Nabors Industries (NYSE: NBR) kicked off 2025 with a modest revenue uptick and a return to profitability, but behind the headline numbers lies a critical challenge facing the U.S. land drilling sector: rig churn. Drilling activity in Q1 2025 declined by nearly 12% compared to the same period in 2024.

While the company’s $736 million in Q1 revenue and $33 million net income signal resilience, especially after a $54 million loss in Q4 2024, the performance of the U.S. Drilling segment reveals operational friction that deserves attention.

🔄 Rig Churn: The Quiet Margin Killer

Nabors was candid about what weighed down U.S. results: elevated rig churn.

“Rig churn placed pressure on utilization and operating expenses,” stated CEO Anthony Petrello during the earnings call.
“Operating inefficiencies from elevated rig churn primarily led to the decline in daily margins.”

What does that mean?
Rig churn refers to the frequent cycling of drilling rigs—either being decommissioned, reassigned, or awaiting redeployment. This transitional downtime introduces inefficiencies, such as:

Increased NPT (non-productive time)
Higher costs for rig-up/rig-down logistics
Gaps in labor continuity
Reduced average utilization

For Nabors, this translated into a decline in Lower 48 daily gross margin, slipping from $14,940 in Q4 2024 to $14,276 in Q1 2025. That’s a drop of $664 per day per rig, which becomes material across a large fleet.

Rig Churn Numbers

Drilling activity in Q1 2025 declined by nearly 12% compared to the same period in 2024.

Here’s the comparison between Q1 2024 and Q1 2025 drilling activity:

Q1 2024 wells drilled: 402
Q1 2025 wells drilled: 354
Difference: 48 fewer wells
Percent change: −11.94%

Here are the top 5 account names that drilled 5 or more wells in Q1 2024 but had the largest percentage decrease (−100%) in Q1 2025:

Coterra Energy
- 2024Q1: 15 wells → 2025Q1: 0 wells
- −100.0% decrease
Civitas Resources
- 2024Q1: 11 wells → 2025Q1: 0 wells
- −100.0% decrease
APA Corporation
- 2024Q1: 10 wells → 2025Q1: 0 wells
- −100.0% decrease
CNX Resources Corporation
- 2024Q1: 6 wells → 2025Q1: 0 wells
- −100.0% decrease
BLACK RIVER OPERATING LLC
- 2024Q1: 6 wells → 2025Q1: 0 wells
- −100.0% decrease

🇺🇸 U.S. Drilling: Financial Drag Amid Opportunity

U.S. Drilling EBITDA: Fell to $92.7M from $105.8M
Lower 48 Rig Count: Averaged 61 rigs, down from 66
Nabors noted that rig count troughed in February but has since begun climbing

The takeaway: Rig activity is recovering, but inconsistent deployment and frequent customer transitions are disrupting operating efficiency.

To combat this, Nabors is “realigning cost structures” and focusing on efficiency gains, signaling that operators must optimize not only for rig count but also for rig continuity.

📈 U.S. Outlook: Gradual Stabilization

For Q2 2025, Nabors expects:

Lower 48 rig count: 63–64 (slight increase)
Daily margin guidance: ~$14,100 (still below Q1 levels)
Alaska & Gulf of Mexico EBITDA: ~$26M

While rig count is moving in the right direction, margins may remain pressured unless churn is reduced and rig crews stabilize.

🔍 Why Rig Churn Matters Now

In today’s competitive land drilling market, high churn destroys margin predictability. It’s not just about the number of rigs; it’s about how often they’re moved, how long they sit idle, and how seamless the transitions are.

Drillers like Nabors are adapting, but the message is clear:

Reducing churn is essential to restoring profitability in U.S. land drilling.

As E&Ps recalibrate in response to commodity price pressure and capital discipline, drilling contractors will need to focus more than ever on contract quality, crew retention, and deployment efficiency.

🧠 Final Thought

Nabors’ Q1 performance highlights a broader trend: rig churn is a margin headwind that can’t be ignored. The path to improved free cash flow and operational efficiency in the U.S. hinges not just on demand, but on stability. Watch this metric closely—it may become one of the most important indicators of upstream health in 2025.