Dennis A. Smith - Director of Corporate Development & Investor Relations Anthony G. Petrello - Chairman, Chief Executive Officer, President, Member of Executive Committee and Member of Technical & Safety Committee Siegfried Meissner - President Joe M. Hudson - President

J. Marshall Adkins - Raymond James & Associates, Inc., Research Division Michael W. Urban - Deutsche Bank AG, Research Division James D. Crandell - Cowen Securities LLC, Research Division Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Waqar Syed - Goldman Sachs Group Inc., Research Division James Knowlton Wicklund - Crédit Suisse AG, Research Division Robin E. Shoemaker - Citigroup Inc, Research Division

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Nabors Industries Ltd. First Quarter 2013 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded today, Wednesday, April 24, 2013 at 10:00 a.m. Central Standard Time. I will now turn the conference over to Mr. Dennis Smith, Director of Corporate Development. Please go ahead, sir. Dennis A. Smith: Good morning, everyone, and thank you, Ron. And thank you to everyone for joining us today on our second -- first quarter earnings conference call rather. We'll follow our customary format, with Tony Petrello, our Chairman and Chief Executive Officer, providing a review of the numbers of the quarter and what we see as a near- and longer-term outlook. We've also posted slides as we customarily do on our website. You can get it in 2 ways. If you're on a webcast, you can get them -- download it through the webcast or from our website at nabors.com under Events Calendar, in the conference call information there. That's also where we posted the historical format that we've reformatted our numbers in as well on an Excel worksheet. With Tony and myself today is Laura Doerre, our General Counsel; Clark Wood, our Principal Accounting Officer; and all of the heads of our principal business units and some of our other corporate staff. Since much of our remarks today will concern our expectations of the future and are subject to the numerous risks and elaborated on our 10-K and other filings, they qualify as forward-looking statements under the various Securities Acts, so we caution to be sure you view our filings and recognize that these are subject to change from time to time, within external factors and other things. And with that, I'll turn the call over to Tony to get started. Anthony G. Petrello: Good morning, everyone. Welcome to our conference call for the first quarter. I'd like to thank everyone for participating this morning. As Dennis said, we have posted to nabors.com a series of slide that contain details about our business, the performance of various segments and other relevant information. I will refer to some of these slides as we proceed, and I'll be referring to them by the page number on the lower bottom right-hand corner for your ease of reference. Let me start off by saying for those of you that are new to our company, Nabors today is a quality provider of oil and gas well construction, completion and production services, and compared to our peers, I think we possess an unmatched global footprint, scope of services and asset base. While Nabors appears to be valued primarily as a North American land driller, we operate in 24 countries with nearly 30,000 highly qualified experienced personnel representing 74 nationalities. This gives us exposure to virtually all of the world's significant oil and gas areas, with an increasing degree of operating leverage, a base EBITDA level last year of about $2 billion. Before I get into the details of our operating results, I'd like to first talk about some general recent events and accomplishments. Starting with Slide 5, Nabors would like to welcome Howard Wolf as a new Board Member. His appointment to the board reflects our ongoing commitment to adding qualified independent voices, with diverse experience and backgrounds. His years working with our industry and advising, as well as serving on boards, will provide valuable experience and insight. We are pleased to welcome Howard to the board. Second noteworthy event this quarter is the initiation of our quarterly dividend. The board initiated our first quarterly cash dividend which was paid in March. The dividend initiation reflects our financial strength and more importantly, our commitment to return value to our shareholders. We are making good progress toward our strategic objectives, including those of reducing debt and improving overall liquidity. Nabors' strong cash flow generation gives us the ability to take steps to deliver value to shareholders, while also maintaining the right level of capital investment in new technologies and other items that will enable us to grow our business over the long term. Turning to the issue of balance sheet, liquidity and strength. Our balance sheet remained strong. As shown on Slide 6, we finished the quarter with $690 million in cash and investments. Our financial position is solid, with leverage of 2.4x, trailing 12-month EBITDA and interest coverage of 7.4x that amount. We have no near-term maturities as our revolving credit facility matures in 2017 and our earliest debt maturity is 2018. Net debt stands at about $3.7 billion, up $89 million from last quarter, as we used EBITDA from last quarter of $422 million to fund capital expenditures of $271 million, interest payments, dividends, 2012 related bonuses and changes in working capital. Our ability to reduce net debt should return in the second half of the year, notwithstanding lower expectations for EBITDA in the near-term. Our net debt to capitalization is 38%. Based on consensus EBITDA estimates for the remainder of 2013, our net debt to capitalization would be 35% at December 2013, assuming no additional asset sales and current levels of planned CapEx. One point I would like to emphasize is that enhancing the flexibility of our balance sheet is not our sole focus. We do intend to continue to generate EBITDA in excess of capital expenditure and use that to reduce net debt, which should positively affect the equity total of our enterprise value in terms of -- in absolute terms and trading local terms. However, we do not intend to reduce our net debt level to prevent us from funding capital projects that improve our competitive position and are in line with our enhanced capital deployment criteria, such as our new PACE-X rigs, 19 of which have already have long-term commitments. Our commitment to capital discipline and confidence in achieving these goals is best illustrated by the initiation of dividend, which reinforces our commitment to generate the cash. The PACE-X rig, you've heard me talk about it before; we now have 3 deployed. Turning to Slide 7, those are deployed in the -- the 3 currently are first deployed in the Haynesville shale for a major operator on 3-year term contracts. This new rig design leverages Nabors' 40-plus years of experience and dedicated designs for pad drilling and applies them to today's environment of large-scale development in unconventional resource plays. The PACE-X is also designed to have best-in-class pad-to-pad and over-the-road move times, making it equally applicable to today's development and exploration work, both domestically and internationally. And that's a key component of our future is to try to develop stuff as agnostic in terms of borders and markets. The PACE-X rig incorporates a bootstrap mast typical of our offshore platform rigs, which reduces the pad space for rig up by 1/3 as compared to most competitive offerings. The rig's side saddle structure features a 16-foot wide by 26-foot tall clearance, allowing it to easily walk over existing wellheads. A significant amount of engineering effort went into the modular design to reduce the number of permit loads by 80%, lowering move cost and increasing the flexibility to move on nights and weekends. PACE-X rigs incorporate additional efficiency features that come equipped with all of Canrig's technology, and they easily accommodate managed pressure manifolds. The rig is readily scalable from 1,000- to 1,500-, to 2,000-horsepower capacity and has direct application to international shale development. We are pleased to announce the sign of 2 additional contracts for PACE-X rigs on long-term contracts predicted to do so in this market. This brings our total new PACE-X rigs on long-term take-or-pay contracts to 19. Strong customer acceptance of the PACE-X rig is shown by our ability to sign term commitments for new rigs in a challenging market. With 14 of them since June 2012, reinforces our belief that we have designed the optimal rig for both exploration and development of global unconventional resources. Furthermore, we continue to have encouraging conversations with customers for additional appointments, and we will increase both our rate of construction and capital spending should we win additional awards. While PACE-X represents a leap in rig efficiency, we have no intention of standing still, and additional innovations are already on the drawing board. Next item, Slide 8. The tax situation in Alaska. We've commented on this many times during the past 2 years, and you could see that the Alaskan State Government finally passed the highly anticipated tax reform. We agree with Alaskan Governor Sean Parnell that new tax structure will set the stage for future growth as Alaska works to reverse decades of declining oil output, and we expect to see a significant increase in our activity there over the next couple of years. Now let me turn to the financial results. Going to Slide #9, which shows the consolidated financial results for the quarter. As we expected, based on lower sequential North American activity levels, EBITDA was $422 million, down marginally by 1% from $427 million in the prior quarter and 25% from $563 million in the same quarter last year. Operating income was $150 million, essentially flat with the prior quarter and down 53% from $316 million in the same quarter last year. Our earnings per share from continuing operations was $0.33 per diluted share. The quarterly EPS results benefited from a net gain on the sale of marketable securities and a lower effective tax rate primarily due to the settlement of long-standing tax disputes. We expect the remainder of 2013 effective tax rate to be approximately 22% to 24%, and cash taxes should remain at minimal levels. Our capital expenditures for the quarter were $271 million; depreciation for the quarter was $273 million; and CapEx -- sustaining CapEx was $59 million. For 2013, we expect depreciation of about $1.1 billion and have currently budgeted $1.2 billion of CapEx, which includes construction of rigs for both U.S. and international opportunities over 20 walking systems and sustaining CapEx, which we'll work on and try to minimize. We will continue to focus on managing our growth and sustaining CapEx plans and are prepared to increase our budget to fund additional newbuild awards that have attractive economics. To summarize the quarter, we generated net operating cash flow, which is EBITDA less CapEx, of approximately $152 million. We still expect to generate significant operating cash flow through the remainder of 2013 despite weaker North American conditions. As we look at the performance of our operating groups, I would like to highlight a few changes to the way we present our financial information. We're enhancing our reporting format to provide more visibility into the cash generation, the EBITDA generation of our segments and to reflect the recent consolidation of several of our operations. For U.S. drilling, we have combined our Lower 48 U.S. Offshore and Alaska financial results. We have also moved our Canadian well-servicing financial results into our production services results. To facilitate this in terms of historical comparisons, we have posted a downloadable Excel worksheet to our website, with 3 years of reformatted results. We will continue to discuss our rig activity on margins at the same level of details, so I noticed in some people's thoughts today, maybe they didn't notice that we're still providing the margin level information that you saw before, so this is not taking away stuff; it's just making it consistent with the reorganization of the company. So first, let me talk about the Drilling & Rig Services group. This group consists of our land drilling operations, offshore rigs, specialized rigs, drilling equipment and manufacturing, drilling software and automation and directional drilling operations. In the fourth -- in the first quarter, this group generated operating income of $137 million, down slightly from $138 million in the fourth quarter and 47% from $261 million in the first quarter of 2012. Seasonal improvements in Alaska -- Canada and Peak/Alaska were marginally offset by weaker results from the other business lines. Slide 12 shows the current status of our unmatched worldwide drilling rig fleet. Including rigs scheduled to be deployed, we have 215 top-of-the-line AC rigs, including advanced deepwater platform rigs and remote location rigs in the Arctic and internationally. 56% of our U.S. Lower 48 fleet are new-generation AC rigs, which are directly suited for manufacturing drilling operations. Included in our Lower 48 SCR rig count are 30 upgraded SCR rigs, which we refer to as SCR plus. These rigs have high utilization of our SCR mechanical rigs and incorporate the majority of the efficiency enhancing features of AC rigs through 3 upgrades. They contain finite direction and control with AC top drives; they have Canrig's proprietary K-box technology, which incorporates digitized auto-drill functionality into the SCR rig top device for greater penetration; and they have increased pump capacity to deliver higher hydraulic horsepower down-hole similar to the AC rigs. I'm sure you've heard much commentary from our competitors regarding the strong demand for pad-capable drilling rigs. Nabors' pioneered pad drilling in the early '70s at Prudhoe Bay, where we routinely drilled wells -- pad -- excuse me, routinely drilled on pads with wells up to 80 wells in parallel rows on standard distances as close to 7 feet. The pie chart on the right illustrates that 45% of our global fleet is capable of drilling on multiple well pads. The market's demand for pad-capable rigs drives enhanced utilization. For example, our Lower 48 pad-capable ACR -- AC, SCR plus and SCR utilizations are currently 97%, 85% and 100%, respectively. That 100% refers to SCR rigs that are pad-capable, just to be clear. These levels of utilization continue to support moving systems to rigs to make them more pad-capable. Slide 13 highlights our first quarter utilization. It is worth noting that 75% of our Lower 48 rig book value is attributable to our AC rig fleet, which had 85% utilization in the quarter. One of these AC rigs, rig B10, recently drilled our customer's longest lateral on the Bakken, with measured depth of over 25,000 feet and a lateral length of just short of 3 miles. Additionally, this well came in under budget and ahead of schedule. In the Lower 48, we currently have 64 rigs that can go back to work the 50 sweet spot on rig demand, mainly 1,000- to 1,500-horsepower. We are working to improve our utilization and are focusing more resources on marketing these rigs. Our Lower 48 legacy fleet is made up of 122 rigs, 17 of which are available high-quality 2,000 to 3,000 horsepower rigs, which currently, as far as we could see, have little to no demand in the U.S., but are available to satisfy future international requirements. Nabors, with our global footprint, can capitalize on relocating these rigs to higher demand markets, in contrast to our North American-focused peers. Our legacy rigs, as a group, will realize outsized earnings power and attractive returns on capital when their utilization improves given their low book value. We have seen an improvement in our U.S. Offshore utilization as compared to recent quarters. Our Super-Sundowner platform workover rigs and our platform drilling rigs remain highly utilized, and we anticipate additional opportunities for our Sundowner platform workover rigs. We are also seeing improved utilization on our jackup and barge rigs. We are well-positioned to capitalize on the expected increase in Alaska activity for the reasons I mentioned earlier and to enhance the utilization of our technologically advanced Alaska drilling fleet. Our Canadian utilization reached its first quarter seasonal high, although it was below first quarter 2012 levels, and it will continue to be impacted by the drilling rigs' supply-demand imbalance in Canada. Our International fleet has experienced improved utilization as compared to recent quarters. We see our available rig inventory as a valuable option if the market commentary regarding increased land rig opportunity materializes. So let's dig deeper into the drilling group, starting with U.S. Lower 48. Our U.S. Lower 48 land drilling operation earned operating income of $50 million, down 47% from $95 million in the prior quarter and down 62% from $132 million in the same quarter in 2012. I think it is important to note that while this is a big drop in operating income, we did collect $57 million in early termination payments in 2012. During the first quarter, we lost 3 rig gears and our average margins for the fleet declined by $2,408 per day, finishing the quarter at $9,955 per rig per day. Adjusting for fourth quarter early termination margins attributable to future periods and for workers' compensation adjustments, that resulted in a normalized $643 per day decline, which is attributable to the drop in rates we predicted in our fourth quarter call. I think the fourth quarter call, we actually said it will be $1,000 -- up to $1,000 off the normalized number. First quarter spot rates were down $500 to $1,500 per day, depending on the regions, due to market weakness with lack of demand for incremental rigs. For example, the Baker Hughes land rig count began 2012 at $1,691 and dropped to $1,680 at the end of the first quarter. It subsequently bottomed at $1,665 on April 5, and is currently at $1,684. By contrast, our working on rig count began the year at 168 rigs. It bottomed at 165 in mid-February. It ended the quarter at 174, and is currently at 177. So we bottomed before the market, and we subsequently have added 12 net rigs. We have been cautious over the prior 2 quarters on industry predictions of a market reset at the first of this year. As we've predicted, operators did not ramp up their activity immediately. We do expect industry rig counts to be higher by the end of this year, but our optimism is tempered as operators are displaying hesitancy given the uncertainty around commodity prices. Additionally, customers are drilling more wells with fewer rigs as efficiencies from rigs, crews and pad operations are now being realized. We are optimistic that a gradual increase in industry activity will serve to improve utilization and stabilize pricing, although there continues to be a number of speculative new rigs entering the market at lower rates and shorter terms. With the lack of significant movement in the rig counts so far in 2013, we anticipate pricing to remain under pressure in the near-term. We expect continued margin compression in the second quarter of $800 to $1,000 as rigs roll to the spot market. However, we intend to help mitigate the financial impact of this by increasing utilization of stacked rigs. Today, we have 177 rigs on revenue, including 7 not working but earning revenue. We currently have 127 AC rigs working or on rate, and have put 5 net AC rigs back to work since our rig count bottoms. Our current AC utilization is 90%. We put these rigs back to work at average rates of 22,000 driven by swap market pricing, and I'd like to comment that 1 contractor does not set the market. We deployed 3 AC newbuilds year-to-date and have 16 newbuild rigs scheduled to deploy on long-term take-or-pay contracts in 2013 and 2014. In addition, we put, since the bottoming, net 4 legacy rigs back to work across our Lower 48 at average rates of 18,400. We had 118 term contracts expire and roll to spot market pricing in 2012, 36 of which were in the fourth quarter alone. By contrast, we had 10 term contracts that rolled into spot market in the first quarter. We believe the impact on our margins due to term contracts rolling to spot will begin to abate, as we have an average of only 12 rigs expiring per quarter for the remainder of 2013. With 60% of our rigs in the spot market or on terms of less than 6 months, we will be able to realize increasing rates as the market improves. Pad drilling capability is one of the strengths of our fleet. We currently have 105 rigs capable of drilling on pads, 78 of which are in walking systems that will allow multidirectional walking and 27 of which have skid systems that are similar to our competitors' systems and are therefore, similarly functionally limited. Our current pad-capable rig utilization is 95%. After completion of planned upgrades to walking systems on existing rigs and completion of PACE-X newbuilds, we will have 141 pad-capable rigs, 114 of which will have multidirectional walking capabilities. I think it's worth spending some time on this, as you go to Slide 18, pad drilling moving systems can generally be characterized in 2 classes: traditional skidding systems, as shown in the top picture, and the newer technology stomper walking systems, as shown in the lower picture of our new PACE-X rig. The stomper systems provide the most flexibility in accommodating the various nuances of multi-well pads, particularly when multiple rows of wells are present. Skid systems have inherent limitations when there more than 2 of them a pad, as illustrated by the next 3 slides. Referring to Slide 19, our customers generally prefer to pre-drill the conductor of starting pipe of the well before the rig arrives. Usually when there are 3 or more wells in a row, the conductor is not installed in a straight line. This poses problems for skidding rigs, which are very limited in sideways movement to accommodate off-center conditions. Turning to Slide 20, you see a large proportion of our competitors' AC rigs are arranged with drawworks or hoist positioned near ground-level. These drawworks, along with the pipe handling system, can interfere with adjacent wellheads, thus requiring movement in a single direction and/or elevation of the drawworks and pipe handling system, while placing the wellhead below ground level. This can also be a problem for some walking rigs that do not have a side saddle mast. Skid systems are also susceptible to uneven ground conditions, as shown on Slide 21. This causes the skid beam to high center and inhibits the movement of the rig without additional pulling force provided by a pair of tractors added to the cost and time to move. Our PACE-X rig is designed to alleviate all of these constraints and provides the customer with maximum mobility between wells, pads, or continents. Slide 22 illustrates the reach and configuration of our PACE-X rig in drilling pad wells superimposed on a football field to give you a sense of scale. The mud and power system complex, as shown here in red and yellow, remain fixed, while the substructure mast, shown in gray, can move in any direction. This gives the operator maximum flexibility to configure the site in multiple well rows, with any distance between well centers within the blue shaded area. By comparison, competitor walking rigs A and B can accommodate wells only within their limited shaded area. We take the time to emphasize the attributes of walking rigs as they are significant drivers of customer demand, as evidenced by our 95% utilization. And we believe continuing to expand our walking rig fleet enhances our competitive position, and it provides attractive returns on capital. Now let me turn to U.S. Offshore. Our U.S. Offshore operation reported operating income of $10 million, up from $14 million lost in the prior quarter and $8 million of operating income in the first quarter of last year. Excluding fourth quarter amounts related to an allowance for doubtful accounts due to a customer bankruptcy and lower margin expectation at a construction project, operating income increased 193% sequentially and $3 million, driven by -- primarily by higher Super-Sundowner platform workover utilization and MASE utilization and margins. Late this year, we will commence operations with 2 new 4,600-horsepower deepwater platforms, as shown on Slide 23. Both were designed and built by our outstanding engineering staff and are scheduled to be operated and managed under long-term contract arrangements. MODS 400, on the left, is owned by Nabors and will generate returns in line with our capital criteria, where the rig on the right will be owned by the customer. Turning to Alaska, our Alaska drilling operation posted a seasonal operating income high of $18 million, up as expected from $2 million in the fourth quarter and down 36% from $27 million in the first quarter of last year. Alaska, as we've remarked previously, has become highly seasonal with little year-round drilling work being conducted in the legacy North Slope fields with progressive tax rates limited reinvestment. The recent tax change should spur additional development drilling and has the potential to return a number of our existing rigs to full-time work. Longer term, numerous strategic options and projects are planned in areas where exploration and development tax incentives are in place, but these are characterized by long lead times, and will likely not commence for another 2 to 3 years. Our market position in Alaska will allow us to participate meaningfully in this market improvement when they materialize. In addition, we will continue to apply our technological base and the demand for ultrahigh spec-ed new rigs increases. An example of applied Nabors innovative technologies and applications is shown on Slide 24. Our CDR-2 rig is an Arctic coiled tubing drilling rig capable of drilling either conventionally or with coiled tubing and with the top driver mast configuration. The rig was designed and built specifically to optimize coiled tube drilling managed pressure drilling operations in the Kuparuk Field, and the customers have been very really pleased with it. Turning to Canada, our Canadian operations posted operating income of $31 million, up 13% seasonally from $27 million in the fourth quarter, but down 29% from $42 million in the first quarter of 2012. Rig activity increased sequentially by 4 to average 40 rig operating years in the first quarter. However, this increase is much less significant than it traditionally is, given the current market. Margins declined slightly over the prior quarter on average $14,278 per day. The same spending constraints witnessed in Lower 48, we believe, are weighing out the Canadian market. And any positive signs of the U.S. should be reflected positively in Canada. Turning to International. International posted operating income of $20 million, down 8% from $22 million in the fourth quarter and flat to the first quarter of last year. Rig activity of 123 rigs increased 3.4 rigs sequentially. Margins declined by $552 to $11,452 per day. The international market is showing signs of improvement. We are seeing indications of future growth in several Latin American countries in which we have strong market positions. Also, we have seen clear indication of increased demand in Saudi Arabia and other Middle East countries to keep pace with domestic and foreign production needs. In addition to the growth potential with national oil companies, we see increased appetite for investment on behalf of the majors, which typically have high technical specifications, and therefore, are well-suited to Nabors' superior engineering capabilities. Positive events for International in the first quarter include the return to work of our jackup Ocean Master in Qatar, the startup of our second rig in Papua New Guinea and a rate increase in our jackup 660 in Saudi Arabia, where we maintain a 25% market share position. The supply/demand balance of quality rigs internationally is quickly tightening as far as we can see. Recent contract renewal rates are up, providing pricing leverage over the intermediate term. Longer term, a number of large projects are set to commence, which will require 30 to 40 rigs into the next year or so and potentially 100 and more over the next couple of years. Saudi Arabia alone has 140 rigs working today, and it's expected to increase its rig count by more than 25 rig years by year-end, with potential additional demand in 2014. With this demand, we expect to see rates that will justify newbuild rates with decent returns. The exact timing of all this is difficult to predict, but nonetheless, we believe these effects will begin to be felt in the second half of the year. Nabors is active in virtually all of the established and developed markets and is uniquely positioned to capitalize on these trends with its existing International infrastructure, local labor force, know-how and rig availability and favorable tax structure. Turning to our Rig Services line, which includes Canrig, Peak and Ryan. They posted results of $8 million this quarter compared to $5 million in the prior quarter and $30 million in the same quarter of last year. Peak experienced its seasonal high and Canrig experienced a decline in Service and Rental activity, lower capital equipment sales and higher investment in R&D. Canrig, has experienced basically on its order books, people pushing out deliveries, which is consistent with what's been happening in the market. Peak should experience some increased activity levels once the effects of the Alaska tax changes are realized, while Canrig and Ryan's near-term results will be driven by North American activity levels. We view Canrig and Ryan as our vertically integrated technology development and manufacturing centers, in line with our focus that the future of drilling will be driven by technological differentiation. Nabors is uniquely positioned to take advantage of the emerging trends to offer a higher degree of remote monitoring, control and optimization of drilling parameters. This entails the auto-driller function, the management of drilling pressures on the formation, the steering of the drilling assembly and eventually, the integration of all these functions into a more automated system. Canrig has available technology relating to these functions and has the technical capability to integrate them. In addition with Canrig, we own our rig's operating systems and posses an extensive amount of well drilling data from our various activities across the globe. Control of the rig operation and directional know-how that is embedded in Ryan brings all the necessary elements under one roof. Ryan recently acquired a new-generation of MWD tools this past quarter that are more reliable and cost-effective and provide enhanced downhole recording features with increased performance. Ryan is also commercializing its own EM tool. Now let me turn to our other division, the Completion & Production Services. This business line consists of various services that complete and maintain wells, including pressure pumping, well servicing, workover and coil tubing rigs and fluids management. Operating income for this division is tabled out on Slide 31. Completion & Production Services posted $44 million in operating income, down 15% from $52 million in the fourth quarter and 53% from $93 million recorded in the first quarter of 2012. Completion Services' operating income of $18 million for the fourth -- first quarter was down 41% from $30 million in the prior quarter and 73% from $65 million in the first quarter of 2012. Results were negatively impacted by exacerbated seasonality as customers were slow to ramp up work after holiday shutdowns and our operations in the Bakken, Rockies and Appalachia, which are important operations to us, were impacted by the weather. These factors were well demonstrated by our March's operating income of $8.2 million, being 70% higher than January's $4.8 million. Our southern region's crews experienced increased utilization and improved sequential margins. While our total stage count was higher sequentially, we had a shift in mix which resulted in lower revenue per stage and U.S. operating margins declined from 11.6% to 8.2% for the quarter. So I think although the quarter was very low, even lower than what we thought it would be, you can see when you look at the January entrance rate and the January-March rate and the exit rate on the operating income, there is the huge delta between the 2. Referring to Slide 33. We now have 19 crews working in the U.S. and 2 in Canada. In the U.S., we have 10 term-contracted crews with maturities ranging from mid-2013 to 2014. We have 10 crews working in the Bakken/Rockies with 6 of these crews working under termed service agreements. Two of our 3 Eagle Ford crews have term contracts. We have 1 term agreement crew and 3 spot crews in Marcellus and 1 term agreement crew and 1 spot crew in the Permian. Three spot crews are working in Canada. Spot market remains weak and we currently have 5 spreads idled. These spreads were operating in the Haynesville, Mid-Continent, Barnett and Permian Basin. This ability with respect to the spot market remains challenging, given the continued horsepower supply-demand imbalance and there continues to be pricing pressure in certain markets. Overall, we remain cautious on this business with 5 stack spot crews and do not anticipate utilization improving until the rig count increases. Turning to Production Services. Our Production Services operating income of $26 million was up 22% from $21 million in the fourth quarter and down 7% from $28 million in the first quarter of 2012. The sequential increase was driven by a 5% increase in rig hours and we did experience normal seasonality as March's operating income was more than double of January's. Again, trying to take to point that quarter numbers to give you an idea of, again, of the big deltas during the quarter this year. As shown on Slide 32, at the end of the first quarter, our U.S. operating fleet consisted of 442 well service rigs, 1,036 fluid service trucks and about 3,500 frac tanks. While the market is currently very competitive, we remain encouraged by the long-term prospects for these services given the large number of new oil wells that will convert to artificial lift existence over time and will require increasing frequent maintenance. The increased inventory of horizontal wells, which are more workover-intensive, should also increase the demand for these services, particularly among higher-capacity rigs. Slide 36, in summary -- summarizes the key takeaways for investing in Nabors today. While the North American land market was challenged in the near term, Nabors possesses an unmatched global leverage from multiple sources over the long term, especially in comparison with our North American land-focused peers. We will generate significant amounts of EBITDA and have the resources, technology and engineering capabilities to invest in high-value assets. We are focused on the matters we can control and we believe we have significant room for trading multiple expansion. I'd like to close with the reminder that despite the weaker North American conditions, Nabors still generated about $125 million of EBITDA in the fourth quarter, which shows you the scale of our operation and its potential. This concludes our remarks. And I'd like to hand the call over to Dennis to compile questions. Thank you. Dennis A. Smith: Thank you, ladies and gentlemen. And Ron, I think we're ready for the question-and-answer session.

[Operator Instructions] Your first question comes from the line of Marshall Adkins from Raymond James. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Tony, very thorough overview there. It seems like there's some confidence in the second half of recovery and a lot of that, and correct me if I'm wrong, seems to be focused on the International side. We've kind of been expecting this to come around here for a few years. You did give us some detail, but could you give us a little bit more color or some more specifics? I mean, what kind of rig count change do you think you'll get by the end of the year there or day rate change or the number of new builds or refurbs or -- can you quantify that and give us a little more color on why you're so confident by the end of the year, International is getting better? Anthony G. Petrello: Well, right -- Ziggy, are you still on the line?

Yes, I'm here. Anthony G. Petrello: Okay, let me just start by saying we're confident in part because it's tangible. I mean the south -- there is some tender out already for more than 20-plus incremental rigs that is now out there. We already have for a super major contract to put 2 rigs in Northern Iraq. There's discussions with -- for rigs in Argentina, and I think this is all symptomatic of what's going on. So Ziggy, do you want to add more color to that?

Yes, I think -- first of all, I think we have been waiting for this. Well I've been waiting for this for a long time. So finally, we see some change in the market. So when I look at it, we have like probably 1/3 of our contracts are coming up for renewal this year as well. So with more activity out there, I think they have a good opportunity to increase our weights to compensate for some of the higher costs that we have experienced in the last 2, 3 years. So Tony already mentioned Argentina, North Africa. Mexico is looking for more rigs. I see opportunities in some of the CIS countries, former CIS countries, and activity in Iraq is picking up again. So in combination with the [indiscernible] and Saudi, the market will be tight and I think that's when we come in and put the rigs to work that we have idled. And I see, I mean, obviously, new builds but not coming into play until 2014, late 2014. But definitely, an increase of [indiscernible]. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Right. So just a quick follow-up on that and I'll turn it over. It sounds like we should be looking at more towards kind of Q4 before we -- this really starts to factor into the numbers just from a modeling perspective and certainly from a new build or refurb perspective maybe into '14 before we start plugging some of that in. Is that fair? Anthony G. Petrello: For the new build, sure. I think the new build is sure, and I think as Ziggy mentioned, there is -- there are contracts that are opening up for renewal and some of that, hopefully, it was going to be realized in the second half as those -- as we deal with those renegotiated rates. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Right. So look for rates to go up, and maybe a small bump in utilization Q3, Q4. Is that fair? Anthony G. Petrello: Fair.

Your next question comes from the line of Mike Urban from Deutsche Bank. Michael W. Urban - Deutsche Bank AG, Research Division: Tony, could you talk a little bit about the practical implications of some of the organizational changes that you've made and rolling some of these businesses together and moving them under different organizational structures? And in some cases, are there -- presumably, this is not just moves on paper, are there cost savings there? Are there revenue synergies, operating synergies there that you can talk about, if you can just go into a little bit more detail on that? Anthony G. Petrello: Sure. I think that there's a few objectives why this -- to do -- in doing this. The first one was obviously just the overall simplification to clarify what business course [ph] we're in. The other point is that by doing a reorganization, we're making available resources that we think have bigger applicability to more of Nabors. So for example, in the consolidated Alaska, our Gulf in Mexico and U.S. land operation. And you might say, "Well they're really vastly different markets." That's true, but if you look -- well we've talked about in terms of the X rig, the X rig genesis is a pad rig that has 1 super major. When you want to see the X rig recombinant, you've taken an offshore rig and put it on land. And what it reflects is all of the Super-Sundowner technology in terms of marginalizing rig on land. And so the one thing we're hoping to gain by this consolidation is to really pull the best of all the things that we've been doing in our various markets into a more cohesive group. And then the other 2 points you can point out, yes, another objective is cost savings. I think there in terms of the consolidation of our production and completion business units, we were -- we are at work doing that. I think there's been a decent SG&A savings just given our fourth quarter run rate to our first quarter run rate in our SG&A and in our Completion & Production business. It's a pretty significant delta right there alone. The problem is in a declining market as far as you see the effect of that. But that's a really a high priority of us to make sure we're best in class in not just performance, but efficiency and cost structure. And we have a bunch of initiatives to do that. And finally, the other thing that comes out of this is to improve our interface with our customer. We were out there now, more approaching customers on account rep basis than sort of looking at everything as a simple product line. And we're hoping to do more of that. Michael W. Urban - Deutsche Bank AG, Research Division: Got you. And in the past, you've talked about further streamlining the business, potentially some asset sales and other monetizations. I mean, there's presumably the -- just changing the organizational structure does not preclude any of that? Anthony G. Petrello: Absolutely, absolutely. The way I look at it, everything we're doing is just making better of whatever we have and creating more value. And the way we were structured, it doesn't preclude any option to optimize anything should we decide to do that. And so that's what we're doing. Basically, we're just -- first step was to get clearly the noncore stuff off the table and get rid of the noise. And that process is still continuing in terms of some E&P assets that we're still working on. And also things like the Gulf of Mexico barges and jackups are still issues for us to exit and that remains there. And then the X we spoke about doesn't takeaway from any of that.

Your next question comes from Jim Crandell from Cowen group. James D. Crandell - Cowen Securities LLC, Research Division: Question for either Tony or Joe. It seems to me guys that not the only advantage, but one of the biggest advantages of the PACE-X rig has to do with its unique lift and roll walking systems. So 2 questions around that. The number one is, how easy is this to duplicate or because of certain features about the system or the greater the usage of your -- of Canrig equipment on the drilling rig and building the rig, designing the rig, actually the used Canrig equipment, does that really give you what you think is a long-term competitive advantage? And then the second part of that is to what extent as you upgrade the -- your PACE rigs, let's say, to have multidirectional walking capability, are these rigs -- do they have similar capabilities then to the PACE-X or does the PACE-X still is going to be viewed as a step above these other rigs? Anthony G. Petrello: Okay. I'll let Joe fill in. I'll try my first stab at that. Yes, there are -- you can take out -- you can -- there are -- people have built lift and roll systems out in the marketplace, so we don't have a lot of proprietary position in the overall lift and roll systems. But in terms of a substructure, what they can go on in terms of existing rigs, depending on how that substructure is set up, it either will work or not work. One thing about the PACE-X rig that is different is it's not just lift and roll, but it's also that sidesaddle that provides capabilities when you move to x and y, you can move over obstructions because you have that big open center, which again, you can't duplicate with an existing rig, adding it to an existing rig. That's some of the advantages. As I mentioned, we are taking existing PACE rigs, which don't have that sort of those features, still adding lift and roll systems and we're getting great interest in utilization on those in any event. In terms of your question about Canrig, the PACE-X rigs, for those of you that have seen it, the Canrig technology's built into it. One thing that we're doing is really integrating certain things like manage the ability to run Managed Pressure Drilling. Canrig has some proprietary technology on that. The PACE-X rigs are all being prewired to do that. Not that we can't put it on other rigs, existing rigs, but it's just -- it's easier if the rig is -- comes pre-equipped. So there's a lot of that, that's being weighed. It's not that the Canrig technology can't be put on other things. It's just that it's being put into PACE-X in a more thoughtful, cost-effective way. Joe, you've got anything to add? Joe M. Hudson: No, you answered it well, Tony. The key there is -- as Tony noted, is also -- notes was the height of the wellhead we can get over is exceptional if you're looking at side [indiscernible] going on the pad of these existing wells. This is truly a key feature. We've got multiple -- lift and roll systems on other AC rigs. It certainly gives us an advantage. We're looking at, as you also heard, deploying this in other equipment to make the rigs more marketable. The PACE-X for us today, is the latest step and that's taking all of the -- or bringing all the technology we have in there, and engineering and know-how and put it in units and put in PACE-X. So, no, I think it's -- again, the ability to put moving -- on existing assets and legacy assets truly makes it more marketable, some of which we beginning to put these systems on, and the PACE-X, the lift and roll, it's quite unique and it's been the feature of a lot of different engineering groups and operations coming together in the design things in this industry. James D. Crandell - Cowen Securities LLC, Research Division: Okay, and just as a follow-up on that same topic, Joe or Tony. So are you suggesting or even if you're not suggesting, if you designed your fleet with walking systems that are based on jack and claw technology instead of lift and roll, are you at a competitive disadvantage in your opinion and you may have to look at redesigning your walking system at your rig? And secondly, just a quick answer, Tony, the 2 new contracts you won this quarter, can we assume that they're term contracts and with day rates somewhere around the average of the previous 17 that you disclosed last quarter? Anthony G. Petrello: I should say on the last point, they are term contracts and they're attractive rates. Joe M. Hudson: Going back to the first question, again. Are you saying we're -- no, not every pad is going to be a 5-, 6-well pad. So we have equipment that we think will work in the North in the near term with the jack and claw system. As we mentioned, we have several out -- we're not -- Jim, we're not looking at continuing to all at that type of build and equipment. However, there's still a lot of operations, different areas. That's all they needed, 1 or 2 wells, and 2 to 3 wells max, and there's a point that the systems worked fine. But as the shale plays develop and mature, you're looking at much larger number of wells. Anthony G. Petrello: And that's why we're focusing on doing it that way.

Your next question comes from the line of Byron Pope from Tudor, Pickering, Holt. Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: In the context of your comment about 2013 CapEx, you are probably being in that $1.2 billion range. It sounded like, if anything, it might be biased, higher based on the opportunity set you see for new builds, both domestically and internationally. So my question is as you think about incremental opportunities to deploy capital internationally, could you just speak to some of the criteria or metrics that you're now using to evaluate those sort of capital allocation decisions as it relates to your International business? Anthony G. Petrello: Right. Let me -- our -- the first thing is our ability to execute. And note, we're aware -- keenly aware that previously, we've had some operational hiccups. So in these contracts, now that we're looking at it, it's our ability to execute is an important organization issue. The second thing is focusing the activity towards the deployment on markets that really have some capacity for scale. I mean, it's all well and good to have -- to put a rig on a term contract in a particular country, but a 1-rig operation a country doesn't really do much for us given our size right now. So those filters now have become much more pronounced in our evaluation. And International still will compete against the other business units for capital. Where nobody has an immediate lock on capital, everyone -- all these projects are going to be measured against one another. And so that continues as an objective. Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay. And then just a second question for the U.S. Lower 48 business. I mean, you've got 16 kind of new build rigs left to be delivered. And as you think about kind of incremental opportunities to add new build rigs, it sounds like depending on customer conversations, there'll be additional opportunities for PACE-X rigs. But how do you think about the pace with which you'll likely put some of your currently idle AC rigs back to work? And in terms of basins, it seems as though you picked up some activity in the Permian. I'm just wondering if that's an area where we should expect for Nabors to continue to see it redeployed some of its currently idle AC rigs? Anthony G. Petrello: Correct. I mean, I think one thing since our last conference call that we exercise is the commitment on our part to put idle rigs back to work, both AC and legacy. And as we noted, we have a net 5 AC rigs that went back to work. The markets that we've focused on, those include the Northeast, the Rocky Mountains, South Texas and West Texas. Those are the markets that we're focused on right now.

Your next question comes from Waqar Syed from Goldman Sachs. Waqar Syed - Goldman Sachs Group Inc., Research Division: Could you talk about this offshore platform rig that you have for the U.S. Gulf of Mexico? When will it start operations and any guidance on what the day rate could be for that rig? Joe M. Hudson: Hey, the rig that Nabors owns will actually begin mobilizing, we hope, sometime in November after the hurricane season. So that's when we should start doing the operation, start the revenue stream. Waqar Syed - Goldman Sachs Group Inc., Research Division: So it will start the revenue stream when it starts mobilizing or when it actually gets on the platform? Joe M. Hudson: When it starts mobilizing on the yard. Currently, the rig is being -- we're utilizing it, finishing commissioning and we're also training on the rig as we speak. Waqar Syed - Goldman Sachs Group Inc., Research Division: Okay. And what could be the day rate? Is it 100-plus kind of range or 100,000 plus? Anthony G. Petrello: Yes, definitely. Otherwise we'd rather not say. Joe M. Hudson: We wouldn't be on the call. Waqar Syed - Goldman Sachs Group Inc., Research Division: And the operating cost would be in the $30,000, $35,000 a day range. Would that be fair? Anthony G. Petrello: Yes. Joe M. Hudson: Maybe a little less, yes, closer to $20,000 25,000, I think. Waqar Syed - Goldman Sachs Group Inc., Research Division: Okay, that's fair. Secondly, in the previous filing, you've mentioned that you've hired some advisors for -- to advise on restructuring. What have you heard from them? Have they come up with a proposal or what's the timing of any advice that you get from there -- from them? Anthony G. Petrello: Well I think you're referring to our press release where we said that the board is evaluating strategies to enhance shareholder value, including optimizing its capital structure, reviewing our mix of business and improving our operational performance. And that we were seeking -- we were -- where we can get access to financial advisers to help with that review. That's part and parcel, frankly, of what we've been doing in the past couple of years, where we first decided we will get rid of our non-core assets and clean up the business and focus on the execution. And this is a natural extension of that focus and what's left and how do we optimize the value. I guess we've hired -- the board has hired an independent outside person to come in and look at where we are, and that review will take place over the summer. Waqar Syed - Goldman Sachs Group Inc., Research Division: Okay. So they'll come up with the proposal over the summer. Is that what you're saying? Anthony G. Petrello: Well I don't know if they come up with a proposal, but they're going to review where we are and -- based on what that review is and then what actions and what changes we want to make as a result of it, then the board will decide. But that review will take place over the summer.

Your next question comes from Jim Wicklund from Crédit Suisse. James Knowlton Wicklund - Crédit Suisse AG, Research Division: What is the outlook for cost inflation of people? Is it proving to be difficult? Is it proving to be easy with the rig count down? Joe M. Hudson: Definitely improving. It's, the people -- when the rig count is going up, obviously, the number -- inflation kicks in. But right now, things have stabilized. We feel very comfortable where it's positioned. Anthony G. Petrello: Yes. Let me add... James Knowlton Wicklund - Crédit Suisse AG, Research Division: [indiscernible] significant cost inflation this year? Joe M. Hudson: Not domestically. Anthony G. Petrello: Not domestically. But International, maybe Ziggy could talk to it. I mean, International, certainly, there's been all kinds of local legislation, local pressure in countries that for sociopolitical reasons have different objectives and they're passing either regulations or mandates that increase our costs. And even things like travel today, travel expense is much higher. So we do have those kinds of cost pressures. Ziggy, do you want to add anything?

Yes, definitely the cost impact is on the local level. But having said that, at the same time, the local labor force, us being in the areas for such a long time, they give us the foundation actually to promote people and that we'll have people for additional rigs in the future. So it's kind of a bad and good -- you have the high expenses, but also you have the labor force for additional growth. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Okay. And my follow-up, if I could, speaking of International, there's a couple of rig packages that are expected to be on the market. I don't expect you guys to explicitly comment on acquisitions. But I would assume, Tony, since, I mean, you ran International for a while that -- is that an area of potential expansion for Nabors? Anthony G. Petrello: I think International is a core part of our portfolio, and what we'll always asses is our option of growing organically versus acquisition or both. And you can assume we're looking at all those options continuously. Dennis A. Smith: Ron, I think we're bumping up against our 1 hour. Let's take one more question and wrap up the call, please.

Our last question comes from the line of Robin Shoemaker from Citi. Robin E. Shoemaker - Citigroup Inc, Research Division: I just wanted to ask, you indicated you expect a few incremental rigs in the North America market through the end of the year. Is there any sign at all of any resumption of activity in the dry gas basins? That is my first question. And if not, as I expect, where do you think those incremental rigs will mostly be, that incremental demand will be in North America? Joe M. Hudson: The -- as far as dry gas, Robin, we're not seeing an uptick. When it does come, it will come in the small independents. They'll drive it first in terms of incremental rig demand. Tony mentioned the Rocky Mountain area. We'll see some increment from that area, some of the lower Mid-Continent, the Pan Am Oil and West Texas continues to improve. So that's where we'll see it grow. Robin E. Shoemaker - Citigroup Inc, Research Division: Okay. And since you -- part of your non-core asset plans to dispose of non-core assets has to do with gas reserves, what are you seeing, if anything, in terms of a different market for those assets as -- or is there any difference in the market for those assets compared to the last couple of years when you have explored the possibility of selling those assets? Anthony G. Petrello: Well, first of all, gas assets, we have Horn River Basin. And I think the one thing that's different today versus where we were 18 months ago would be the prospect of LNG as an export reality is more visible, and that would then open up the Horn River to a whole different set of economics. And so depending on what the players that are in that market how they asses that reality and the timing, that can either be good or not good for us. But that's probably the biggest difference in terms of that asset and its marketability from where we've been. Dennis A. Smith: Ron, we'll wrap up the call with that. If you'd close it out for us, please.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. You may now disconnect your line.