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

James Knowlton Wicklund - Crédit Suisse AG, Research Division Waqar Syed - Goldman Sachs Group Inc., Research Division Robin E. Shoemaker - Citigroup Inc, Research Division James D. Crandell - Cowen Securities LLC, Research Division J. Marshall Adkins - Raymond James & Associates, Inc., Research Division

Ladies and gentlemen, thank you for standing by, and welcome to the Nabors Industries Ltd. Third Quarter 2013 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, October 23, 2013. I would now like to turn the call over to Dennis Smith, Director of Corporate Development. Go ahead, sir. Dennis A. Smith: Thank you, Joan, and welcome, everybody, for our third quarter earnings conference call this morning. As usual, we'll have about a 30 minutes to 40 minutes of narrative by Tony on the state of the business, the quarter results, how we see the full year and how we think the near-term and longer-term stuff is shaping up. With Tony and myself today is also Laura Doerre, our General Counsel; Clark Wood, our Principal Accounting Officer; a number of other principals of our corporate staff and all the heads of our various operating units. As you -- there's also a set of slides that is posted to our website. You can access through the meeting site if you want to follow along with some that Tony might refer to as we go through the narrative. Also, I want to remind everybody, as that we're talking about the outlook, things are subject to change, and as such, they're forward-looking statements and as per the SEC rule, those things may change. So anyway with that, I will hand it over to Tony, please. Anthony G. Petrello: Good morning, everyone. Welcome to our conference call for the third quarter, and thank you for your participation. As Denny mentioned, we have posted the quarterly presentation slides, and I will refer to them by slide number during my remarks. Yesterday, we announced our results for the third quarter. In summary, the quarter came out roughly in line with our expectations at the time of our previous call. Our GAAP EPS was a loss of $0.30. However, that figure includes the $208 million premium we paid to refinance our high interest rate notes, $14 million of International equipment retirements, $20 million of coil tubing equipment impairments, and $34 million of early termination income related to contracted revenue we would have earned subsequent to the third quarter. Stripping out those items equates to normalized EPS of $0.20 at a 16% effective tax rate. I'd first like to discuss in more detail some comments from a high level. Our International segment performed very well and its results improved significantly. U.S. Drilling was roughly in line, and completion and production improved, although its results were tempered in a couple of specific areas. We also had several notable developments during the quarter that will contribute meaningfully to earnings beginning in 2014 that I would like to highlight before we go into the operating results. As noted in the press release and as you see on Slide 4, in the third quarter, Nabors was awarded 21 new build rig contracts with a total incremental capital commitment of approximately $800 million. These projects all meet our capital allocation metrics. 13 of these new build rig contracts are for International. You'll recall that last quarter, we said we believe the rig market was emerging from an extended trough. We believe these awards, in addition to 11 contract renewals and 2 redeployment awards, confirm our International outlook, most notably in the Middle East. The 13 International new build awards include 9 contracts in Saudi for 2,000-horsepower rigs and 2 contracts in Saudi for 15 (sic) [1,500] horsepower rigs, all beginning in 2014 with 4-year durations. With these awards, we will have 43 rigs working in the Saudi market. Consistent with our strategy to extract more value from existing assets, roughly 13% of the capital for these new builds will be supplied by high-performance components currently installed on underutilized high horsepower SCR rigs in the U.S. The most important consideration of the use of these components is significant acceleration of the timeline toward deployment of these rigs. This validates the point we have made previously about the optionality -- the benefit of the optionality of our U.S. legacy fleet. Beyond the Middle East, I can report that we won 2 new build contract awards for 3,000 horsepower platform rigs to be used off the coast of Mexico. These contracts begin in the fourth quarter of 2014 and the first quarter of 2015, respectively, and increase our growing platform footprint in the Gulf of Mexico. Lastly, in International contract awards, Nabors secured awards for 2 existing platform rigs to return to work in 2014: 1 in Malaysia and 1 in Australia. This quarter's 15 rig awards in our International unit, coupled with the 9 significant upgrades announced last quarter, aggregate to approximately $1.9 billion in revenue through 2018. Additionally, we were able to renew 11 rigs, including 2 of our jackup rigs in the Middle East on 3-year contracts at favorable day rates, the majority of which take effect in the second half of 2014. These rig renewals account for over $500 million in contract revenue throughout their duration. The new rig awards and the renewals we have announced over the past 2 quarters equate to contracted backlog of 117 rig years and $2.4 billion of revenue through 2018. We are also pleased that the continued performance of our PACE-X rigs and their skilled crews has led to 8 incremental new build PACE-X contracts, bringing the total to 29. The 8 we are announcing today validate the performance of the early PACE-X deployments, especially on more complex, multi-well pads as operators continue to transition from exploration to large-scale development. Our success contracting these rigs well in advance of their completion dates, coupled with discussions for additional new builds, allows us to consider increasing our pace of construction. Our growing International footprint and the continued growth of PACE-X rigs in the U.S. are strong reminders of our unique, global and technological capabilities. This volume is a direct result of Nabors' technical and operational expertise. We are unlocking the value in our International rigs as the market improves and the flexibility to redeploy rigs internationally distinguishes Nabors from our competitors. Let me turn to comment on some acquisition activity. In addition to our organic growth, both in the U.S. drilling market and abroad, we grew our production service line with the strategic acquisition of the leading provider of a fluid management services in the California market. Our prior presence in the California fluid management market was de minimis. This operation is a clear example of both our focus on capital deployment criteria and where we can improve our service to our customers over the life of the well. This opportunistic acquisition expands our strong position in the California well-servicing business and improves the scale of our services to customers. Turning to our debt on Slide 5. As part of the continuing effort to enhance our financial flexibility, during the third quarter, we took advantage of the current low interest rates and refinanced approximately $785 million of high interest notes. In doing so, we decreased the annual interest payments by roughly $45 million, and our interest paid on the refinanced portion of the notes declined from 9.25% to a weighted average of 3.5%. Additionally, our total blended interest rate for all debt is now at 4.56% versus our previous rate of 5.48%. Refinancing these notes should increase our annualized EPS by about $0.09 a share. Whereas a simple share repurchase, which we looked at, at current market prices, would have been less accretive by $0.04 a share. This move also allows us to spread the original maturity of the 9.25% notes out over 3 different timeframes, including an opportunity to retire $350 million of the newly issued notes 3 years earlier than originally scheduled. We continued to be confident in our ability to fund future projects and improve our fiscal health with future cash flows. Our divestitures in the third quarter reinforce this outlook. So turning to the divestitures. As you may recall in our last conference call, we signaled some activity. During this quarter, we completed the sale of our Eagle Ford A acreage and signed a definitive agreement for the sale of Peak Oilfield Services. Peak has a strong reputation of excellence in safety and crane and services, road construction and field support in Alaska and North Dakota. Our divestiture of Peak will ultimately strengthen both Nabors and Peak itself. Combined, these 2 divestitures will provide total cash proceeds of over $225 million. Both sales reflect our commitment to divest non-core assets, improve our capital structure and focus on our primary service offerings. We continued to actively pursue additional divestitures. Turning to the balance sheet. During the third quarter, our gross debt declined by $35 million, notwithstanding the premium paid of $208 million on tendered debt, which we funded with a combination of operating cash flow, proceeds from the asset sales and cash on hand. Our net debt increased by $82 million during the order. However, we anticipate closing on the Peak sale by the end of the month should bring net debt down. During the quarter, our capital spending totaled $289 million, and we are now targeting approximately $1.5 billion, including acquisitions that I mentioned for all of 2013, which is up from an expectation of $1.2 billion a quarter ago. This increase is attributable for the rig awards I mentioned earlier and to the fluids acquisition. For 2014, our current plans are we're currently targeting capital spending of approximately $1.4 billion to $1.5 billion. That figure may change as we finalize our capital budget and, of course, as we see what the market appetite is for additional new builds. Turning to the outlook. Our recent success signing large-scale contracts, we believe, signals the prospect of the long awaited upturn in international rig market. The supply of high-quality available rigs has declined, and we believe rig economics in certain markets are already at levels that would support new builds. We expect a market strong enough to support new builds will pull renewal rates up as well, which we have already begun to see in our renewals that we've taken. Aside from the Saudi market, we see the potential for near-term improvement in specific rig markets in Latin America and elsewhere in the Middle East. As with most trends, the upswing in international markets is not uniform, and we do see continuing challenging markets in selected countries. Turning to the Lower 48 land rig market, we think the market has digested the transition to oil-directed drilling, several large operator-specific issues and the initial impact of the gains in rig efficiencies. The latest well data from Baker Hughes shown on Slide 6 confirms the continuing increase in the number of wells per rig. That translates to additional focus on rig performance and the efficiencies gained from multi-well pad operations. As illustrated by the 8 contracted new builds we announced yesterday, the market for highly advanced rigs remains active. We are in discussions with several customers for additional new builds. It is still too early to predict how those talks will conclude, but we are encouraged by the interest at this stage. Our view for the completion services market, specifically pressure pumping, is less sanguine. As you can see on Slide 7, the pumping market remains significantly oversupplied. The realization of field operating efficiencies exacerbates that oversupply, as seen in our own stage counts, which since the beginning of the year are up 28% in the northern region and 20% overall. This market continues to experience periodic bouts of aggressive pricing. We have withheld predictions of the timing of improvements in this market. That said, we believe the underlying profitability of some pumpers is insufficient to support a long-term presence in the market. In the near term, we still see risk of an exaggerated end of year slowdown due to the rapid consumption of annual budgets by some customers. Now let me share some of our near-term expectations. We expect several items to impact our Q4 results. As was the case last year, seasonality in the Completion & Production Services business continues to be an issue. The seasonal upticks in Canada and Alaska could be less pronounced than a year ago. In our International segment, more normal revenue days and contract roll offs of high spec rigs will likely reduce income below the third quarter level for the next few quarters. In the U.S. Lower 48 market, we anticipate additional rig deployments as we continue to roll PACE-X rigs into the field. Further, you should be aware of some specific issues that we see impacting Q1 of 2014. First, in Pressure Pumping, the last remaining take or pay contracts will roll off at the beginning of the year. Second, as we explain later, we'll see some transitory items that impact our International business in Q1 and Q2 of 2014. When we view, however, our business through these outlooks, we conclude that the markets for our drilling rigs are generally improving. The underlying trends, specifically in Drilling & Rig Services, are mostly constructive with pockets of challenges. The Completion & Production Services business, particularly Completion Services, remains tenuous. Our priorities remain to: First, grow in the U.S. and international drilling markets with continued focus on advanced technology and operational excellence, and also through targeted marketing of our legacy assets; second, to focus action on improving operating profitability across all business lines, both internationally and domestic, and to take appropriate steps as needed; and third, to rightsize cost to current market conditions throughout our operation. Let me turn to the financial results. Our consolidated financial results are on Slide #8. Overall, operating income was $166 million compared to $226 million in the third quarter of 2012 and $90 million in the second quarter of this year. Operating cash flow was $439 million for the third quarter compared to $491 million in the third quarter of last year and $356 million excluding Peak in the second quarter of this year. These results include early termination payments of $34.3 million applicable to 8 long-term contracts. On 4 of those contracts, we will realize a total of $60 million, including an additional $30 million scheduled to be received next summer. The improvement in EBITDA versus the June quarter also came from International, Other Rig Services, Completion & Production Services and a seasonal improvement in Canada. Net income from continuing operations was a loss of $91 million compared to net income of $23 million in the second quarter and $64 million in the third quarter of last year. Operating revenue and earnings from unconsolidated affiliates for this quarter totaled $1.55 billion. Now I will review the results of each of our segments. First, turning to the Drilling & Rig Services segment. This, as you know, consists of our drilling rigs, our land rigs, offshore rigs, and equipment and manufacturing, drilling software and automation and directional drilling units. Our summarized results are on Slide 10. In the third quarter, this group reported operating income of $162 million, including the $34 million in early termination income, compared to $101 million in the second quarter. Strength was evident in the International business results, while the balance of the group's operations came in about as expected. Slide 11 illustrates the current status of the Nabors global rig fleet. Including the new build rig contracts announced today and other units scheduled to deploy, our U.S. AC fleet totaled 164 rigs. In addition to the PACE-X rigs, we currently have 3 platform rigs in the queue scheduled to go out in 2014 and 2015. Slide 12 shows our utilization during the third quarter. While we think utilization is an important indicator of performance, I would point out that our International segment recorded a sequential financial improvement with 1 fewer rig year. Basically, what happened was everything turned right there, and it shows you the power of the installed base of assets in International. That fact illustrates that we're making progress in the geographies where costs are an issue and we pointed out -- as we pointed out a quarter ago, we have the flexibility to redeploy rigs from underutilized, underpriced markets to better markets as opportunities arise. Our U.S. Offshore rigs normally experience a decline in Q3 utilization due to hurricane season, and this year was no exception. Please keep in mind, it is not the number of named storms that impact activity, but rather operators' reluctance to engage in projects that could be interrupted by such storms. In Alaska, our fleet is poised with an expected increase in activity. We are engaged in discussions with some customers who are contemplating projects that could lead to high spec new build opportunities. Our rig utilization in Canada rebounded from the seasonal low that is normal for the second quarter. Utilization is likely to remain challenged until LNG rig related drilling activity commences in earnest or until natural gas prices increase enough to warrant more drilling. As for our International fleet, utilization was essentially flat from the second quarter, so the financial performance of the International fleet exceeded our expectations as a result of average margins improving by 16%. We view our idle rigs internationally and in the U.S. as a valuable option to support increasing International rig demand, particularly if that demand is for higher capacity rigs. Let's dig deeper into the drilling numbers. First, focusing on U.S. The U.S. Drilling segment, which includes Lower 48, Offshore and Alaska, earned operating income of $92.7 million, including the $34.3 million of early termination fees for revenue attributable to future periods. This is compared to 6.9 -- $69.8 million in the June quarter. Both Alaska and Offshore dipped seasonally, but were offset by the increase in the Lower 48. During the third quarter, our Lower 48 rig years totaled 179, up 3 from the second quarter. It proved tougher than we expected to put the rigs back to work during the quarter, mainly in light of the significant changes in drilling plans by a few notable operators. We expect Lower 48 rig years to increase modestly in Q4. Our average margin for the fleet declined to $9,268 a day normalized for the early termination revenue that would have been attributable to future periods. We expect sideways daily operating margins in the fourth quarter. We anticipated our daily margins bottomed around the $9,000 level, and appears we were a little conservative with that forecast. Today, we have 180 rigs on revenue, including 9 on standby rates. 150 rigs are working on term contracts and 65 are in the spot market. Of those rigs that are working, 134 are AC and 105 are pad capable. Utilization of our pad capable AC rigs is currently 98%. You will remember, our rig count bottomed in February of 2013 at 165. From that point, we have added net 12 rigs through the end of the third quarter and 3 more so far in the fourth quarter. Our AC rig count now stands at 134, up from the low point of 119 in February. Our working rigs include 6 PACE-X rigs, and we have 23 more scheduled to deploy on long term take-or-pay contracts into mid-2014. Once those go into the field, we will have PACE-X rigs in every major shale basin in the U.S. Our fleet includes 111 rigs equipped with moving systems for pad drilling. Of those, 79 have walking systems and another 32 have skid systems. We continue to deploy new rigs with walking systems, as well as retrofit rigs with that capability. With the PACE-X rigs now in the queue on planned upgrades, we anticipate 151 of our rigs will be pad capable and 119 will have multidirectional walking system. We are, by far, the leader in multidirectional walking rigs. We see operators continuing to increase a portion of their wells that are drilled on pads with more than 2 to 3 wells. Moreover, the number of wells per pad is growing, and we are seeing a high occurrence of pads configured for multiple rows of wells as we have seen in the Bakken. This change includes the Texas market where currently 2 well pads -- 2 wells per pad is the norm, with an occasional 3 well pad. Our PACE-X rig, with its structural designed walking system, is tailor-made for multi-row pad geometries. The current trend in spot rates supports our near-term outlook for the Lower 48 business. For AC rigs, spot rates in the low-20s depending on basin and rig configuration. During the September quarter, spot rates generally held flat, although we did see rates move up in West Texas, South Texas and the Mid-Continent. Spot rates for legacy rigs remain flat in the range of $15,000 to $21,000, again, depending on region and power type. We continue to see demand and our rig count picking up in the Rockies and in West Texas. 29 rigs on term contracts expired during the third quarter. 13 of those received extensions averaging about 5.5 months at rates around the low-20s. 10 are now in the spot market. As we have been saying, the impact of our fleet repricing in the spot was most pronounced last year. The impact of additional rig drilling off contract net of new deployments should have a limited impact on our fleet margins. For the fourth quarter, we have 27 rigs expiring. Our outlook calls for a flattish market though one with a slight upward bias. Cash flows for our customers have been robust, which tees up favorable spending as we head into 2014. Our most recent survey of our large U.S. Drilling customers indicates that the outlook for the fourth quarter rig counts are relatively constant with current levels. Indications for 2014 at this stage of their budget cycle are for modest increases in rigs. That said, we foresee overall rig count and rates remaining in their current ranges. We believe our margins will improve somewhat as our mix changes, thanks to the additional new builds going on day rate. In addition, we believe the market has digested the bulk of the rig count disruption from operator-specific drilling rig releases. Although this factor is always a risk, the market is just coming through a period of abnormally high early terminations from a number of large operators. We have seen a small uptick in interest in our legacy rigs. If we are successful in putting some of these assets back to work, that could dampen our fleet average profit margin, but we would certainly welcome the additional cash flow and as well profit. Finally, while a few initial PACE-X rig deployments have gone to the Haynesville and Marcellus, we do not believe those represent an uptick in gas-directed drilling at this point. Turning to U.S. Offshore. Our third quarter results reflect the traditional seasonality of the Offshore business, as many of our customers suspend work during hurricane season. We see a little rate momentum and upward bias for platform rigs in the Gulf of Mexico, while the barge and shallow water workover jackup markets remain challenging, with little upside quarter-to-quarter. In the near future, we anticipate a slow restart from the seasonally challenged third quarter with holidays approaching. We are anticipating a late Q1 deployment for our recently built modular platform rig supporting the Big Foot development in the Gulf of Mexico. That platform rig is designed to withstand the turbulent wind and wave action with spars and TLPs. It should provide a significant boost to our Offshore operations and financial results. Turning to Alaska. Our Alaska drilling operation reflect the market's highly seasonal operations. We were able to put 1 rig back to work this quarter, and anticipate a strong winter season ahead. We are optimistic that the recent change in the tax structure there will result in further development drilling. As it currently stands, pricing is improving and many strategic projects appear to be moving forward. These projects will likely not become a meaningful contributor for a year or 2, but we are in a favorable position to gain additional work that generally is 3 to 4x more profitable per rig than similar contracts in the Lower 48. Turning to Canada, let's go to Slide 13. This shows our working Canadian fleet of 35 rigs and their rig locations. Canada rebounded from its seasonally low second quarter, posting operating income of $12 million, up from $4 million. Rig years in the third quarter increased, though our rig years were constrained below our expectation due to both mix and decline in the Canadian rig count. The third quarter results confirm that the Canadian market share many -- the Canadian market shares many of the characteristics of the Lower 48 market, constrained by customer budgets and steady pricing. We do anticipate traditionally strong fourth and first quarters, and each quarter that brings past just brings us closer to anticipated LNG-related drilling work in 2015. Slide 14 shows International and the countries where we are working currently. Our International operations continue to perform well, posting $54 million in operating income, which is up from $32 million in the second quarter and is 79% higher than the third quarter of last year. The improved number reflects a 16% increase in average margin to $14,397 per rig per day, with the full contribution of earlier startups, fewer unexpected revenue days, which are unlikely to repeat and improved efficiencies in certain geographies. We continue to focus on improving profitability in distressed markets with full mitigation not expected until the end of next year. Moreover, we are seeing a continued improvement in pricing in several international markets. We find ourselves in a good position to put rigs back to work at higher day rates in core markets. However, there is a lag in the pace of magnitude of financial impact. Operating results for the next 2 quarters will likely be lower than for the quarter just reported. This decrease is transitory, and results in part from planned downtime for maintenance in the first half of 2014 on Rig 660, our flagship jackup in the Middle East. Also, one of our other Arabian Gulf jackups is set to roll off contract in Q1. Even if our rare efforts to re-up it are successful, it will likely spend some time off day rate. We foresee geographically redeploying several rigs, which also can result in time off day rate. That being said, we are optimistic about some upcoming tenders and several renewals despite less than perfect clarity in their timing. And when you talk about timing, I think -- when you think about the third quarter versus the second quarter, it's that kind of -- things all working together that accounts for the large increase in the third quarter to the second quarter. That being said, we are optimistic about some upcoming tenders and several renewals despite less than perfect clarity in their timing. Over the last 2 quarters, we have secured 26 long-term contracts, including new builds, extensions and restarts, in addition to the 6 rigs in Argentina and 3 rigs in Northern Iraq and Kazakhstan announced last quarter, all evidence of the improving market environment. Though there will be some challenges in the near term, we expect long-term growth in our International segment. The rig count is increasing and the supply of other [ph] rigs appears to be mostly exhausted, which leads us to believe that rates will increase and new builds and rig locations will begin to fill the supply gap in the future. We intend to use our unique domestic and global operations to maximize our rig utilization across all markets. Turning to Rig Services. This segment includes our Canrig equipment and technology business, as well as Ryan directional drilling. Results in Canrig rebounded from their performance in Q2. Services and rental revenue, third party top drive shipments, total revenue and operating income all increased versus the second quarter. Beginning with Q3, our results exclude Peak, which we have an agreement to sell. Business in Canrig is down significantly versus a year ago. However, this quarter we have received an increase in international orders. We remain cautious on the domestic market as it lacks clear visibility, particularly for third party equipment sales. We have been pursuing a number of technology initiatives within Canrig, consistent with our view of the evolutionary -- evolution of the drilling markets. We will continue to focus efforts to augment Canrig's technology offerings, while improving its cost structure. Now let's turn to Completion & Production Services. This unit, as you know, consists of maintaining wells, including pressure pumping, well-servicing, workover, and coil tubing and fluids management. Operating income for this division is tabled on Slide 16. Completion & Production Services posted operating income of $39 million, up from $30 million in the second quarter. We suggested a quarter ago that the disappointing results for the second quarter were in large part due to the adverse operating environment in North Dakota. The September quarter results bear that out. Completion Services recovered from its second quarter results to post operating income of $13 million, up nearly 90% from the last quarter. Challenges in the coil tubing and Canadian pressure pumping market and intense competition in West Texas stimulation market prevented a full recovery to expected operating levels. Mitigation of these challenges is a priority of ours, so it would have a material impact on an ongoing basis. Also, job scheduling at the request of operators did slide somewhat from Q3 into Q4. Of our 18 frac fleets active in the U.S., 11 are currently working on 24-hour schedules. We divide the pressure pumping market into northern and southern regions. So both regions are competitive. The southern region, which includes South Texas and West Texas remains particularly intense. Recently, the margin in general has seen even more aggressive pricing. Efficiency gains in pressure pumping continue to increase the industry's effective capacity. Even in these tough conditions, we are making headway in the market. We will begin working for 4 new stimulation customers this quarter. Let me speak to the outlook for this business. We expect continued down pressure on pricing as a result of the now familiar themes of aggressive competition, the oversupply of pressure pumping capacity and operating efficiencies, which further compound the oversupply of equipment. We expect the fourth quarter results to reflect holidays, the onset of winter weather and reduced activity levels by some operators as they curtail operations ahead of year end as annual budgets are spent. We have, however, seen operators increasing their tender activity, though this may reflect their desire to lock in current pricing as opposed to meaningful increases in activity. We continue to focus on extracting cost savings in our completion business. We were able to consolidate our yards in several areas. In addition, we are ceasing operations in our Canadian Pressure Pumping and in selective areas in our Lower 48 coil tubing business. We are relocating the Canadian Pressure Pumping fleets to the U.S. In the meantime, we expect to quickly stem the losses in these 2 areas. As we look farther out and into 2014, we expect a significant drop in operating results beginning in Q1. Our last large take-or-pay contract roll off at the beginning of the year. Market pricing has declined significantly since we entered those contracts, resulting in a decline of per stage pricing on the order of 40%. While our results have reflected these spreads working at contractual minimums were lower for about a year, we are less certain about the forward impact on activity levels. Lastly, we expect a slowdown in the fourth and first quarters due to seasonal weather, shorter delays and budget constraints. In response to customer interest demand, we recently introduced our first full spread of dual fuel frac pumps, which is cost-effective and reflects our environmentally conscious operations. These conversions are simply the latest in our continued initiatives to improve our cost structure and efficiency. The dual fuel technology benefits our cost of fuel and our customers' emissions profile. Turning to Production Services. Our Production Services segment posted operating income of $26 million, up sequentially from $23 million in the second quarter, primarily due to the seasonal increase in activity in Canada. In the U.S., rig releases have impacted the overall market and stalled pricing momentum. We experienced pricing declines in daylight rates and lower rental rates on frac tanks, as well as the decline in P&A activity. As I mentioned earlier in the call, we finalized our acquisition of the leading fluid service provider in the California market in the third quarter. We are bringing it into Nabors' fold. We have bolstered our overall trucking fleet by roughly 40%, place trucks -- Nabors trucks in every major Lower 48 market, and gained significant market share in the California market where we formally had no meaningful trucking presence. That share is a credit to the hard work of the people who are now joining Nabors. We expect to see a slight increase in workover rig activity. However, we do not see any pricing trend changes in the near term. Much like our Lower 48 outlook, however, we do expect customer budgets to increase in 2014, and we are simultaneously consolidating yards to further improve our efficiency and cost structure. Let me conclude our outlook with our estimates for effective income tax rate. For 2013, we still anticipate a full year effective rate of 16% on normalized income before taxes. For 2014, we anticipate an effective tax rate in the low-20s. Keep in mind, our rate will vary with geographic mix of our income. This concludes my prepared remarks on the third quarter's results and our outlook. I would like to take a moment to bring you up to date on our strategic initiatives. Last March, we announced that we will undertake a review to evaluate strategies that enhance shareholder value, including optimizing the capital structure, reviewing the mix of Nabors businesses, improving operational performance. During the course of the summer, the board reviewed numerous options to enhance shareholder value. That review has resulted in the board identifying and now focusing on certain specific initiatives that are impactful, viable and executable. We are now in the process of proceeding with an implementation plan. We will disclose details on the specific initiatives taken when the implementation process matures. We have also then taken a comprehensive review of our operations with the goal of improving operational efficiency and reducing expenses. Efforts are underway in that regard, and we anticipate those efforts being reflected in financial results beginning in 2014. In summary, let me summarize where, I think, we stand. We view the global drilling markets in the aggregate as having bottomed. Not in every market, but when we tally them, we believe the resulting direction is upward. Our rig awards discussed on this call support this conclusion. The sequential impact on those trends on our income statement will be uneven. Although we are optimistic on international markets, near-term disruption will likely persist and will temper the underlying increase in trend. We remain focused on operations that are within our control. We are consolidating functions and facilities where that makes sense and closing operations where that makes sense. Finally, we remain committed to streamlining the company's activities. We sold the Eagle Ford acreage in the third quarter and are selling Peak in the current quarter. We are making progress and are actively continuing efforts to shed additional non-core assets. With that, thank you for your time, and we'll open it up to questions. Dennis A. Smith: Operator, I think we're ready for the Q&A session, please.

[Operator Instructions] Our first question is from the line of Jim Wicklund with Crédit Suisse. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Tony, you gave us an awful lot to digest. And so having the first question is probably a liability on this one. Let me ask, of the 23 PACE-X rigs, which are fabulous rigs, 23 PACE-X rigs will go to work next year. Will they cannibalize your existing fleet? Will they displace existing Nabors rigs? Or will they be additive to the overall rig count for Nabors? Anthony G. Petrello: I think they will be additive. I mean, the market for those rigs generally compared to legacy rigs is a different market. So I don't see the type of market that those rigs would be, would be markets that typically we would take our legacy rigs. The only exception is, we have some legacy rigs that we have retrofitted with pad, with pad capability like our SCR-Plus rigs. And those are working in those markets. So with that, I don't think generally there's cannibalization of our existing stuff, which is one of the reasons why we're pursuing it. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Okay, that's positive. And everybody is building new rigs and everybody insists, it won't be their rigs that are cannibalized. So we're just trying to figure out if the overall rig count doesn't go up by as many as new rigs as we add next year, then obviously, somebody will lose, we're just trying to figure out who. The second question, I guess, is internationally, you talked about Saudi and its 43 rigs is impressive. Can you tell us where the markets aren't as good? Is Argentina good or bad these days? Where are the markets you kind of warned us about without mentioning countries? Anthony G. Petrello: Well, in terms of the markets, when you say not as good. I mean, I think international, in Argentina, in particular, I think we see that as a market which has turned and opened up. And as you know, we are sending additional rigs down there. In terms of markets that have challenges from the cost point of view. As you know, Iraq continues to be one of those challenges for us. Other markets where there's challenges include... Siggi?

Algeria, for example. Anthony G. Petrello: Yes, Algeria.

There's still various markets where we still don't see the uptrend, but it's in discussion and probably a time lag. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Understand. And how many rigs do you have in Iraq now?

At this moment, 6 rigs.

And our next question comes from the line of Waqar Syed with Goldman Sachs. Waqar Syed - Goldman Sachs Group Inc., Research Division: In terms of your PACE-X rig deployment in the U.S. land business and Lower 48, could you talk about the timing of deployment? How many rigs get deployed each quarter? Anthony G. Petrello: Sure. I think in the PACE-X, we actually have a pretty active fourth quarter. We're aiming to put 13 of those rigs into the market throughout the fourth quarter and 6 in the first quarter and then probably 2 thereafter. So it's -- we've been working hard to get these out into the market as quickly as possible, so those should hit on that kind of schedule. Waqar Syed - Goldman Sachs Group Inc., Research Division: Okay, that's great. And then in terms of your operating income from International business, you provided some color of some of the challenges. Could you quantify for us, like what kind of a detriment percentage-wise are we looking at into the fourth quarter and perhaps in the first half of next year? Anthony G. Petrello: Yes. I think, it's -- well, first of all, let me just give you some color here. In terms of the new rigs being deployed, there's basically 1 scheduled for the first quarter, about 6 -- 5 or 6 in the second quarter, the same about in the third quarter, and then 13 or so in the fourth quarter, and 1 of the additional ones into 2015. So it's going to be quite a ramp up. In terms of the incremental number, I think we've given you the dollar amount of the CapEx. And we've told you to meet [ph] our metrics, and I think you guys can back into some numbers. We're still in process, frankly, of having more discussions in both these -- in all the markets that we've talked about of additional contracts, and so we don't want to get into specific margins. Waqar Syed - Goldman Sachs Group Inc., Research Division: Okay. And then the 2 platform rigs that you're adding into Mexico, are those kind of the traditional Sundowner type or those are some of the bigger ones like you have for the Big Foot project? Anthony G. Petrello: Yes, the rigs, the 3,000-horsepower platform rigs, they're the big -- they're known as MASE rigs, which is Nabors' trademarked modular minimal area spacing self-elevating rig. And PEMEX has specifically spec-ed that kind of requirement for the their needs. And these are 2. And just, I think it's known in the marketplace. PEMEX is looking for quite a number of additional such platform rigs. Waqar Syed - Goldman Sachs Group Inc., Research Division: Okay. And your International -- other International land rigs that you're adding, do they primarily have camps with them or they are just -- you sending them just with the basic drilling unit? Anthony G. Petrello: No, they will camps with them. And I don't think you should underestimate the magnitude of the task here in terms of the ramp up in Saudi. I mean, these 11 rigs are going to require an enormous amount of equipment. And just the number of people, they need about 1,000 additional people just to staff these rigs. So it's a very substantial effort that's going to be undertaken.

And our next question is from the line of Robin Shoemaker with Citi. Robin E. Shoemaker - Citigroup Inc, Research Division: So Tony, with the legacy contracts -- sorry, the term contracts expiration, you mentioned, I believe, 29 in the third quarter, 27 in the fourth quarter. That's a big chunk of your AC drive fleet, I assume those term contracts with the AC drive rigs, so I'm trying -- are those typically staying with the same operator? A lot of them go back to work, some on spot, some on term. Kind of -- I was just interested in some color around what happens typically in terms of movement between regions or between operators to keep these rigs employed as the term contracts expire? Anthony G. Petrello: Okay. I'll let Joe give you some color, but the term contracts apply not just to the AC rigs. There are some legacy rigs on term contract as well so. And as I mentioned, in this quarter, we have been able to roll over a bunch of expiring contracts to short term additional term contract. But Joe, maybe you had some more color. Joe M. Hudson: Yes, no, it's a combination of both. I don't have the specific breakdown. But there is, at this point in time, as the operators see the efficiency gains out of these rigs, a lot of the operators want to maintain the asset they have. They don't want to lose the efficiency gain by picking something else up. So we're seeing the -- where the operator wants to re-term the contract or maintain the operation. It typically has stayed with the operator. Now we have redeployed some assets from areas that are a little less robust in activity, i.e. the northeast to the Niobrara. I mean, there's, I think, we moved 3 or 4 across that area and actually turn those contracts up. So there is -- it's a mixture and -- but I think we're still seeing the operator likes the rig, likes the crew, likes the efficiency and he's sticking with the contract. Robin E. Shoemaker - Citigroup Inc, Research Division: Okay. So just on your overall then U.S. land rig margin, it ticked up in the third quarter, I think that's because of the revenue from the early termination. But prior to that, it was kind of in the $9,000 to $10,000 a day range. And with the renewal rates you're seeing, have we bottomed there, excluding early termination revenues or anything like that? Anthony G. Petrello: Yes, I think that... Joe M. Hudson: You got 3 of us to answer that one. Anthony G. Petrello: Yes, that's a fair comment. Joe M. Hudson: Robin, earlier, we had indicated we thought margins could drift as low as $9,000, $8,800 range, I think Tony pointed -- tried to point out in the call that this quarter's margin when you normalize it, it's about $9,300 and change. And that's about where we expect it to stabilize now. Robin E. Shoemaker - Citigroup Inc, Research Division: Okay. For -- it would stabilize at that level incorporating the renewal pricing that you're getting today on AC drive and legacy rigs? Joe M. Hudson: Yes. We think it's stable for a couple of quarters, then starts to progress. As more of the big rigs rollout, and we're actually seeing slight tick up in some of the spot market renewals and some of the contract renewals.

And our next question is from the line of Jim Crandell with Cowen. James D. Crandell - Cowen Securities LLC, Research Division: Tony, are the day rates and terms of your new PACE-X contracts both in line with the previous contracts that you signed on the PACE-X rigs? Anthony G. Petrello: I mean, this is why I think, if they're both -- they're attractive terms and rates. And with respect to rate, in particular, I would say, they're not -- they're not too different from the rate that we've been historically enjoying, so. James D. Crandell - Cowen Securities LLC, Research Division: So a little bit below is what you would say? Anthony G. Petrello: Correct. James D. Crandell - Cowen Securities LLC, Research Division: Okay. And are those, generally, Tony, for the ones which you're winning, are they bid or negotiated? Joe M. Hudson: Oh. Really, I would say, a majority are negotiated. We've had a high traffic through the -- through our Crosby yard through our -- both Rockwell, we're building these rigs. A lot of traffic with operators up in the Haynesville area, which I know some of the folks have -- from analyst community have seen. And then we're getting a pretty good demand. So it's not really being awarded through an effective tender quite honestly. It's a lot of negotiations involved. James D. Crandell - Cowen Securities LLC, Research Division: Well, I've seen 5 of your PACE-X rigs now, Joe, so I think I might be in the lead in that category. In Canada, Tony, how quickly do you see the LNG market unfolding, both in terms of when you see the contract signed, I guess, to when you expect rig awards there? And do you -- are you expecting Nabors to be a major player there? Anthony G. Petrello: I think LNG, we're looking at 2018 I think, but you have to -- given that, that -- if that date kind of holds, I think people are going to start in 2015 or so really start to gear up, and so, and yes, we're interested, I think that kind of rig is definitely on the fairway for us. And as you know, we went into that region a long time ago, including in the E&P, in the E&P distraction as well. So yes, I think it's a market that's going to be there. And I think it will become more visible in about 1.5 years. James D. Crandell - Cowen Securities LLC, Research Division: Okay. But I think there's been sort of 4 awards for Canadian LNG so far. And at least 1 of your Canadian players is talking about another 4 to 8 awarded this year. Are you looking at opportunities and do you see the things unfolding that quickly? Joe M. Hudson: Yes. Jim, eventually, we're probably looking at a market that will approach 40 incremental rigs, we think, for those projects in aggregate. So this is kind of the early beginning to that, but we think '15 is where you'd see the big step. Anthony G. Petrello: Yes. I think per our prior conversations on this topic, we still are sensitive to our returns on capital. We want to make sure that the numbers all there make sense. With the short season, typically short season, it's been hard to get those kind of returns. And that's still something we have to focus on. James D. Crandell - Cowen Securities LLC, Research Division: Okay. My last question, Tony. Given your emphasis on return on capital, are the International contracts you are signing, how does the -- given all the things, all the things you take into consideration there, are the returns on capital on your International contracts as good or better than the PACE-X rigs you're signing in the U.S.? Anthony G. Petrello: Better. James D. Crandell - Cowen Securities LLC, Research Division: Better, even given sort of extra costs? Anthony G. Petrello: On the Saudi contracts, they should be better. The only thing I would say is, it's also better, but it comes at a price. And the price is the complexity and the herculean effort it's going to take. Just to give you some idea, if you take all these rigs together, it's probably, on a normalized basis, equal to about 53 PACE-X rigs we're talking about putting out there into the marketplace. So it's just giving you an idea of the dimension of what we're talking about. But yes, it would be better. James D. Crandell - Cowen Securities LLC, Research Division: And is that in part, Tony, the fact that you're using a lot of equipment that's been on some of your SCR rigs? Anthony G. Petrello: Correct. As I signaled, I think we have about 8 SCR rigs in the U.S. that the foundations of which were transferring to International. And that as we've signaled to people before, we'll always use the SCR rigs as optionality benefit. And this is a prime example of that. And the benefit to the customer, of course, is the mass of substructures, which he can use are already in existence. And therefore, cuts the timeline time-to-market. And I think they saw value in that with us. Joe M. Hudson: Jim, these are largely 3,000-horsepower and 2,000-horsepower which are weak demand in the U.S. market right now.

Our next question is from the line of Marshall Adkins with Raymond James. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Two questions for the final question. International, it seems like we've been waiting a couple of years for this thing to turn. And this is the first real sense I have of a meaningful turn in that market, so it clearly looks like '14 is going to ramp up over the course of the year, particularly later. But it's hard for us analysts to kind of gauge the near-term issues. You had a lot of swirling issues short term that are going to affect margins and utilization. Can you give me a little more color just on the next couple of quarters on how we should think about margin trends and utilization trends there? Anthony G. Petrello: Here's the way, one way of thinking about it, Marshall. In the second quarter, I think our operating income for International was about $30 million. Joe M. Hudson: $32 million. Anthony G. Petrello: $32 million. And in the third quarter, as we said, unexpectedly maybe, everything went right and you saw the power of what we have translated to the number there, which was a little early from what the scale is. So I think when we look at the fourth quarter, I think in terms of continuing a pace off of the $32 million number moving forward into the fourth quarter as a base, still increasing from that, but off that number as opposed to having already set a high watermark with the $50 million. And then the only caveat looking at that when you go into Q1 is that those major large income swinging items that I mentioned. It's basically the jackups. The jackups, they're going to go into a shipyard, and as you know, the rates are very high, therefore, those 1 or 2 rigs have a big meaningful impact. And that's where the Q1 number can be reduced somewhat or more significantly depending on how long it takes to get those things in the shipyard. So that's the way we think about it. But for that reason that's why I referred to this thing as transitory and not emblematic of the overall situation. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Right, all right, yes, I got that sense. So just be conservative in Q1. All right. So just summarizing everything I've heard, because you got a lot of moving parts here. International business, over the course of the year, let's call it just in '14 gets better. Completion business should get better over time, recognizing there are some contract rollover issues there. Production business, modestly better now that the large operators are back in. U.S. land flat, maybe slightly up as you go into the second half. I add all that up and '14 looks meaningfully better. What about Q4? I still have Q4 down in '13. Does that make sense? Anthony G. Petrello: Q4. Joe M. Hudson: More flattish, Marshall, so maybe -- and part of it's the acquisition of the trucking company we did. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Okay. So I was just thinking all the early termination benefits you got this quarter go away, plus the daylight hour and all that kind of stuff, but... Joe M. Hudson: Well, yes, a lot of those rigs are recommitted already.

And I will now turn it back to management for any closing remarks. Dennis A. Smith: So we want to thank anybody for joining us today. And if you didn't get your questions answered and want to follow up, just feel free to give us a call. We'll be available the rest of today and through most of tomorrow. Thanks for participating.

Ladies and gentlemen, that does conclude your call for today. Thank you for your participation. You may now disconnect.