Nabors Industries (NBR Quick QuoteNBR - Free Report) is a leading provider of land-based drilling rigs and advanced drilling technologies used by oil and gas producers to explore and extract hydrocarbons. The company plays an important role because drilling is a critical first step in the energy supply chain — without efficient and technologically advanced drilling services, oil and gas production cannot be sustained. Nabors enhances efficiency, reduces costs and improves safety through automation and digital solutions, making it a key enabler for upstream activity.

Over the past six months, NBR has significantly outperformed both the Oil and Gas – Drilling sub-industry (ZSI134M) and the broader Oil and Energy sector (ZS12M). The stock gained approximately 79.5% compared with about 69.1% for the sub-industry and 29.6% for the broader sector, reflecting stronger operational momentum and higher leverage to increased drilling activity. This outperformance highlights investor confidence in Nabors’ ability to capitalize on rising demand for drilling services and its strategic positioning within the energy market.

6-Month Price Performance

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What’s Powering the Upside in NBR’s Shares?

Strong Momentum in Lower 48 Rig Count Defying Market Trends: NBR exited 2025 with 62 rigs and recently increased to 66 rigs working, exceeding internal expectations. This growth is driven by public operators across the Permian, Eagle Ford and Haynesville basins, demonstrating that the company’s performance excellence and cost discipline are winning market share despite a challenging commodity price environment.

Significant Net Debt Reduction Strengthens Balance Sheet: NBR reduced its net debt by approximately $554 million since the end of 2024, bringing this to the lowest level since 2005. This dramatic improvement materially de-risks the capital structure, enhances financial flexibility and lowers annual cash interest expenses by roughly $45 million, which directly boosts free cash flow.

Annual Interest Savings Directly Improve Free Cash Flow: The company’s strategic debt refinancing and redemptions, including the 2027 and 2028 notes, will reduce annualized cash interest expense by about $45 million. This dollar-for-dollar improvement in adjusted free cash flow provides more liquidity for further debt reduction or shareholder returns, strengthening the overall investment case.

International Drilling Segment Provides Visible Multi-Year Growth: The International Drilling segment is a source of stable growth with multi-year contracts. NBR expects the average rig count to reach 96 to 98 in 2026, exiting the year at or above 101 rigs. Deployments include five newbuilds in Saudi Arabia, two suspended rigs returning and two rigs redeployed in Argentina, offering exceptional revenue visibility.

SANAD Joint Venture in Saudi Arabia Drives Long-Term Value Creation: The SANAD joint venture deployed its 14th newbuild rig in fourth-quarter 2025, with five more planned for 2026 and one in early 2027. Each annual tranche of five newbuilds generates incremental annualized EBITDA of more than $60 million. At current Middle East driller valuations, this translates into more than $500 million of value creation per year.

PACE-X Ultra Next-Generation Rig Gains Customer Traction: The first PACE-X Ultra rig has been working successfully for a customer in South Texas since mid-September 2025, delivering on high expectations. NBR is now negotiating a second unit and upgrading existing PACE-X rigs for four-mile lateral wells. This high-spec rig offers a 1,000,000 lbs mast rating and 10,000 PSI mud pressure.

Attractive Valuation of Retained Parker Wellbore Businesses: Following the acquisition and divestiture of Quail Tools, NBR retained a portfolio of Parker Wellbore businesses projected to contribute at least $70 million in adjusted EBITDA for 2026. This achievement includes synergy realization at an annualized run rate of $63 million, exceeding the ambitious $60 million target, thus enhancing overall profitability.

Improved Net Leverage Ratio to Lowest Level Since 2008: As a direct result of transformative transactions, including the Parker acquisition and Quail divestiture, NBR improved its net leverage ratio to approximately 1.7x, the lowest since 2008. This improvement has already led to credit rating upgrades on elements of the debt structure and significantly extends the company’s maturity runway into 2029.

Disciplined Capital Allocation With Targeted Debt Reduction: Management is committed to further reducing gross debt by at least $100 million during 2026, funded by free cash flow from operations outside the SANAD joint venture. Excluding SANAD, the rest of the business units generated approximately $175 million in adjusted free cash flow for full-year 2025, providing ample firepower for deleveraging.

Improving Payment Collections and Activity Outlook in Mexico: NBR has seen a major step forward in Mexico, with a sizable percentage of 2024 receivables settled by PEMEX in the fourth quarter, alongside timely payment for 2025 services. Three offshore platform rigs are working, and a fourth is expected to restart. This improved payment posture enables a more stable operating cadence and cash flow.

Final Note

NBR is showing encouraging momentum, with solid growth in its U.S. rig count and a steadily expanding international presence backed by long-term contracts that provide strong visibility into future revenues. At the same time, the company has taken meaningful steps to strengthen its financial health, cutting debt, lowering interest costs and improving leverage, all of which support stronger and more flexible cash flow generation. NBR’s strategic moves — including the SANAD joint venture, rollout of advanced PACE-X Ultra rigs and value creation from Parker Wellbore assets — position it well for sustained earnings growth, while improving payment trends in Mexico add further stability.

With the company’s potential for improved financial performance and enhanced operational stability, investors may want to stay optimistic about its growth prospects. As the Zacks Rank #2 (Buy) continues to strengthen its position in the oil and gas sector, the stock offers exciting opportunities for those looking to benefit from long-term gains.

Other Key Picks

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TechnipFMC is valued at $28.52billion. It is a global energy technology company that provides subsea, surface, and offshore and onshore project solutions to the oil and gas industry. TechnipFMC specializes in integrated engineering, procurement, construction and installation services for complex energy developments.

Eni is valued at $96.38 billion. It is an Italian multinational energy company headquartered in Rome. Eni operates across the entire energy value chain, including oil and gas exploration, production, refining, marketing and growing renewable energy businesses worldwide.

USA Compression Partners is valued at $4 billion. The company ranks among the largest independent providers of natural gas compression services in the United States.