Nabors Sheds California Assets

Ramshorn Investments Inc, the wholly owned subsidiary of Nabors Industries Ltd. (NBR - Analyst Report), announced that it has completed the divesture of all of its interests in some oil and gas properties in California. The deal will fetch Nabors approximately $72 million in cash.

The assets were sold to an undisclosed buyer in a deal that entails the purchaser to continue utilizing Nabors' rigs.

We believe this sale highlights Nabors’ efforts to divest low profit generating upstream properties and re-design its asset base. Management is expected to divest other holdings throughout 2012.

Barbados-based Nabors is a leading land-drilling contractor with oil, gas, and geothermal land drilling operations across the world. The company is also one of the largest land well servicing companies and workover contractors in the U.S.

Currently, Nabors owns and operates approximately 491 land drilling rigs and 749 land workover and well-servicing rigs in North America.  Nabors' actively marketed offshore fleet comprises 39 platform rigs, 12 jackup units and 4 barge rigs in the United States and multiple international markets.

We believe that Nabors enjoys a large, high-quality fleet of drilling and workover rigs. Over the years, the company has not only grown through cash flow reinvestments but has also extended its geographic reach and diversified its operating assets beyond land rigs.

We expect Nabors to present robust results in the final quarter of 2011, fueled by the addition of new and advanced rigs, better pricing and commencement of several pending projects. Management also expects attractive expansion opportunities and growing demand for oil to boost the company’s performance.

However, with businesses across the globe, Nabors’ operations remain susceptible to various risks such as war, civil disturbances and government actions. With natural gas fundamentals remaining weak and a high debt level, we do not see much upside potential for the company in the coming months. Thus, we are maintaining our long-term Neutral recommendation on the stock.

Nabors competes with peers such as Patterson-UTI Energy (PTEN - Analyst Report) and Ensco plc (ESV - Analyst Report), and currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Read the full analyst report on PTEN

Read the full analyst report on ESV

Read the full analyst report on NBR