Land drilling contractor
Nabors Industries Ltd.
) reported mixed fourth-quarter 2012 results, as strong
operational execution was offset by weak market conditions and
lower pressure pumping activity.
Earnings per share from continuous operations (excluding
special items) came in at 30 cents, just ahead of the Zacks
Consensus Estimate of 29 cents. However, comparing year over
year, the results declined 42.3% from 52 cents (adjusted) earned
in the fourth quarter of 2011.
Revenues of $1,627.1 million were below the fourth-quarter
2011 sales of $1,739.9 million, due to the decline in activities
in most of the business units. The results were also below the
Zacks Consensus Estimate of $1,660.0 million.
Nabors reports its operations into 2 major segments: Drilling
and Rig Services - comprising U.S. Lower 48 Land Drilling, U.S.
Offshore, Alaska, Canada, and International; and Completion and
Production Services - including U.S. Production Services
and Completion Services.
During the quarter, Drilling and Rig Service revenues were
down 7.2% year over year at $1,152.5 million, while the segment's
operating income decreased approximately 34.5% to $138.9 million.
The company's rig years fell to 345.9 from 390.1 in fourth
The company's U.S. Lower 48 Land Drilling division registered
year-over-year downsides in its sales (down 15.6%) and profits
Nabors' U.S. Offshore operations recorded quarterly revenues
of $61.2 million, up 13.5% from the year-ago level. However, the
segment experienced a loss of $14.3 million, as against a profit
of $3.4 million in the fourth quarter of 2011 due to lower
margins on a platform construction project and reversal of
earlier accrued profits.
The revenues of the Alaska operations were down 12.7% at $25.5
million from the prior-year quarter and operating income
decreased 58.9% year over year.
The Canadian market registered a year-over-year decline of
9.8% in revenues of $152.1 million and 23.2% in operating profit
of $28.1 million.
The company's international operations saw a substantial
improvement in revenue generation (up 10.0% year over year) but
operating income moved down 0.3% from fourth-quarter 2011.
Payments received due to early termination of contracts aided the
Revenues of the U.S. Production Services segment improved 7.3%
year over year, while operating income decreased 16.0% from the
prior-year quarter. The results were down due to lower average
truck hours partially offset by improved average rig rates.
Completion Services posted revenue and operating income of
$295.8 million (down 20.0%) and $30.3 million (down 60.4%),
As of Dec 31, 2012, the company had $778.2 million in cash and
short-term investments and $4,379.7 million in long-term debt
(inclusive of current portion), with a debt-to-capitalization
ratio of approximately 42.4%.
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, having 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, some other companies in the energy sector are
expected to perform well in the coming 1 to 3 months. These
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