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Nabors (NBR) Q2 Loss Wider Than Expected, Revenues Beat

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Drilling contractor Nabors Industries Ltd. (NBR - Free Report) posted mixed second-quarter 2017 results. Shares of the company declined 2.99% to eventually close at $7.46 on Aug 3.

Nabors reported second-quarter 2017 adjusted loss from continuing operations of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 35 cents. Further, the reported loss was also wider than the year-ago adjusted loss of 26 cents per share. Lower revenues in international markets along with higher costs in the U.S. and international operations led to weaker results. 

However, the quarterly revenues of $630.5 million surpassed the Zacks Consensus Estimate of $597 million. Further, the recorded revenue was higher than the year-ago quarter level of $517 million. Increased rig activities in the U.S. and Canadian markets along with improvement in Nabors Drilling Solutions drove revenues.

Nabors Industries Ltd. Price, Consensus and EPS Surprise

 

Nabors’ U.S. operations generated quarterly revenues of $187.3 million, up 33.5% from the year-ago level. This was mainly driven by the increased rig count by 87.3% to 100.6 in the reported quarter in the Lower 48. However, the US operations recorded an operating loss of $56.1 million compared with a loss of $48.3 million in the prior-year period. The wider loss is attributed to the additional costs incurred due to rig reactivation.

The Canadian market witnessed 158.7% year-over-year growth in revenues and recorded sales of $17.1 million. Moreover, the segment’s quarterly loss of $5 million was narrower than an operating loss of $10.8 million in the year-ago quarter. Rig activity increased by 195% which in turn led to the improvement.

International operations registered 5.1% year-over-year decline in revenues to $380.3 million. Operating income plunged 32.8% from second-quarter 2016 to $36.2 million. Reduction in rig activities impacted the results. The average operating rigs in the international market was 93 compared with 101 in the prior-year quarter, reflecting a decline of 8.4%.

Revenues at the Rig Services segment increased 137% from the prior-year quarter to $93 million. This segment benefited primarily from increasing demand for Nabors Drilling Solutions products and services along with better performance in Canrig, the company’s manufacturing unit. The unit incurred a loss of $1.3 million compared with a loss of $19.7 million in the year-ago quarter.

Expenses

Total costs and expenses increased 2.8% to $765.4 million, compared with $744.8 million in the year-ago quarter. Direct expenses related to operations were $417.5 million, up 22.3% from the year-ago quarter. General /administrative expenses, Research/engineering expenses and interests costs also increased.

Balance Sheet

As of Jun 30, 2017, the company had $232 million in cash and short-term investments and $3,740.2 million in long-term debt, with a debt-to-capitalization ratio of approximately 55.1%.

Zacks Rank & Key Picks

Barbados-based Nabors conducts oil, gas, and geothermal land drilling operations. The company offers a number of ancillary well site services, including oilfield management, engineering, transportation, construction, maintenance, well logging and other support services in select domestic and international markets. The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked players in the energy space include TransCanada Corporation (TRP - Free Report) , Global Partners LP (GLP - Free Report) and Braskem S.A. (BAK - Free Report) . All three firms sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada posted positive average earnings surprise of 4.06% in the preceding four quarters.

Global Partners delivered positive average earnings surprise of 415.30% in the preceding four quarters.

Braskem reported positive average earnings surprise of 107.79% in the trailing four quarters.

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