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Nabors (NBR) to Acquire Robotic Drilling Systems in Q3

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Oil and gas drilling operator, Nabors Industries Ltd. (NBR - Free Report) recently agreed to buy Norwegian drill-floor solution developer, Robotic Drilling Systems. This marked Nabors’ second acquisition in August following the transaction to buy Tesco Corporation (TESO - Free Report)   earlier this month.

Deal Details

The main shareholders of Robotic Drilling, Odfjell Drilling, Statoil ASA (STO - Free Report) , Investinor and Westcon have agreed to the acquisition. With 37% stake in Robotic Drilling, Odfjell Drilling Technology Ltd, a wholly owned subsidiary of Odfjell Drilling, is the major shareholder.

Odfjell Drilling believes the move will enable Robotic Drilling to utilize Nabors' resources in Canrig for further improvement.

Nabors and Odfjell Drilling have signed a memorandum of understanding (MOU) for strategic cooperation. The deal is expected to close in the third quarter of 2017. Although the transaction amount will be decided upon closing of the deal, Odfjell Drilling is anticipated to receive an accounting gain of around $11 million. Per the deal, Odfjell Drilling will have continuous access to the technologies of Robotic Drilling for its present and future rigs.

Deal Rationale

The transaction will improve Nabors’ available technology base.  It will also help Nabors to become a provider of drilling products and services from being just a provider of onshore and offshore drilling rigs. It will increase the company’s potential to attract more clients.

Nabors’ direct expenses related to operations were $417.5 million, up 22.3% from the year-ago quarter. We believe cost synergies from the transaction will reduce total cost in the long term.

About Nabors

Barbados-based Nabors conducts oil, gas, and geothermal land drilling operations and is the largest land-drilling contractor in the world. It is also one of the largest land well servicing companies and workover contractors in the U.S. 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 unprecedented oil slide has rocked drilling and oilfield services companies such as Nabors Industries, as they grapple with fewer orders from explorers that are looking to cut capital expenditure. 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%.

Price Performance

Nabors has lost 59.6% of its value year to date compared with 47.9% fall of its industry.

Zacks Rank and Stocks to Consider

Nabors carries a Zacks Rank #4 (Sell).

A better-ranked stock from the oil and energy sector is Range Resources Corporation (RRC - Free Report) . It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Range Resources’ sales for 2017 are expected to increase 122.8% year over year. The company delivered a four-quarter average positive earnings surprise of 51.8%.

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