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Nabors (NBR) Climbs 23.2% Following Q3 Earnings Release

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Shares of Nabors Industries Ltd.’s (NBR - Free Report) have rallied 23.2% since third-quarter 2020 earnings release on Nov 3. Along with higher-than-expected results, investors are optimistic about the company’s full-year cost-controlling efforts.

Nabors’third-quarter 2020 loss from continuing operations (excluding special items) of $22.81 per share is narrower than the Zacks Consensus Estimate of a loss of $24.63. This outperformance can be attributed to better-than-expected revenues from the Rig Technologies segment, and lower costs and expenses. However, the loss was wider than the year-ago loss of $15.50, primarily due to weak performance at the U.S. drilling and Drilling Solutions segments.

Quarterly revenues of $437.6 million missed the Zacks Consensus Estimate of $451 million and also declined from the year-ago level of $757 million.

Notably, year over year, Nabors’ adjusted EBITDA fell from $207 million to $114.2 million.

Segmental Performance

U.S. Drilling generated quarterly operating revenues of $130.2 million, down 57.7% from the year-ago level of $307.8 million. The segment recorded an operating loss of $39.2 million against the year-ago income of $12.4 million due to a drop in the rig count at Lower 48.

Canadian Drilling’s revenues of $10.8 million in the quarter under review tumbled from the year-ago figure of $12.2 million. However, the segment’s operating loss came in at $3.5 million, narrower than the year-ago quarter’s loss of $5.7 million, attributable to improvement in average daily gross margin as a result of higher average working rig count. 

International Drilling’s operational revenues of $248.4 million decreased from the year-ago quarter’s sales of $328.3 million. Moreover, the segmental operating loss came in at $16.9 million in the reported quarter against the prior-year income of $2.5 million due to weak activity across several markets.

Revenues from the Drilling Solutions were 52.9% down to $29.3 million in the third quarter from $62.3 million a year ago and the same further missed the Zacks Consensus Estimate of $31.3 million. Moreover, the unit’s operating loss of $3.6 million came against the year-ago profit of $16.1 million due to diminished activity across service lines and an increased price competition.

Revenues from the Rig Technologies segment plunged 54.9% to $28.5 million from the prior-year level of $63.1 million. However, the metric surpassed the Zacks Consensus Estimate of $26.9 million. Meanwhile, the segment’s operating loss widened to $1.8 million from the prior-year loss of $641 thousand. This downside is due to weak capital equipment sales.

Nabors Industries Ltd. Price, Consensus and EPS Surprise

Nabors Industries Ltd. Price, Consensus and EPS Surprise

Nabors Industries Ltd. price-consensus-eps-surprise-chart | Nabors Industries Ltd. Quote


Total costs and expenses declined to $587.9 million from $832.5 million in the year-ago quarter, reflecting lower depreciation costs, and general and administrative expenses.  

As of Sep 30, 2020, the company had $513.8 million in cash and short-term investments, and a long-term debt of $3.3 billion with total debt to total capital of 72.4%.

Nabors generated free cash flow of $9 million in the third quarter.


Nabors announced its 2020 capex guidance of $200 million, down from the prior guidance of $240 million. Further, it projects adjusted EBITDA to decline in the fourth quarter as its international rig count is anticipated to fall persistently through the remaining year after decreasing 13% in the third quarter, sequentially.

This Hamilton-based entity’s fourth-quarter average Lower 48 rig count is anticipated to increase by two to four rigs from the third-quarter’s average of 48 rigs. Additionally, the company projects its drilling margins between $8,500 and $9,000, implying the continued impact of soft pricing.

Meanwhile, its Canada Drilling segment estimates its fourth-quarter rig activity to be equal to the third-quarter level. Also, the company expects fourth-quarter adjusted EBITDA for Drilling Solutions and Rig Technologies to remain roughly in line with the third-quarter results.

The company expects to generate free cash flow of nearly $90-$100 million in the fourth quarter.

Zacks Rank & Key Picks

Nabors currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Oasis Petroleum Inc. , Antero Resources Corporation (AR - Free Report) and Matador Resources Company (MTDR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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