Nabors Industries Ltd., which owns and operates the world’s largest land-based drilling rig fleet, has seen little change to its U.S. operations as crude oil prices sputtered then revived, but management still is planning to be cautious this year by reducing capital spending and paying down debt.

The oilfield services company provided a preview of fourth quarter results and a preliminary outlook for 2019. Capital expenditures (capex) in 2018 was “well under $500 million,” and this year capex is targeted at the “$400 million level.”

Fourth quarter debt was cut by an estimated $230 million net to around $3.12 billion. Net debt basically excludes liquids assets. Total debt fell to $3.59 billion. Another $108 million of long-term debt also was repurchased.

"As anticipated, fourth quarter cash flow generation allowed us to reduce our net debt significantly,” CFO William Restrepo said. “The industry experienced a sharp drop in oil prices during the fourth quarter of 2018. Given the recent oil price rally this past week, it is uncertain to what extent this volatility could lead our U.S. customers to scale back investment.”

However, so far, he said, “there has been minimal negative impact on U.S. activity and the demand for our high-specification rigs in the Lower 48 remains strong, with leading edge dayrates at attractive levels.”

The goal for Nabors management is to “remain focused on cash generation and reduce our leverage...To that end, we are targeting a $200-250 million net debt reduction during 2019."

Fourth quarter and full-year 2018 financials are set to be issued in late February.

To meet this year’s objectives, in what Restrepo said appeared to be a “volatile market,” caution is key.

In addition to reducing capital spend year/year, Nabors plans to optimize general/administrative and research/experimental expenses “through a reduction of about 10% compared with 2018,” the CFO said.

Nabors also has cut its quarterly cash dividend to 1 cent/share, an 83% reduction, beginning in 2Q2019.

"We believe our combination of top quality personnel, superior assets, market position and technology serves us well in any environment,” CEO Anthony G. Petrello said. “We will continue our focus on reducing our leverage over the next two to three years. 

“We can accomplish this through stringent capital allocation and still continue the progress we have made in modernizing our fleet, introducing new automation technologies and enhancing our performance drilling capabilities.  We continue to expect 2019 to be an improvement over 2018 and another good step forward for the company."

Nabors’ shares were “punished” during the fourth quarter because of the commodity collapse and its high leverage ratio, Evercore ISI analysts noted. However, the preliminary information shows that Nabors total debt was “way down from where the company ended full-year 2017 with total debt of $4.02 billion.”

In what could be a positive for Nabors, Evercore is forecasting 6% year/year growth in 2019 for the industry’s U.S. land rig count, but analysts acknowledged that “the commodity volatility adds some uncertainty around activity levels early in the year.”