Nabors Industries Completes $600 Million Sale of Quail Tools to Superior Energy Services

Nabors Industries Ltd. (NYSE: NBR), a leading provider of advanced technology for the energy sector, recently announced the completion of an agreement to sell its subsidiary, Quail Tools, LLC, to Superior Energy Services, Inc. for a total net consideration of $600 million. The agreement comprises a cash payment of $375 million and a seller note valued at $250 million, with an expectation of approximately $5 million in cash taxes on the proceeds.

This transaction is not just a mere divestiture; it represents a strategic maneuver aimed at significantly enhancing the financial positioning of Nabors. With this sale, Nabors anticipates reducing its net debt by more than 25%, translating into an expected decline in net debt of approximately $625 million. This reduction is projected to result in annual interest savings exceeding $50 million, ultimately bolstering Nabors' financial stability and flexibility.

Anthony Petrello, Chairman, President, and CEO of Nabors, expressed confidence in the acquisition, stating, “In Superior, we believe Dave Lesar and his talented team will enable Quail to achieve even greater success.” He pointed out that this partnership will position both companies favorably within the competition for tubular rental services across both U.S. land and offshore markets.

Quail Tools has established itself as a key supplier of high-performance downhole tubulars to the U.S. oil and gas drilling industry. The sale encompasses a Preferred Supplier Agreement that designates Superior as the favored supplier of rental drill pipe and related products for Nabors moving forward. Given Quail’s robust performance, which has even surpassed Nabors’ expectations amid challenging market conditions, it is projected to generate an adjusted EBITDA of about $150 million in 2025 post-transaction.

The drive behind this sale comes on the heels of Nabors’ acquisition of Parker Wellbore earlier in the year, which was seen as a pivotal move for the company. The company previously estimated that the Parker business alone would earn an adjusted EBITDA of $150 million for 2025, alongside anticipated capital expenditures of $80 million. By divesting Quail Tools now, Nabors is focusing on its strengths and the synergies it can achieve through retained operations of drilling rigs and tubular running services, which it acquired from Parker.

The deal not only reduces debt but is also geared towards accelerating Nabors' free cash flow. With the expected net proceeds from the sale, Nabors will accelerate the financial benefits equivalent to over five years of free cash flow from its combined Parker operations. It is expected that these retained operations will yield considerable contributions, generating an additional adjusted EBITDA run rate of at least $55 million from 2025 onward, which includes the advantages gained from the synergies realized post-transaction.

Despite the positive outlook of the Quail Tools business, Petrello acknowledged the challenges of making the decision to sell, commending the Quail team for their dedication and success. He emphasized that the metrics associated with this transaction overwhelmingly support the decision to sell in the interest of shareholder value, stating, “This divestiture creates significant value for our shareholders.”

Nabors, with a presence across over 20 countries, is devoted to innovating the future of energy through advanced technology solutions crafted to ensure safe and efficient energy production. As the landscape of the energy market evolves, Nabors remains committed to its core competencies in drilling, engineering, automation, and data science while working to facilitate a transition towards lower carbon emissions globally.

In conclusion, this $600 million sale positions Nabors for enhanced profitability and strengthens its portfolio of energy technology solutions, paving the way toward a prosperous future amidst the shifting dynamics of the energy industry.