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Nabors Industries Ltd.

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Nabors’s stock price has fallen around 57% since the start of this year, wider than the broader industry’s decline of 36%. While a renewed slump in crude prices due to a persistent global supply glut sent a shockwave through the industry, Nabors’s escalating labor and reactivation costs is also a matter for concern. Rising operating and direct costs weakened the results of the firm in the recent quarter, adversely affecting the already weak financials of the company. Over the last few years, the company has kept adding debt to its balance sheet for a fleet recapitalization program. This has increased the leverage ratio of the company to over 55% which might affect the credit metrics of the company adversely. Further, we also need to factor the dismal earnings surprise history and unfavorable return on equity. Given these headwinds, we see Nabors as a risky bet that investors should sell.


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