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Nabors (NBR) Q1 Loss Wider Than Expected, Sales Beat Mark

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Nabors Industries Ltd. (NBR - Free Report) recently reported first-quarter 2021 loss from continuing operations (excluding special items) of $20.16 per share, wider than the Zacks Consensus Estimate of a loss of $20.10 as well as the year-ago loss of $19.86. This underperformance was primarily due to weak performance at the U.S. drilling, International Drilling and Drilling Solutions segments.

Quarterly revenues of $462 million beat the Zacks Consensus Estimate of $451 million, attributable to better-than-expected sales from the Canadian Drilling unit (which logged $20.99 million, comparing favorably with the Zacks Consensus Estimate of $19 million). However, the top line declined from the year-ago level of $715.2 million.

Notably, year over year, Nabors’ adjusted EBITDA fell from $187.7 million to $107.3 million.

Segmental Performance

U.S. Drilling generated quarterly operating revenues of $142.3 million, down 48.2% from the year-ago level of $274.9 million. The segment recorded an operating loss of $23.4 million, wider than the year-ago loss of $7.4 million due to a change in the mix toward rigs priced at the current market rates.

Canadian Drilling’s revenues of $20.99 million in the quarter under review tumbled from the year-ago figure of $25.6 million. However, the segment’s operating income came in at $3.9 million, higher than the year-ago quarter’s income of $37,000, attributable to an improvement in average daily gross margin as a result of increased activity and a pay subsidy from the government. 

International Drilling’s operational revenues of $246.8 million decreased from the year-ago quarter’s sales of $337.1 million. Moreover, the segmental operating loss came in at $18.6 million in the reported quarter, wider than the prior-year loss of $4.15 million because of the lack of early termination sales in the first quarter.

Revenues from the Drilling Solutions were 35.5% down to $35.7 million in the first quarter from $55.4 million a year ago. Also, the same missed the Zacks Consensus Estimate of $37.4 million. Moreover, the unit’s operating income of $4.7 million fell from the year-ago profit of $10.5 million.

Revenues from the Rig Technologies segment plunged 38.9% to $25.75 million from the prior-year level of $42.2 million. Moreover, the metric missed the Zacks Consensus Estimate of $30.4 million due to weak capital equipment sales. However, the segment’s operating loss narrowed to $2.57 million from the prior-year loss of $8.2 million.

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 $580.4 million from $1.07 billion in the year-ago quarter, reflecting lower depreciation costs, and general and administrative expenses.  

As of Mar 31, 2020, the company had $417.6 million in cash and short-term investments, and a long-term debt of $2.90 billion with total debt-to-total capital of 74.1%.

Nabors generated free cash flow of $60.4 million in the first quarter.

Guidance

Nabors’ second-quarter 2021 average Lower 48 rig count is anticipated to increase by six-seven rigs from the first-quarter 2021 average of 64 rigs. The company projects its drilling margins to be more than $7,000, implying the persistence of migration of the fleet's pricing into the existing market rates.

This Hamilton-based entity’s Canada Drilling segment’s first-quarter 2021 rig activity is estimated to increase to more than six rigs from just above two rigs in the second quarter of last year. Also, the company expects June-quarter adjusted EBITDA for Drilling Solutions to remain almost in line with the March-quarter results whereas second-quarter adjusted EBITDA for Rig Technologies is expected to be marginally above breakeven.

Zacks Rank & Key Picks

Nabors currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the  energy  space are Whiting Petroleum Corporation (WLL - Free Report) , Diamondback Energy, Inc. (FANG - Free Report) and Laredo Petroleum, Inc. (LPI - 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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