Land drilling contractor
Nabors Industries Ltd.
) reported a year-over-year decline in first-quarter 2013
results, due to the seasonal depression in the Completion
Services segment and weaker U.S. operations.
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Earnings per share from continuous operations came in at 33
cents, beating the Zacks Consensus Estimate of 29 cents. This was
aided by better results by Production Services segment and
seasonal peak in Canadian operations. However, the results
declined 32.7% from 49 cents earned in the first quarter of 2012.
Revenues of $1,661.0 million were below the first-quarter 2012
sales of $1,842.0 million, due to the decline in activities in
most of the business units. The top line also failed to meet the
Zacks Consensus Estimate of $1,663.0 million.
Nabors reports its operations in 2 major segments: Drilling and
Rig Services - comprising U.S., Canada, International and Rig
Services; and Completion and Production Services - including
Production Services and Completion Services.
During the quarter, Drilling and Rig Service revenues were down
15.7% year over year at $1,112.5 million, while the segment's
operating income decreased approximately 47.4% to $137.3 million.
The company's rig years fell to 352.3 from 405.5 in first quarter
Nabors' U.S. operations recorded quarterly revenues of $484.8
million, down 22.7% from the year-ago level. Additionally,
operating income decreased 53.5% year over year to $77.6 million
due to a decline in activity in the U.S. Lower 48 portion of the
The Canadian market registered a year-over-year decline of 12.3%
in revenues of $126.9 million and 29.3% in operating profit of
Nabors' international operations saw a substantial improvement in
revenue generation (up 4.9% year over year) and operating income
moved up 1.6% from first-quarter 2012. Increase in rig activity
aided the segment's revenue.
The revenues of the Rig Services segment were down 25.8% at
$179.3 million from the prior-year quarter and operating income
decreased 74.1% year over year.
Revenues of the Production Services segment decreased 2.2% year
over year, while operating income decreased 7.2% from the
prior-year quarter. The results were down due to adverse weather
condition in the Northern districts.
Completion Services posted revenues and operating income of
$262.1 million (down 34.1%) and $17.8 million (down 72.6%),
As of Mar 31, 2013, Nabors had $690.5 million in cash and
short-term investments and $4,380.2 million in long-term debt
(inclusive of current portion), with a debt-to-capitalization
ratio of approximately 42.3%.
The company currently retains a Zacks Rank #3 (Hold), implying
that it is expected to perform in line with the broader U.S.
equity market over the next one to three months.
Nabors Industries is the leading North American land drilling
contractor, with a large, high-quality fleet of drilling and
workover rigs. Over the years, the company has grown through cash
flow reinvestments and acquisitions. In the process, Nabors has
not only increased its rig fleet, but also extended its
geographic reach and diversified its operating assets beyond land
However, an imbalance in the demand-supply of rigs in the U.S.
land drilling market presents considerable risk for the company.
Moreover, the challenging near-to-intermediate term outlook for
Nabors' international business will likely hamper its
profitability in the coming months.
Meanwhile, there are other drilling contractors in the energy
sector that are expected to perform well in the coming 1 to 3
months. These include
) with Zacks Rank #1 (Strong Buy) as well as
Vantage Drilling Company
Hercules Offshore Inc.
) with Zacks Rank #2 (Buy).