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Nabors (NBR) Q4 Loss Wider Than Expected, Sales Beat Mark

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Nabors Industries Ltd. (NBR - Free Report) recently reported fourth-quarter 2020 loss from continuing operations (excluding special items) of $23.82 per share, wider than the Zacks Consensus Estimate of a loss of $23.56 as well as the year-ago loss of $12. This underperformance was primarily due to weak performance at the U.S. drilling and Drilling Solutions segments.

Quarterly revenues of $447 million beat the Zacks Consensus Estimate of $421 million, attributable to better-than-expected sales from the International Drilling unit ($245.1 million, compared favorably with the Zacks Consensus Estimate of $218 million) but declined from the year-ago level of $716 million.

Notably, year over year, Nabors’ adjusted EBITDA fell from $202.5 million to $108.1 million.

Segmental Performance

U.S. Drilling generated quarterly operating revenues of $134.1 million, down 53.7% from the year-ago level of $289.5 million. The segment recorded an operating loss of $26.2 million against the year-ago income of $6.8 million due to a drop in daily revenues.

Canadian Drilling’s revenues of $14.8 million in the quarter under review tumbled from the year-ago figure of $19.4 million. However, the segment’s operating loss came in at $2.5 million, narrower than the year-ago quarter’s loss of $3.2 million, attributable to an improvement in average daily gross margin as a result of higher average working rig count. 

International Drilling’s operational revenues of $245.1 million decreased from the year-ago quarter’s sales of $331.7 million. Moreover, the segmental operating loss came in at $35.5 million in the reported quarter against the prior-year income of $1.15 million due to transitory rig suspensions in Saudi Arabia, and other activity declines in the Eastern Hemisphere.

Revenues from the Drilling Solutions were 47.1% down to $32 million in the fourth quarter from $60.5 million a year ago. However, the same surpassed the Zacks Consensus Estimate of $30 million, attributable to improved activity across service lines. Moreover, the unit’s operating loss of $2.5 million came against the year-ago profit of $16.6 million.

Revenues from the Rig Technologies segment plunged 48% to $27.4 million from the prior-year level of $52.6 million. Moreover, the metric missed the Zacks Consensus Estimate of $29.5 million. Also, the segment’s operating loss narrowed to $2.03 million from the prior-year loss of $6 million owing to better 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

Financials

Total costs and expenses declined to $511.8 million from $973.8 million in the year-ago quarter, reflecting lower depreciation costs, and general and administrative expenses.  

As of Dec 31, 2020, the company had $481.7 million in cash and short-term investments, and a long-term debt of $2.97 billion with total debt to total capital of 72.1%.

Nabors generated free cash flow of $65.7 million in the fourth quarter.

Guidance

Nabors announced its 2021 capex guidance of $200 million, indicating a rise from the reported 2020 capex level of $190 million.

This Hamilton-based entity’s first-quarter 2021 average Lower 48 rig count is anticipated to increase by two-four rigs from the fourth-quarter 2020’s average of 54 rigs. The company projects its drilling margins to be around $8,500, implying the persistence of soft pricing.

Its Canada Drilling segment’s first-quarter 2021 rig activity is estimated to increase 30% from the fourth-quarter 2020 level. Also, the company expects March-quarter adjusted EBITDA for Drilling Solutions and Rig Technologies to remain almost in line with the December-quarter results.

Zacks Rank & Key Picks

Nabors currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Matador Resources Company (MTDR - Free Report) , PDC Energy, Inc. (PDCE - Free Report) and Denbury Inc. (DEN - Free Report) , each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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