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Nabors (NBR) Misses Earnings, Revenue Estimates in Q3

One of the largest drilling contractors in the world, Nabors Industries Ltd. NBR reported third-quarter 2017 adjusted loss from continuing operations of 42 cents per share, wider than the Zacks Consensus Estimate of a loss of 33 cents. The reported loss was also wider than the year-ago adjusted loss of 35 cents per share, primarily due to lower rig count in the International segment. Unexpected cancellation of capital equipment and delivery deferrals, mainly in Canrig, also adversely impacted results.

Quarterly revenues of $662 million also missed the Zacks Consensus Estimate of $675 million. However, it was higher than the year-ago quarter level of $520 million. Increased rig activities along with rising margins in Nabors’ Lower 48 operations were responsible for the year-over-year increase. Higher margins in the international markets also helped.

Nabors Industries Ltd. Price, Consensus and EPS Surprise

Nabors Industries Ltd. Price, Consensus and EPS Surprise | Nabors Industries Ltd. Quote

Segments

Nabors’ U.S. operations generated quarterly revenues of $222.7 million, up 91.8% from the year-ago level. This was mainly driven by an increase in rig count in Lower 48. Also, the company deployed two Quad rigs here with increased capabilities. Though U.S. operations incurred an operating loss of $53.5 million, it improved from the loss of $58.9 million in the prior-year period.

Canadian market witnessed 74% year-over-year growth in revenues, which amounted to $18.1 million. The gain was triggered by higher average quarterly rig count. Moreover, the segment’s quarterly loss of $7.5 million was narrower than an operating loss of $10.2 million in the year-ago quarter.

International operations registered 2.9% year-over-year increase in revenues to $374.1 million due to higher average daily rig margins. However, operating income fell 25.9% from third-quarter 2016 to $32.3 million. Reduction in rig activities affected results.

Revenues at the Rig Services segment increased 48.3% from the prior-year quarter to $87.5 million. This segment benefited primarily from increasing demand for Nabors Drilling Solutions products and services. The unit incurred a loss of $4.7 million compared with a loss of $12.9 million in the year-ago quarter.

Expenses

Total costs and expenses increased 22.7% to $796.5 million from $648.9 million in the year-ago quarter. Direct expenses related to operations were $441.3 million, up from $306.4 million in the year-ago quarter. General /administrative expenses, research/engineering expenses and interests costs also increased.

Balance Sheet

As of Sep 30, 2017, the company had $220.3 million in cash and short-term investments and $3,958.6 million in long-term debt, with a debt-to-capitalization ratio of approximately 57.7%.

Outlook

The company believes its recent acquisitions and near-term developments will help it to get back on track in the coming quarters. Its joint venture with Saudi Aramco, Sanad, is expected to provide Nabors long-term benefits.

About Nabors

Barbados-based Nabors conducts oil, gas, and geothermal land drilling operations and is the largest land-drilling contractor in the world. It is also one of the largest land well servicing companies and workover contractors in the United States. The company offers a number of ancillary well-site services, including oilfield management, engineering, transportation, construction, maintenance, well logging, and other support services in select domestic and international markets.

Q3 Price Performance

Nabors has lost 0.9% of its value year to date against the 8% gain of its industry.

Zacks Rank and Stocks to Consider

Nabors carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Par Pacific Holdings, Inc. PARR, Braskem S.A. BAK and Denbury Resources Inc. DNR. All these sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Par Pacific’s sales for the third quarter of 2017 are expected to increase 28.5% year over year. The company delivered an average positive earnings surprise of 9.1% in the last four quarters.

Braskem’s sales for the third quarter of 2017 are expected to increase 4.1% year over year. The company delivered a positive earnings surprise of 68.5% in the second quarter of 2017.

Denbury Resources’ sales for 2017 are expected to increase 5.9% year over year. The company delivered a positive earnings surprise of 100% in the second quarter of 2017.

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