Nabors Industries upgraded to ’B’ by S&P on debt reduction efforts

Investing.com -- Nabors Industries Ltd. received a credit rating upgrade to ’B’ from ’B-’ by S&P Global Ratings, reflecting the company’s refinancing plans and debt reduction efforts.

The rating agency also assigned a ’B+’ rating to Nabors’ proposed new debt issuance, which will be used to refinance $546 million of senior priority guaranteed notes (SPGNs) due May 2027.

Nabors recently sold its Quail Tools segment, receiving $375 million in August and the remaining $250 million seller note on October 9. The company used the initial proceeds to repay a $178 million credit facility draw and redeem $150 million of its 2027 notes.

S&P expects Nabors to use the $250 million seller note proceeds to further reduce debt, focusing on its upcoming 2028 maturity. The rating agency forecasts Nabors’ adjusted debt will decrease to approximately $2 billion by year-end 2025, down from $2.47 billion at the end of 2024.

Despite industry headwinds, particularly in North America where Nabors has about 44% of its contracted rigs, the company’s geographic diversification provides some stability. Its largest international operation is in Saudi Arabia, where approximately 53 rigs are working under its SANAD joint venture, representing about 60% of its international working rigs.

S&P revised Nabors’ expected 2025 capital expenditure to $715 million, down from its previous forecast of $775 million. Growth spending accounts for 50-55% of projected 2025-2026 capital expenditure, primarily related to the SANAD joint venture’s 50-rig newbuild program.

The rating agency expects Nabors to maintain average funds from operations (FFO) to debt of 35% and debt to EBITDA of 2.2x for 2025-2026, improved from 25% and 2.7x respectively in 2024.

S&P’s stable outlook reflects expectations that Nabors will continue using proceeds from the Quail Tools sale to reduce debt, supporting improved credit metrics despite lower industry activity.

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