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MERRILL LYNCH GLOBAL ENERGY CONFERENCE NOVEMBER 5, 2003. Presenter: Gene Isenberg Chairman & CEO. Balance Sheet Data as of September, 2003. A CONSERVATIVE AND FLEXIBLE FINANCIAL POSITION. ($Millions). (1) Some debt issues are unrated. AVAILABLE CAPACITY AT OCTOBER 31, 2003.
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MERRILL LYNCH GLOBAL ENERGY CONFERENCE NOVEMBER 5, 2003 Presenter: Gene Isenberg Chairman & CEO
Balance Sheet Data as of September, 2003 A CONSERVATIVE AND FLEXIBLE FINANCIAL POSITION ($Millions) (1) Some debt issues are unrated
AVAILABLE CAPACITY AT OCTOBER 31, 2003 (1) Represents Nabors’ Net Interest in J.V. Rigs in Saudi @ 50%, operating rig count includes those leased from GOM Offshore
NATURAL GAS OUTLOOKSupply challenges point to a more orderly and sustainable cycle • North American Gas Decline Rates Imply 20+ BCFPD Production Decline Per Year • Timing of the Supply Impact of Gas From: • Deepwater • McKenzie Delta • Alaska • LNG • US & Canadian Basins are the only alternatives for incremental supply of natural gas over the next five to eight years. Longer term, LNG will ultimately become the marginal supply
GLOBAL OIL Supply Demand Balance Appears Favorable But Less Visible Than Gas • Supply: • Aging and Declining Fields • North Sea, North Slope, US, Latin America, Middle East • Prospective New Supplies • Deep Water – US GOM, West Africa • Middle East – Exploration and Development • Russia – Rehabilitation and New Developments • Former Soviet Union States • Demand: • Global GDP – China, India and Emerging Economics • North American Gas Alternatives
INCREMENTAL GASDRILLING CHALLENGES • Existing Reserves • Higher Recovery Efficiency • Increased Technology • Incremental Reserves • Deeper Horizons • More Complex • Higher Risks • More Remote • Less Accessible
U.S. GAS RIG ACTIVITY TODAY – 944 YTD 03 – 855 939 717 691 564 563 484 463 376 Source: Baker Hughes, Bloomberg
4% 2% 0% -2% -4% -6% -8% -10% U.S. NATURAL GAS PRODUCTIONYEAR-OVER-YEAR % CHANGE Est. 1,000 at year end Today = 944 Y-T-D Avg. = 855 717 Gas Rigs 939 Gas Rigs 691 Gas Rigs Quarterly YOY % Change - 6.2 - 4.9 - 4.8 - 5.2 - 2E - 3E - 2E - 1E ACT ACT ACT ACT Storm Related Quarterly Bcfd: 52.0 51.6 52.0 52.1 53.0 53.0 52.2 50.5 50.3 49.7 48.7 49.4 51.9 49.0 48.8 48.5 2000 2001 2002 2003E +1.2% - 5.3% - 1 to - 3% Annual Change Assumes BHI Gas Rig Count 1,000 Year End 2003 EOG_BS0503 - 3
LAND RIG SUPPLYCYCLE-TO-CYLCE • August 2000 Effective 100% Utilization at 850 US Land Rigs • Today Effective 100% Utilization at 1100+ US Land Rigs • Increased Operating Costs • Increased Capital Costs • None the less, we expect significantly lower dayrates than the 2001 peak
FOCUSING ON RIG EFFECIENCY & INNOVATION US LOWER 48 • Reducing moving times • From 5 – 7 days to 3.5 – 5 days • 24 hour moves, pre-planning, load unitizations, and Nabors controlled Trucking • Upgrading rig capabilities • Higher hydraulic horsepower • Iron ruffnecks • Incorporating technology innovations where cost effective • Noble OptiDrill ™ • 8 systems expanding to 12 by end of year • Overall performance improvements in safety and efficiency • El Paso’s Robert Guerra #1 well in South Texas set new industry record to 19,000 feet in 38 days - 11 days and more than $1 million under AFE • El Paso’s Casa de Nylon well in South Texas drilled to 17,000 feet - 11 days and $750,000 under AFE
FOCUSING ON RIG EFFICIENCY & INNOVATION • Data acquisition and management: • Real-time and historical rig and well parameters • Real-time drilling engineering functions • Automation of rig accounting functions • Top drives for directional, horizontal and problem wells: • AC drive implementation – 750 to 275 ton capacities • New 175 ton DC easily convertible to AC • New remote diagnostics and trouble shooting system • New directional steering control system
