Nabors Industries, Inc.

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Nabors Industries, Inc.

515 West Greens Road Suite 1200
Houston, Texas 77067 U.S.A.
(713) 874-0035
Fax: (713) 872-5205

Public Company
Incorporated: 1978 as Anglo Industries, Inc.
Employees: 3,168
Sales: $286.26 million
Stock Exchanges: American
SICs: 1381 Drilling Oil & Gas Wells; 1389 Oil and Gas Field Services

Nabors Industries, Inc., is the largest land drilling contractor in the United States and one of the largest international land drilling contractors, with a fleet of over 200 land drilling rigs operating in most of the significant oil, gas, and geothermal drilling markets in the world. Nabors also provides offshore drilling services through more than a dozen offshore, jackup, and barge rigs, as well as a range of complementary oilfield management, logistics, and engineering services.

Nabors is the amalgamation of several other restructured drilling companies and informally traces its lineage to Anglo-Lautaro Nitrate Corporation, a Chilean nitrate production company formed by Guggenheim family interests in the late 1920s. During the early 1970s the government of Chile repatriated Anglo-Lautaros mining interests in exchange for several million dollars in cash, and the company began diversifying after changing its name to Anglo Company, Ltd., in March 1972.

Under the direction of Peter Lawson-Johnston, chairman and heir to the Guggenheim family fortune, and Albert Van de Maele, president and chief executive, during the two years following the companys name change, Anglo Company acquired a wide range of businesses. These purchases included Minerec Corporation, a manufacturer of chemicals used in the mining industry; a 50 percent interest in Printex Corporation, a manufacturer of printed circuit boards for the electronics industry; a 25 percent interest in Robert Garrett & Sons, Inc., an investment banking firm; and Motor Parts Industries, Inc., an automotive replacement parts supplier.

In 1974 Anglo entered the contract drilling business when it acquired a 52.6 percent interest in Nabors Drilling Limited of Canada, an independent oil and gas drilling contractor. Nabors Drillings precursor was the Parker Drilling Company of Canada, which had been organized in 1952 and had been operating in Alaska since 1963. By 1978 Anglo had increased its interest in Nabors Drilling to 99 percent by initiating a number of refinancing and reorganizational moves designed to expand its activities in the contract drilling business.

In order to fund the acquisition of R.L. Manning Company, a Denver-based contract drilling firm, Anglo went public in the spring of 1978 through a two-part offering that included nearly $20 million in subordinated debentures and one million shares of common stock. In May 1978 Anglo Company, Inc., was created to act as a holding company for Anglo Company, Ltd., and its subsidiaries, which included Anglo Industries, Inc., also formed in May 1978. That same month Anglo acquired R.L. Manning for $23.6 million, or about three-quarters of the $30.2 million Anglo eventually raised through its initial public offering.

By the end of 1978 Anglo had a fleet of 49 drilling rigs and had earned $9.9 million on annual sales of $99.7 million, with Nabors Drilling contributing nearly two-thirds of those revenues. By 1979 sales had risen to $145 million, pushing income up proportionately to $14 million. Anglo entered 1980 as a diversified company predominantly engaged in contract drilling for oil and natural gas in Western Canada, Alaska, and the U.S. Rocky Mountains. The company was also marketing oilfield hauling services in Alaska and producing circuit boards and automotive replacement parts through its manufacturing subsidiaries. In 1980 William J. Johnson joined the company as executive vice president and chief operating officer and became president and chief executive the following year when Van de Maele retired. Under Johnsons guidance Anglo expanded its oilfield service operations during the early 1980s by acquiring a handful of small oilfield equipment and supply companies.

In 1981 Anglo sold Printex and diversified into oil and gas exploration through a partnership with National Utilities & Industries Corporation to explore undeveloped land in Texas and Louisiana. Unfortunately, while the company was expanding its range of oilfield operations, an oil glut was developing. The following year, Anglo was forced to slice its 2,500-employee payroll by 1,000. After recording a quarterly loss of $7.8 million in September of 1982 the company suspended its stock dividend. For the year Anglo earned only $444,000, compared to $27 million in 1981.

By early 1983 the companys stock value had plunged from a 1981 high of $35 to about $6. As the shakeout of small drilling firms ensued, Anglo began selling its supply and equipment operations and cutting management pay. The company also secured a short-term borrowing agreement with an $85 million credit line. Anglo lost $41 million during the spring 1983 quarter, spurring Johnsons resignation and a reevaluation of the companys activities. Chosen to help redirect the company and solidify its focus on contract drilling and oilfield services were Allen F. Rhodes, former president of Warren Oilfield Services, who became Anglo president, and Nabors Drilling president K. G. Reed, who became Anglos senior vice president of operations. The new management team promptly agreed to abandon Anglos oil and gas exploration venture and accelerate the sale of Anglos oilfield supply and equipment businesses.

By November 1983 Anglo had sold about two-thirds of its oilfield equipment line, having dealt away its exploration and production business for $14 million. With liabilities of nearly $200 million, that same month the companywhich had been renamed Anglo Energy, Ltd., during the early 1980sfiled for reorganization under Chapter 11 of the federal bankruptcy code.

Between November 1983 and mid-1986 Anglo Energys five subsidiaries, all engaged in oil drilling and transportation, continued to operate outside the jurisdiction of bankruptcy court while the parent operated under bankruptcy protection. During this time Anglo Energy and its creditors both filed several rounds of competing reorganization plans until reaching an accord in April 1986. In August 1986 the company was restructured and emerged from bankruptcy with a new president and chief operating officer, Richard A. Stratton. In January of the following year Eugene M. Isenberg became chairman and chief executive officer and soon initiated a business strategy geared toward developing and expanding Anglos position in international drilling markets, where there was potential for long-term contracts. In December 1987 Anglo significantly expanded its oilfield service operations when it entered into a 50-50 partnership with Peak Maintenance and Equipment Company to form Peak Oilfield Service Company, an oilfield maintenance, hauling, and construction service firm.

Expenses stemming from discontinued businesses took their toll on Anglos earnings in 1987, and the company lost $85.9 million on revenues of $28.6 million. In February 1988 Anglo again filed for Chapter 11 protection, invoking a seldom-used section of the U.S. federal code that allowed the company to petition for bankruptcy with a reorganization plan already pre-approved by a majority of its creditors. A month after filing for bankruptcy protection, Anglo sold the assets R.L. Manning Company and bowed out of the Rocky Mountain drilling market.

In May 1988 Anglo again emerged from bankruptcy and through its approved reorganization plan exchanged about $100 million worth of debt obligations for about 30 million shares of new common stock, effectively eliminating the companys liabilities. Debt-free, Anglo was able to borrow on its rig fleet and between late 1988 and 1990 the company made three strategic acquisitions of international drilling companies that were designed to extend Anglos operations beyond the bounds of Alaska and Canada.

In November 1988 Anglo acquired the Westburne Group of Companies, a Canadian-based drilling and oil transportation contractor with operations in the Middle East, the Far East, North Africa, Southeast Asia, Australia, Canada, and the North Sea. Because a majority of Anglos business was conducted by Nabors Drilling Ltd. and Nabors Alaska Drilling subsidiaries and because the company wanted to change its moniker to reflect its new managements goals, in March 1989 the company changed its name to Nabors Industries, Inc.

In February 1990 Nabors joined the field of the worlds largest drilling companies after paying $58 million to acquire Loffland Brothers Company and its 53 rigs, which increased Nabors fleet to more than 100 rigs. Founded in Ohio in 1906, Loffland was the worlds oldest contract drilling company and had a reputation for ultra-deep drilling, frontier drilling, and major discoveries, such as its discovery of the huge Prudhoe Bay oilfield on Alaskas North Slope. Loffland also added domestic geothermal drilling operations to Nabors activities, helped expand Nabors presence in the North Sea, Canada, the lower 48 states, and the Middle East, and gave Nabors a new presence in Venezuela and the Gulf of Mexico.

In November 1990 Nabors expanded its international and domestic operations further when it purchased Henley Drilling Company, a subsidiary of Hunt Oil Company with 11 rigs operating in Texas, Louisiana, and Yemen. Nabors then merged the operations of Henley and Loffland to create a new subsidiary, Nabors Loffland Drilling Company. Largely as a result of the acquisitions of Henley, Loffland, and Westburne, Nabors annual sales rose between 1988 and 1990 from $56 million to $138 million.

Between 1988 and 1990 Nabors grew not only on land, but on water as well; at the end of 1990, the company controlled about 20 percent of the platform rigs in the British North Sea. Although international operations were expanding, the companys North American operations, which accounted for two-thirds of the companys rigs, were only marginally profitable, particularly in the lower 48 states.

As a result of its ongoing financial struggle to make operations in the lower 48 states pay, Nabors strategy during the early 1990s included internal growth of its Alaskan operations and redeployment of acquired equipment in North America to such international markets as the Middle East, South America, the Far East, and Central America. By the beginning of 1991 Nabors Industries was operating a fleet of 111 land and offshore rigs in most of the worlds major drilling markets and was among the largest international drilling contractors.

In 1991 Nabors began solidifying its position in the service contract market by creating Crest Service Company, which would provide oilfield transportation and construction services in the Middle East and other international frontier drilling markets. Through continuing redeployment of rigs, during 1991 Nabors steadily expanded its presence in the Middle East countries of Yemen and Saudi Arabia, as well as in Venezuela and the British North Sea.

In North America, where financial results continued to hover around the break-even mark, Nabors concentrated on developing new technology with worldwide applications, such as the companys new slim hole drilling rig designed to provide a more cost-effective and efficient means of conducting exploratory drilling in remote and logistically difficult regions. In 1991 Nabors also stepped up efforts to consolidate its corporate activities in Houston, where the company had moved its headquarters a year earlier from New York City. By the end of 1991 Nabors annual revenues had jumped to more than $240 million, and net income nearly doubled from $14.5 to $27 million.

In 1992 Stratton was named vice chairman and Anthony G. Petrello became president and chief operating officer. The companys presence on the Alaskan North Slope was further solidified that year when Nabors became the first service company to join in a new long-term alliance with the operator of the Prudhoe Bay oilfield. In 1992 international drilling, particularly in Yemen, continued to provide the majority of operational growth for Nabors; revenues climbed to $286.2 million and income rose to $33.7 million. At the close of 1992 Nabors secured a ten-year, fixed-rate financing agreement, providing the company with available capital for further internal expansion efforts and potential acquisitions.

In 1993 Nabors moved closer to its goal of becoming a total drilling service when it acquired the Thistle Group, a provider of platform drilling and testing services. Nabors further expanded its offshore operations that year in the British North Sea, introducing integrated drilling services, including engineering and platform management services. Nabors international land drilling and service operations also continued to expand, and by 1993 the company was operating a fleet of exploratory, development, workover, and water well rigs in Yemen, while also offering logistical and drill site construction services. That same year the company received its first drilling contract in Russia and extended into 1995 its long-term contract for geothermal drilling in Costa Rica. In 1993 Nabors debuted one of its new slim hole rigs in Venezuela, where the companys operations were expected to become increasingly profitable as a result of new government polices designed to spur oil exploration and production activities.

In June 1993 Nabors became the largest land drilling contractor in the United States after buying out its major domestic competitor, Grace Drilling Company. The $32 million transaction gave Nabors an additional 167 land rigs, which were merged with Nabors existing 40-rig Lower 48 fleet. The expanded domestic drilling firm was renamed Nabors Drilling USA, Inc.

Nabors entered the mid-1990s expecting to capitalize on its acquisition of Grace Drilling through an anticipated upswing in domestic natural gas drilling. The companys strategyused since its 1987 reorganizationwas to use the assets of the former services companies it had acquired to maintain and expand upon its position in international and domestic land drilling markets, tapping into their potential for long-term contracts.

Principal Subsidiaries

Nabors Drilling USA, Inc.; Nabors Alaska Drilling, Inc.; Nabors Drilling International Limited; Loffland Nabors Limited (United Kingdom); Nabors Loffland Drilling Company; Nabors Development Corporation; Peak Oilfield Service; Nabors Yemen, Ltd.; Loffland Brothers de Venezuela, C.A.

Further Reading

Booth, Michael, R.L. Manning Co. Sell Rigs, Will Close, Denver Business Journal, March 28, 1988, Section 1, p. 6.

Brammer, Rhonda, Blowing in the Wind: The Battered Oil-Service Industry Is Primed for Recovery, Barrons, October 28, 1991, pp. 10, 11, 20.

Calkins, Laurel Brubaker, Competitors Buying Each Other Out in Oilfield Services Industry, Houston Business Journal, May 3, 1993, Section 1, p. 21.

Griffin, Judith Fuerst, Over a Barrel: Falling Oil Prices Pushed Oil Field Work into a Precipitous Decline that Tested the Mettle of Alaskas Oil Field Service Firms, Alaska Business Monthly, February 1989, Section 1, p. 30.

Neumeier, Shelley, Companies to Watch: Nabors Industries, Fortune, January 13, 1992, p. 65.

Palmeri, Christopher, Making a Killing from a Corpse, Forbes, September 13, 1993, pp. 7071.

Percefull, Gary, N.Y. Firm to Buy Tulsa-Based Driller: Loffland Brothers Getting New Nabors, Tulsa World, November 23, 1989, Section B, p. 1.

____, Loffland to Continue Operations Under Name, Tulsa World,

February 27, 1990, Section B, p. 5.

Roger W. Rouland