Nabors Stays at Neutral - Analyst Blog
August 09 2011 - 11:29AM
Zacks
We are maintaining our long-term Neutral recommendation on
Nabors Industries (NBR) reflecting its strong
position in the majority of fertile natural gas and oil-based shale
plays that is partially offset by weak natural gas
fundamentals.
Nabors enjoys a large, high-quality fleet of drilling and
workover rigs, making it the leading North American land drilling
contractor. Over the years, the company has not only grown through
cashflow reinvestments and acquisitions but has also extended its
geographic reach and diversified its operating assets beyond land
rigs.
With the company’s strong exposure to oil plays, owing to its
presence in the Bakken, Permian and International plays, we expect
Nabors to benefit from higher activity and pricing. The ‘Superior
Well’ acquisition will further boost Nabors’ earnings visibility by
expanding its pressure pumping capabilities and geographic
foothold.
Moreover, we remain positive on the U.S. land rig market and
expect the rig count -- now at around 1,860 -- to cross 1,900 by
this year -end, spurred by oil-directed activities. As drilling
picks up, we expect to witness improved demand for Nabors’
services.
However, our optimism was somewhat mitigated by disappointing
second quarter 2011 results that were bruised by slow international
activities along with weather-related difficulties and operational
hindrances. Earnings per share from continuous operations
(excluding special items) came in at 23 cents, lagging the Zacks
Consensus Estimate of 25 cents. Revenues of $1.36 billion also
failed to meet our forecast of $1.48 billion.
With businesses across the globe, Nabors’ operations remain
susceptible to various risks such as war, civil disturbances and
government actions. Any disturbances in international markets will
likely limit or disrupt the company’s operations, and impose
restrictions on the movement of funds, currency values and exchange
controls.
Moreover, the glut in domestic gas supplies still exists, with
storage levels remaining close to their five-year average. This
will continue to weigh on natural gas prices in the near-to-medium
term. Nabors remains particularly exposed to this situation since
its North American business is heavily biased toward gas
drilling.
Considering the aforesaid factors, we expect the company to
perform in line with its peers Patterson-UTI Energy
Inc. (PTEN) and Pride International Inc.
(PDE). Nabors currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating.
NABORS IND (NBR): Free Stock Analysis Report
PATTERSON-UTI (PTEN): Free Stock Analysis Report
Zacks Investment Research
Pride (NYSE:PDE)
Historical Stock Chart
From Jun 2024 to Jul 2024
Pride (NYSE:PDE)
Historical Stock Chart
From Jul 2023 to Jul 2024