425: Nabors Industries Addresses Shareholder Demand Letters, Supplements Proxy Statement for Parker Drilling Merger

Nabors Industries addresses concerns raised in demand letters from shareholders regarding the proposed merger with Parker Drilling, supplementing its definitive proxy statement to provide additional disclosures.

Summary

• Nabors Industries Ltd. has received 13 demand letters from putative shareholders alleging deficiencies in the disclosures within the preliminary and definitive proxy statements related to the proposed merger with Parker Drilling Company.
• While Nabors and Parker believe the demand letters are without merit and the proxy statements comply with all applicable laws, they have decided to voluntarily amend and supplement the definitive proxy statement to minimize expenses and distractions.
• The supplemental disclosures will not alter the consideration paid to Parker stockholders or the timing of the Nabors special general meeting scheduled for January 17, 2025.
• The board of directors of Nabors continues to unanimously recommend that shareholders vote in favor of the proposals related to the merger, including the issuance of common shares to Parker stockholders.
• The supplemental disclosures include additional details regarding the background of the merger, specifically the initial call with Moelis on April 26, 2024, and the engagement of Intrepid Financial Partners as financial advisor.
• The supplement also includes additional unaudited prospective financial information for both Nabors and Parker, including adjusted gross margin and adjusted EBITDA reconciliations for Nabors.
• Nabors provides adjusted gross margin forecasts for 2024 and 2025, with total adjusted gross margin expected to increase from $1,217.4 million to $1,416.7 million.
• Adjusted EBITDA is projected to rise from $910.0 million in 2024 to $1,106.4 million in 2025.
• Adjusted EBITDA less capital expenditures is estimated at $320.4 million for 2024 and $516.4 million for 2025.
• Parker's management made assumptions about market growth based on macroeconomic patterns, customer interactions, and published industry information.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company is facing shareholder scrutiny, it is proactively addressing concerns and forecasts positive financial performance. The unanimous board recommendation also adds a positive element.

Positives

• Nabors is proactively addressing shareholder concerns by supplementing the proxy statement.
• The board's unanimous recommendation to approve the merger signals strong support.
• The company is providing additional financial information, including adjusted gross margin and EBITDA forecasts.
• Forecasted adjusted EBITDA and adjusted gross margin show positive growth from 2024 to 2025.

Negatives

• The receipt of 13 demand letters suggests shareholder concerns about the initial disclosures.
• Addressing the demand letters, even if deemed without merit, incurs expenses and management distraction.

Risks

• The failure of Nabors shareholders or Parker's shareholders to approve the proposed transaction.
• The risk that the conditions to the closing of the proposed transaction are not satisfied.
• Potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed transaction.
• Litigation relating to the proposed transaction.
• The inability to obtain, or delays in obtaining, cost savings and synergies from the proposed transaction.

Future Outlook

Nabors provides forward-looking statements regarding adjusted gross margin, adjusted EBITDA, and adjusted EBITDA less capital expenditures for 2024 and 2025, indicating expected growth in these metrics.

Management Comments

• Nabors and Parker believe that the Demand Letters are without merit, that each of the Preliminary Proxy Statement and the Definitive Proxy Statement fully complies with the Securities Exchange Act of 1934, as amended, and all other applicable law, and that no further disclosure is required.
• The board of directors of Nabors continues to unanimously recommend that you vote FOR each of the proposals to be voted on at the Nabors special general meeting described in the Definitive Proxy Statement, including the proposal to approve the issuance of Common Shares to stockholders of Parker, in connection with the merger.

Industry Context

The merger between Nabors and Parker Drilling reflects a trend of consolidation in the oil and gas drilling industry, potentially driven by the need to achieve economies of scale and enhance competitiveness in a challenging market environment. The document references Spears & Associates Drilling and Production Outlook forecasted numbers for land rig count, footage drilled and customer spending for United States, Saudi Arabia and Abu Dhabi, respectively, which suggested material improvements in activities and prices for these regions in 2025 and 2026.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• To assess Nabors' performance against industry benchmarks, one would need to compare its adjusted EBITDA margins, capital expenditure levels, and revenue growth rates to those of its peers, such as Schlumberger, Halliburton, and Baker Hughes.
• Additionally, the projected synergies and cost savings from the merger with Parker Drilling should be evaluated against similar transactions in the oilfield services sector to determine if they are realistic and achievable.

Stakeholder Impact

• Shareholders: The supplemental disclosures aim to provide greater transparency and address concerns regarding the merger.
• Employees: The merger could lead to integration efforts and potential changes in organizational structure.
• Customers: The combined entity may offer a broader range of services and technologies.
• Suppliers: The merger could impact supplier relationships and procurement strategies.

Next Steps

• Nabors shareholders will vote on the proposed merger at the special general meeting on January 17, 2025.
• Nabors and Parker will continue to monitor and respond to any further shareholder inquiries or legal challenges.
• The companies will work towards satisfying the remaining conditions to close the merger.

Key Dates