, including the capital and credit markets.
Our business depends, to a large degree, on the level of spending by oil and gas
companies for exploration, development and production activities. Therefore, a
sustained increase or decrease in the price of oil or natural gas, that has a
material impact on exploration, development and production activities, could
also materially affect our financial position, results of operations and cash
flows.
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The above description of risks and uncertainties is by no means all-inclusive,
but highlights certain factors that we believe are important for your
consideration. For a more detailed description of risk factors that may affect
us or our industry, please refer to Item 1A. - Risk Factors in our 2019 Annual
Report, as amended and supplemented in Part II, Item 1A.- Risk Factors in our
Quarterly Reports for the quarters ended March 31 and June 30, 2020 .
Management Overview
This section is intended to help you understand our results of operations and
our financial condition. This information is provided as a supplement to, and
should be read in conjunction with, our condensed consolidated financial
statements and the accompanying notes thereto.
We own and operate one of the world's largest land-based drilling rig fleets and
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, consisting of
equipment manufacturing, rig instrumentation and optimization software. We also
specialize in tubular services, wellbore placement solutions and are a leading
provider of directional drilling and measurement-while-drilling systems andservices. Outlook The demand for our products and 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. During 2020, the oil markets have experienced unprecedented volatility. The outbreak of the COVID-19, and its development into a pandemic, along with policies and actions taken by governments and companies and behaviors of customers around the world, have had a significant negative impact on demand for oil. Additionally, decisions by large oil and natural gas producing countries around the start of the pandemic led to increased oil production and supply. This combination of oversupply and demand weakness has had a negative impact on the energy markets and has led to a significant drop in oil prices with West Texas Intermediate crude oil reaching negative prices during the second quarter. Crude oil prices have continued to be impacted by oversupply fears, as considerable uncertainty remains as to timing of a resumption of normal levels of economic activity following the COVID-19 related restrictions. This has led many of our customers to make significant cuts in their activity, which has negatively affected our operating results and cash flow. During the third quarter of 2020, the volatility in oil prices began to stabilize. There were also signs of increased global demand for energy as economic activity began to increase. When taken together with slight improvements in oil inventories and supply side indicators, these signs have led to indications of renewed customer confidence. In theU.S. markets, we saw activity levels stabilize during the third quarter, and even increase towards the end of the quarter and subsequently. Internationally, activity levels continue to vary by market, but we have seen some resumption of activity in many of the regions that experienced more restrictive responses to COVID-19. In other markets, we believe that we have visibility to some level of restored activity levels in the near term. In response to market challenges, we have implemented various measures to mitigate their potential impact. These include reducing planned capital expenditures, reductions in discretionary expenditures and dividends, reductions in our workforce, salary reductions across most of our employee base and other steps to further streamline our operations. Although we cannot predict the full impact of COVID-19 on global oil demand, it could have a larger material adverse effect on our business, financial condition, results of operations and cash flows beyond what is discussed within this report. Recent Developments Tender Offers InJanuary 2020 , Nabors completed a private placement of$600.0 million aggregate principal amount of senior guaranteed notes due 2026 (the "2026 Notes") and$400.0 million aggregate principal amount of senior guaranteed notes due 2028 (the "2028 Notes" and, together with the 2026 Notes, the "Notes"). The 2026 and 2028 Notes bear interest at 30
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an annual rate of 7.25% and 7.50%, respectively. The Notes are fully and unconditionally guaranteed by certain of Nabors' indirect wholly owned subsidiaries. The proceeds from this offering were used primarily to repurchase$952.9 million aggregate principal amount of certain ofNabors Delaware's senior notes that were tendered pursuant to an offer to purchase certain of our senior notes (the "Tender Offers"). The aggregate principal amount repurchased included approximately$407.7 million of our 5.50% Notes,$379.7 million of our 4.625% Notes and$165.5 million of our 5.10% Notes. We also repurchased an additional$134.8 million in aggregate principal amount of various senior notes during the quarter, for a combined total of$1.1 billion . We realized a net gain of$15.7 million from these repurchases. Reverse Stock Split
At a special meeting of shareholders heldApril 20, 2020 , our shareholders authorized the Reverse Stock Split at a ratio of not less than 1-for-15 and not greater than 1-for-50, with the exact ratio to be set within that range at the sole direction of our Board. OnApril 20, 2020 , the Board set the Reverse Stock Split ratio at 1-for-50. As a result of the Reverse Stock Split, 50 pre-reverse split common shares were automatically combined into one new common share, without any action on the part of the shareholders. Our authorized number of common shares were also proportionally decreased from 800,000,000 to 16,000,000 common shares. Subsequently, the par value of each common share was proportionally increased from$0.001 to$0.05 . In addition, at the special meeting, the shareholders authorized an increase in our common share capital by 100% following the Reverse Stock Split, to$1,600,000 , resulting in an increase in the number of authorized shares to 32,000,000. No fractional common shares were issued as a result of the Reverse Stock Split. Any fractional common shares of registered holders resulting from the Reverse Stock Split were rounded up to the nearest whole share. Unless otherwise noted, all share and per share information included in this quarterly report on Form 10-Q has been retrospectively adjusted to reflect this Reverse Stock Split. Shareholder Rights Plan
OnMay 5, 2020 , our Board adopted a shareholder rights plan and declared a dividend of one right (a "Right") for each outstanding common share to shareholders of record onMay 15, 2020 . Each Right entitles the holder to purchase from Nabors one one-thousandth of a Series B Junior Participating Preferred Share, par value$0.001 per share (the "Series B Preferred Shares'), of Nabors at a price of$58.08 per one one-thousandth of a Series B Preferred Share, subject to adjustment. The description of the Rights are set forth in a Rights Agreement, datedMay 5, 2020 (the "Rights Agreement"), by and between Nabors andComputershare Trust Company , N.A., as Rights Agent. Initially, the Rights will not be exercisable and will trade with our common shares. Under the Rights Agreement, the Rights will become exercisable only if a person or group or persons acting together (each, an "acquiring person") acquires beneficial ownership of 4.9% or more of our outstanding common shares. The Rights Agreement was amended onMay 27, 2020 to permit the shareholder identified therein, together with affiliates and associates, to beneficially own up to 10% of our outstanding common shares. If the Rights are triggered, each holder of a Right (other than the acquiring person, whose Rights will become void) will be entitled to purchase additional shares of our common stock at a 50% discount. In addition, if we are acquired in a merger or other business combination after an Acquiring Person acquires more than 4.9% of our outstanding common shares (10% for the shareholder identified in the amendment), each holder of a Right would then be entitled to purchase shares of the acquiring company's stock at a 50% discount. Our Board, at its option, may exchange each Right (other than Rights owned by the acquiring person that have become void) in whole or in part, at an exchange ratio of one common share per outstanding Right, subject to adjustment. Except as provided in the Rights Agreement, our Board is entitled to redeem the Rights at$0.01 per Right. A person or group of persons that beneficially owns our common shares at or above the trigger applicable threshold as of the time of the public announcement of the Rights Agreement generally will not trigger the Rights until such person or group of persons increases its ownership by 0.5% or more. Financial Results
Comparison of the three months ended
Operating revenues for the three months ended
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our operating segments due to the impact on our businesses brought on by the COVID-19 outbreak mentioned earlier. While all of our segments have been adversely impacted, the US markets experienced the most dramatic decline in activity, as evidenced by the 53% decline in average rigs working within our US Drilling operating segment. Our Drilling Solutions and Rig Technology segments also are affected by the decline in activity in the US. Our International Drilling segment experienced a significant, but less pronounced decline in activity as evidenced by the 19% decline in average rigs working. For a more detailed description of operating results see Segment Results of Operations, below. Net loss from continuing operations attributable to Nabors common shareholders totaled$161.1 million $23.42 per diluted share) for the three months endedSeptember 30, 2020 compared to a net loss from continuing operations attributable to Nabors common shareholders of$123.4 million $18.27 per diluted share) for the three months endedSeptember 30, 2019 , or a$37.7 million increase in the net loss. Our net loss was adversely impacted by the$89.6 million decrease in our segments' adjusted operating income. This decrease was partially offset by a$27.6 million favorable change in income taxes and$11.5 million favorable change in adjusted operating income in our corporate expenses and eliminations. General and administrative expenses for the three months endedSeptember 30, 2020 totaled$46.2 million , representing a decrease of$17.4 million , or 27%, compared to the three months endedSeptember 30, 2019 . This is reflective of a significant reduction in workforce and general cost-reduction efforts across our operating segments and our corporate offices due to current industry market conditions. Research and engineering expenses for the three months endedSeptember 30, 2020 totaled$7.6 million , representing a decrease of$4.4 million , or 37%, compared to the three months endedSeptember 30, 2019 . The decrease is attributable to reductions in staffing levels and other cost control efforts across many of our research and engineering projects and initiatives due to current industry market conditions.
Depreciation and amortization expense for the three months endedSeptember 30, 2020 was$206.9 million , representing a decrease of$14.7 million , or 7%, compared to the three months endedSeptember 30, 2019 . The decrease is primarily due to reduction in rig activity, limited capital expenditures over recent years and the effect of recent impairments and retirements of long-lived assets.
Segment Results of Operations
The following tables set forth certain information with respect to our reportable segments and rig activity:
Three Months Ended
September 30,
2020 2019 Increase/(Decrease)
U.S. Drilling
Operating revenues $ 130,243 $ 307,808 $ (177,565) (58) %Adjusted operating income (loss) (1)$ (39,162) $ 12,427
$ (51,589) (415) % Average rigs working (2) 53.4 114.1 (60.7) (53) % Canada Drilling Operating revenues$ 10,774 $ 12,191 $ (1,417) (12) %
Adjusted operating income (loss) (1)$ (3,507) $ (5,701)
$ 2,194 38 % Average rigs working (2) 7.4 7.7 (0.3) (4) % International Drilling Operating revenues$ 248,392 $ 328,278 $ (79,886) (24) %
Adjusted operating income (loss) (1)$ (16,872) $ 2,466
$ (19,338) (784) % Average rigs working (2) 71.3 87.7 (16.4) (19) % Drilling Solutions Operating revenues$ 29,324 $ 62,286 $ (32,962) (53) %
Adjusted operating income (loss) (1)$ (3,583) $ 16,145
$ (19,728) (122) % Rig Technologies Operating revenues$ 28,466 $ 63,106 $ (34,640) (55) %
Adjusted operating income (loss) (1)$ (1,807) $ (641)
$ (1,166) (182) % 32 Table of Contents
Adjusted operating income (loss) is our measure of segment profit and loss. (1) See Note 12-Segment Information to the consolidated financial statements
included in Item 1 of the report.
Represents a measure of the average number of rigs operating during a given
period. For example, one rig operating 45 days during a quarter represents (2) approximately 0.5 average rigs working for the quarter. On an annual period,
one rig operating 182.5 days represents approximately 0.5 average rigs
working for the year.
U.S. Drilling
Operating revenues for our
Canada Drilling Operating revenues decreased during the three months endedSeptember 30, 2020 compared to the corresponding period primarily due to a decrease in activity as evidenced by the 4% decrease in average rigs working and decreased day rates. However, cost reduction actions more than offset the drop in revenue. International Drilling Operating revenues for our International Drilling segment were down compared to the corresponding prior year period primarily due to reduced activity, as reflected by the 19% decrease in the average number of rigs working, as certain countries implemented measures to counter COVID-19, particularly inLatin America . This reduction in revenues was partially offset by significant cost reductions related to the drop in activity. Drilling Solutions
Operating revenues for this segment also decreased during the three months endedSeptember 30, 2020 compared to the corresponding period primarily due to the reduced activity across theU.S. as the market softened in response to reduced oil prices and COVID-19. The reduction in activity and operating revenues was partially offset by cost management initiatives mainly focusing on labor and repair and maintenance costs as well as an overall reduction in administrative expenses. Rig Technologies Operating revenues for our Rig Technologies segment decreased during the three months endedSeptember 30, 2020 compared to the corresponding period due to the overall decline in activity in theU.S. as mentioned previously. Despite a significant drop in revenues of$34.6 million , this segment enacted significant cost reduction measures to mitigate almost all the impact, such that adjusted operating income was only down by$1.2 million . Other Financial Information Interest expense Interest expense for the three months endedSeptember 30, 2020 was$52.4 million , representing an increase of$1.1 million , or 2%, compared to the three months endedSeptember 30, 2019 . The increase was primarily due to the higher interest rates on the 2026 Notes and the 2028 Notes, which were issued inJanuary 2020 , compared to the lower interest rate debt that was repurchased in the Tender Offers using the proceeds from that offering. 33 Table of Contents
Impairments and other charges
During the three months endedSeptember 30, 2020 , we recognized impairments and other charges of approximately$5.0 million , which primarily consisted of severance and reorganization costs of$4.8 million due to significant reductions in our workforce and cost cutting measures that we enacted in response to the current industry environment. During the three months endedSeptember 30, 2019 , we recognized impairments and other charges of$3.6 million , resulting from severance and other related costs incurred to right-size our cost structure of approximately$2.9 million and a loss on debt buybacks of approximately$0.7 million . Other, net Other, net for the three months endedSeptember 30, 2020 was$0.4 million of income, which included a net gain on debt buybacks of$14.2 million . This was partially offset by net losses on sales and disposals of assets of approximately$3.3 million , foreign currency loss of$9.3 million and an increase in litigation reserves of$0.6 million . Other, net for the three months endedSeptember 30, 2019 was$5.0 million of expense, mostly attributable to foreign currency exchange losses of$8.7 million , primarily due to the devaluation inArgentina . This was partially offset by a decrease in litigation reserves of$2.4 million and net gains on sales and disposals of assets of approximately$1.8 million . Income taxes Our worldwide effective tax rate for the three months endedSeptember 30, 2020 was 2.5% compared to (31.5%) for the three months endedSeptember 30, 2019 . The change in the effective tax rate was primarily attributable to the change in our geographic mix of our pre-tax earnings (losses). Future changes in the mix or pre-tax earnings could materially change the effective income tax rate.
Comparison of the nine months ended
Operating revenues for the nine months endedSeptember 30, 2020 totaled$1.7 billion , representing a decrease of$638.5 million , or 27%, compared to the nine months endedSeptember 30, 2019 . The primary driver was a decrease inU.S. activity in response to the rapid decline in global market conditions, as evidenced by the 40% decline in average rigs working within ourU.S. Drilling operating segment. This market decline led to a decrease in operating revenue across virtually all of our operating segments, and specifically within theU.S. markets. For a more detailed description of operating results see Segment Results of Operations, below. Net loss from continuing operations attributable to Nabors common shareholders totaled$708.3 million ($102.25 per diluted share) for the nine months endedSeptember 30, 2020 compared to a net loss from continuing operations attributable to Nabors common shareholders of$453.1 million ($66.70 per diluted share) for the nine months endedSeptember 30, 2019 , or a$255.2 million increase in the net loss. This increase in the net loss is primarily attributable to$233.3 million increase in various impairments and other charges recognized. This increase in impairments and other charges was primarily due to the outbreak of COVID-19 which caused the oil market to experience unprecedented volatility leading to a significant decline in oil prices resulting from oversupply and demand weakness, which in turn has had a significant impact on our business and results of our operations. During the nine months endedSeptember 30, 2019 , we recognized$106.0 million in various impairments and other charges primarily related to goodwill and intangible impairments as compared to$339.3 million recognized during the nine months endedSeptember 30, 2020 .
General and administrative expenses for the nine months endedSeptember 30, 2020 totaled$149.8 million , representing a decrease of$46.4 million , or 24%, compared to the nine months endedSeptember 30, 2019 . This is reflective of a significant reduction in workforce and general cost-reduction efforts across our operating segments and our corporate offices due to current industry market conditions. Research and engineering expenses for the nine months endedSeptember 30, 2020 totaled$26.3 million , representing a decrease of$11.2 million , or 30%, compared to the nine months endedSeptember 30, 2019 . The decrease is attributable to reductions in staffing levels and other cost control efforts across many of our research and engineering projects and initiatives due to current industry market conditions. 34 Table of Contents Depreciation and amortization expense for the nine months endedSeptember 30, 2020 was$645.0 million , representing a decrease of$5.2 million , or 1%, compared to the nine months endedSeptember 30, 2019 . The decrease is primarily due to reduction in rig activity, limited capital expenditures over recent years and the effect of recent impairments and retirements of long-lived assets.
Segment Results of Operations
The following tables set forth certain information with respect to our reportable segments and rig activity:
Nine Months Ended
September 30,
2020 2019 Increase/(Decrease)
(In thousands, except percentages and rig activity)
U.S. Drilling
Operating revenues $ 578,928 $ 951,419 $ (372,491) (39) %
Adjusted operating income (loss) (1) $ (69,961) $ 57,502$ (127,463) (222) % Average rigs working (2) 71.1 119.0 (47.9) (40) % Canada Drilling Operating revenues$ 39,929 $ 48,895 $ (8,966) (18) % Adjusted operating income (loss) (1)$ (9,265) $ (11,297) $ 2,032 18 % Average rigs working (2) 8.8 10.4 (1.6) (15) % International Drilling Operating revenues$ 886,580 $ 992,439 $ (105,859) (11) % Adjusted operating income (loss) (1)$ (20,743) $ (10,055) $ (10,688) (106) % Average rigs working (2) 80.1 88.7 (8.6) (10) % Drilling Solutions Operating revenues$ 117,837 $ 192,291 $ (74,454) (39) %
Adjusted operating income (loss) (1)$ 8,699 $
42,793$ (34,094) (80) % Rig Technologies Operating revenues$ 104,198 $ 207,610 $ (103,412) (50) %
Adjusted operating income (loss) (1)$ (11,450) $
(5,293)
Adjusted operating income (loss) is our measure of segment profit and loss. (1) See Note 12-Segment Information to the consolidated financial statements
included in Item 1 of the report.
Represents a measure of the average number of rigs operating during a given
period. For example, one rig operating 45 days during a quarter represents (2) approximately 0.5 average rigs working for the quarter. On an annual period,
one rig operating 182.5 days represents approximately 0.5 average rigs
working for the year.
U.S. Drilling
Operating revenues for our
Canada Drilling Operating revenues decreased during the nine months endedSeptember 30, 2020 compared to the corresponding period primarily due to a decrease in activity as evidenced by the 15% decrease in average rigs working and decreased day rates. However, cost reduction actions more than offset the drop in revenue. International Drilling
Operating revenues for our International Drilling segment were down compared to the corresponding prior year period primarily due to reduced activity, as reflected by the 10% decrease in the average number of rigs working, as
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certain countries implemented measures to counter COVID-19. The reduction in revenues was partially offset by significant cost reductions related to the
drop in activity. Drilling Solutions Operating revenues for this segment also decreased during the nine months endedSeptember 30, 2020 compared to the corresponding period primarily due to the reduced activity across theU.S. as the market softened in response to reduced oil prices and COVID-19. The reduction in activity and operating revenues was partially offset by cost management initiatives mainly focusing on labor and repair and maintenance costs as well as an overall reduction in administrative expenses. Rig Technologies Operating revenues for our Rig Technologies decreased during the nine months endedSeptember 30, 2020 compared to the corresponding period due to the overall decline in activity in theU.S. as mentioned previously. Despite the drop in revenues of$103.4 million , this segment enacted significant cost reduction measures to mitigate almost all of the impact, such that adjusted operating income was only down$6.2 million . Other Financial Information Interest expense Interest expense for the nine months endedSeptember 30, 2020 was$158.3 million , representing an increase of$3.2 million , or 2%, compared to the nine months endedSeptember 30, 2019 . The increase was primarily due to the higher interest rates on the 2026 Notes and the 2028 Notes, which were issued inJanuary 2020 , compared to the lower interest rate debt that was repurchased in the Tender Offers using the proceeds from that offering. Impairments and other charges
During the nine months endedSeptember 30, 2020 , we recognized impairments and other charges of approximately$339.3 million . The increased amount of impairments was due to the outbreak of COVID-19 and the oil market experiencing unprecedented volatility leading to a significant decline in oil prices resulting from oversupply and demand weakness in early 2020. These impairments primarily included impairments and write offs of long-lived assets of$194.4 million comprised of underutilized rigs and drilling-related equipment across all of our operating segments. We recognized impairments of$16.4 million for the remaining goodwill balance attributable to our Rig Technologies operating segment and$11.4 million for the remaining goodwill balance attributable to our Drilling Solutions operating segment. Additionally, we recognized an impairment of$83.6 million to write off our remaining intangible assets. During the nine months endedSeptember 30, 2019 , we recognized impairments and other charges of$106.0 million , primarily resulting from goodwill impairment charges of$93.6 million . Additionally, we recognized a partial impairment of$5.2 million to write down our intangible asset within our Rig Technologies operating segment to its fair value. The balance of the impairments and other charges represents$5.4 million in severance and other related costs incurred to right-size our cost structure and a loss of$1.8 million related to the repurchase of our senior notes. Other, net Other, net for the nine months endedSeptember 30, 2020 was$48.3 million of income, which included a net gain on debt buybacks of$65.8 million and release of contingent consideration reserves in connection with a previous acquisition of$8.6 million . This was partially offset by net losses on sales and disposals of assets of approximately$5.8 million , an increase in litigation reserves of$2.7 million and foreign currency exchange loss of$11.4 million . Other, net for the nine months endedSeptember 30, 2019 was$30.6 million of expense, which included foreign currency exchange losses of$18.7 million , net losses on sales and disposals of assets of approximately$8.4 million and an increase in litigation reserves of$4.2 million . 36 Table of Contents Income taxes Our worldwide effective tax rate for the nine months endedSeptember 30, 2020 was (2.9%) compared to (19.7%) for the nine months endedSeptember 30, 2019 . The change in the effective tax rate was primarily attributable to the change in our geographic mix of our pre-tax earnings (losses). Future changes in the mix or pre-tax earnings could materially change the effective income tax rate.
Liquidity and Capital Resources
Financial Condition and Sources of Liquidity
Our primary sources of liquidity are cash and investments, availability under our revolving credit facility and cash provided by operating activities. As ofSeptember 30, 2020 , we had cash and short-term investments of$513.8 million and working capital of$677.0 million . As ofDecember 31, 2019 , we had cash and short-term investments of$452.5 million and working capital of$592.1 million . AtSeptember 30, 2020 , we had$752.3 million of borrowings outstanding under the 2018 Revolving Credit Facility, which has a total borrowing capacity of$1.014 billion . The 2018 Revolving Credit Facility requires us to maintain "minimum liquidity" of no less than$160.0 million at any time in order to access the total borrowing capacity and an asset to debt coverage ratio of at least 4.25:1, as of the end of each calendar quarter. The asset to debt coverage ratio applies only during the period whichNabors Delaware fails to maintain an investment grade rating from at least two rating agencies, which was the case as of the date of this report. As ofSeptember 30, 2020 , there was a$50.6 million reduction in total available borrowing capacity under the 2018 Revolving Credit Facility due to the minimum liquidity requirement discussed above. We also had$26.7 million of letters of credit outstanding under the 2018 Revolving Credit Facility. AtSeptember 30, 2020 , we were in compliance with all covenants contained in the 2018 Revolving Credit Facility and based on current forecasts of operational performance, we believe we can meet all our obligations over
the next twelve months. Our ability to access capital markets or to otherwise obtain sufficient financing may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies inthe United States . While there can be no assurances that we will be able to access these markets in the future, we are optimistic that we will be able to continue to access these markets or otherwise obtain financing in order to satisfy any payment obligation that might arise upon maturity, exchange or purchase of our notes and our debt facilities, loss of availability of our revolving credit facility and our A/R Agreement, and that any cash payment due, in addition to our other cash obligations, would not ultimately have a material adverse impact on our liquidity or financial position. The majorU.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future, increase the cost of future debt, and potentially require us to post letters of credit or provide cash or other collateral for certain obligations. We had 18 letter-of-credit facilities with various banks as ofSeptember 30, 2020 . Availability under these facilities as ofSeptember 30, 2020 was as follows: September 30, 2020 (In thousands) Credit available$ 630,902 Less: Letters of credit outstanding, inclusive of financial and performance guarantees 117,782 Remaining availability$ 513,120 37 Table of Contents
Accounts Receivable Sales Agreement
OnSeptember 13, 2019 , we entered into the$250 million A/R 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, 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. The amount available for purchase under the A/R Agreement 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 Agreement is approximately$250.0 million and the amount of receivables purchased by the Purchasers as ofSeptember 30, 2020 was$52.0 million .
The Originators,
Future Cash Requirements Our current cash and investments, projected cash flows from operations, proceeds from equity or debt issuances and our revolving credit facility 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, 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. Purchase commitments outstanding atSeptember 30, 2020 totaled approximately$104.3 million , primarily for capital expenditures, other operating expenses and purchases of inventory. 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. See our discussion of guarantees issued by Nabors that could have a potential impact on our financial position, results of operations or cash flows in future periods included below under "Off-Balance Sheet Arrangements (Including Guarantees)."
There have been no material changes to the contractual cash obligations table that was included in our 2019 Annual Report.
OnAugust 25, 2015 , our Board authorized a share repurchase program (the "program") under which we may repurchase, from time to time, up to$400.0 million of our common shares by various means, including in the open market or in privately negotiated transactions. Authorization for the program, which was renewed inFebruary 2019 , does not have an expiration date and does not obligate us to repurchase any of our common shares. Since establishing the program, we have repurchased 0.3 million of our common shares for an aggregate purchase price of approximately$121.1 million under this program. The repurchased shares, which are held by our subsidiaries, are registered and tradable subject to applicable securities law limitations and have the same voting and other rights as other outstanding shares. As ofSeptember 30, 2020 , the remaining amount authorized under the program that may be used to purchase shares was$278.9 million . As ofSeptember 30, 2020 , our subsidiaries held 1.1 million
of
our common shares.
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
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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Cash Flows
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, dividends,
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
cash flows for the nine months ended September 30, 2020 and 2019 below.
Operating Activities. Net cash provided by operating activities totaled $247.9
million during the nine months ended September 30, 2020 , compared to net cash
provided of $430.8 million during the corresponding 2019 period. Operating cash
flows are our primary source of capital and liquidity. The decrease in cash
flows from operating activities is primarily attributable to decreases in
activity and margins in our U.S. Drilling operating segment. Changes in working
capital items such as collection of receivables, other deferred revenue
arrangements and payments of operating payables and interest payments are
significant factors affecting operating cash flows. Changes in working capital
items used $37.4 million and provided $37.3 million in cash during the nine
months ended September 30, 2020 and 2019, respectively.
Investing Activities. Net cash used for investing activities totaled $129.3
million during the nine months ended September 30, 2020 compared to net cash
used of $333.7 million during the corresponding 2019 period. Our primary use of
cash for investing activities is capital expenditures for rig-related
enhancements, new construction and equipment, as well as sustaining capital
expenditures. During the nine months ended September 30, 2020 and 2019, we used
cash for capital expenditures totaling $153.1 million and $366.6 million ,
respectively.
Financing Activities. Net cash used for financing activities totaled $48.5
million during the nine months ended September 30, 2020 compared to net cash
used of $141.8 million during the corresponding 2019 period. During the nine
months ended September 30, 2020 , we received net proceeds of $1.0 billion in
proceeds from the issuance of new long term debt as well as $397.3 million in
net amounts borrowed under our revolving credit facility. This was partially
offset by a $1.4 billion repayment on our senior notes. Additionally, we paid
dividends totaling $18.9 million to our common and preferred shareholders.Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries
Nabors has fully and unconditionally guaranteed on a joint and several basis all of the issued public debt securities ofNabors Delaware , a 100% wholly owned subsidiary. The following condensed consolidating financial information is included so that separate financial statements ofNabors Delaware are not required to be filed with theSEC . The condensed consolidating financial statements present investments in both consolidated and unconsolidated affiliates using the equity method of accounting. In lieu of providing separate financial statements for issuers and guarantor (the "Obligated Group "), we have presented the accompanying supplemental summarized combined balance sheet and income statement information for theObligated Group based on Rule 13-01 of theSEC's Regulation S-X that we early adopted effectiveApril 1, 2020 . All significant intercompany items among theObligated 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 theObligated 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
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