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Here's Why Hold Strategy Is Apt for Nabors Industries Stock for Now
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Key Takeaways
NBR delivered stronger-than-expected adjusted EBITDA, with all four segments exceeding targets.
NBR is extending contract visibility in the Lower 48, with over 45% of rigs having six months of contracts.
SANAD supports growth, but heavy capital spending and modest free cash flow could pressure cash generation.
Nabors Industries Ltd. (NBR - Free Report) has delivered a strong rally, with its shares gaining 91.5% over the past 12 months, significantly outpacing the 51.9% increase for the Oil and Gas-Drilling sub-industry and the 28.8% rise for the broader Oil-Energy sector. The sharp appreciation has brought increased investor attention to the stock and raised questions about whether its strong momentum can continue.
12-Month Price Performance Comparison
Image Source: Zacks Investment Research
Nabors is a leading land-based drilling contractor that provides advanced drilling rigs, rig-related services, performance software, automation technologies and directional drilling solutions to oil and gas producers worldwide. The company generates revenues through day-rate contracts and integrated drilling services, helping exploration and production companies improve drilling efficiency, safety and cost management.
The company’s operations are closely tied to upstream oil and gas activity, as its drilling rigs and technology support producers in developing and maintaining oil and natural gas wells. With NBR’s shares already posting a substantial gain, investors may want to examine the fundamental factors supporting the rally, along with the risks that could affect future performance.
What’s Driving NBR Stock’s Performance?
Stronger-Than-Expected Profitability: NBR delivered adjusted EBITDA of $222 million in the second quarter, above expectations, with all four reporting segments exceeding targets. Stronger daily margins in Lower 48 and international drilling show that operational execution and commercial discipline are translating into better profitability.
Better Contract Visibility: NBR is extending contract visibility in the Lower 48. Daily revenues improved more than $900 sequentially, while over 45% of rigs had at least six months of remaining contract duration at quarter-end. Management expects that share to reach about 50% in the third quarter, improving visibility.
Long Runway From Saudi Arabia: Saudi Arabia provides a significant international growth platform for Nabors Industries through the SANAD joint venture. SANAD operates 55 rigs with a 28% market share, including 16 newbuilds and two reactivated rigs. Another 34 rigs remain to be delivered under the 50-rig newbuild program, supporting growth.
Additional Middle East Opportunities: Nabors Industries has additional international opportunities beyond Saudi Arabia. Kuwait has three deep-gas exploration rigs on long-term contracts, while four rigs operate in Oman. Tender activity in both markets could support incremental work, giving the company multiple avenues to expand its high-specification international fleet.
Strong Position in Argentina: Argentina demonstrates Nabors Industries' ability to combine drilling and technology. The company operates 13 rigs and is mobilizing another, while serving five operators with a 30% market share. Nabors Drilling Solutions generated about 46% of the company's adjusted EBITDA in Argentina in the first half of 2026.
Factors Limiting NBR Stock’s Upside
Geopolitical Operating Risks: Nabors Industries remains exposed to geopolitical and operating risks in international markets. Its filings identify political or economic instability, civil disturbance, war and terrorism among relevant risks. Such events could interrupt operations, delay projects, affect customer spending or increase costs across its international footprint.
Limited Free Cash Flow Outlook: Nabors Industries' free cash flow outlook remains modest despite improving operations. Management expects only $20-$30 million of adjusted free cash flow for the full year, while SANAD alone is expected to consume $60-$80 million. This limits the amount of internally generated cash available for debt reduction.
Heavy Capital Spending Requirements: NBR expects significant capital spending in the second half of 2026. Third-quarter capital expenditures are projected at $245-$255 million, including about $130 million for SANAD newbuilds. High investment requirements could pressure cash generation even as drilling activity and adjusted EBITDA improve.
Exposure to Commodity Cycles: Nabors Industries' results remain sensitive to oil and natural gas activity. Its presentation states that sustained lower commodity prices could reduce exploration, development and production spending, which would materially affect financial position, results and cash flows. This creates meaningful exposure to cyclical energy markets.
International Market Concentration: Nabors Industries has meaningful exposure to international markets, particularly Saudi Arabia and other Middle Eastern operations. Saudi Arabia remains the cornerstone of its international business, with SANAD operating 55 rigs. Any slowdown or disruption in major international markets could affect activity and earnings.
Final Verdict on NBR’s Potential
NBR benefits from stronger-than-expected profitability, improving contract visibility in the Lower 48 and significant growth opportunities through SANAD in Saudi Arabia, along with additional prospects in Kuwait, Oman and Argentina. However, geopolitical risks, exposure to commodity cycles and concentration in international markets could create volatility in operations and earnings. High capital spending, particularly for SANAD newbuilds, is also expected to constrain free cash flow and limit financial flexibility. Given this mix of strengths and potential challenges, investors should wait for a more opportune entry point instead of adding this Zacks Rank #3 (Hold) stock to their portfolios.
Magnolia Oil & Gas is valued at $5.71 billion. It is an independent oil and natural gas company focused on the acquisition, development, exploration and production of oil, natural gas and NGLs in South Texas. Magnolia Oil & Gas’ operations are concentrated in the Eagle Ford Shale and Austin Chalk formations across the Karnes and Giddings areas.
Delek US Holdings is valued at $4.15 billion. It is a diversified downstream energy company engaged in petroleum refining, renewable fuels, asphalt production and logistics operations. Delek US Holdings operates multiple refineries in the United States and is committed to delivering safe, reliable energy while investing in cleaner energy initiatives.
Oceaneering International is valued at $4.60 billion. It is a global technology and engineering company. Oceaneering International provides subsea robotics, offshore services, engineered products and advanced solutions to the energy, defense, aerospace and other industries.
View the Zacks #1 Rank List
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Here's Why Hold Strategy Is Apt for Nabors Industries Stock for Now
Key Takeaways
Nabors Industries Ltd. (NBR - Free Report) has delivered a strong rally, with its shares gaining 91.5% over the past 12 months, significantly outpacing the 51.9% increase for the Oil and Gas-Drilling sub-industry and the 28.8% rise for the broader Oil-Energy sector. The sharp appreciation has brought increased investor attention to the stock and raised questions about whether its strong momentum can continue.
12-Month Price Performance Comparison
Image Source: Zacks Investment Research
Nabors is a leading land-based drilling contractor that provides advanced drilling rigs, rig-related services, performance software, automation technologies and directional drilling solutions to oil and gas producers worldwide. The company generates revenues through day-rate contracts and integrated drilling services, helping exploration and production companies improve drilling efficiency, safety and cost management.
The company’s operations are closely tied to upstream oil and gas activity, as its drilling rigs and technology support producers in developing and maintaining oil and natural gas wells. With NBR’s shares already posting a substantial gain, investors may want to examine the fundamental factors supporting the rally, along with the risks that could affect future performance.
What’s Driving NBR Stock’s Performance?
Stronger-Than-Expected Profitability: NBR delivered adjusted EBITDA of $222 million in the second quarter, above expectations, with all four reporting segments exceeding targets. Stronger daily margins in Lower 48 and international drilling show that operational execution and commercial discipline are translating into better profitability.
Better Contract Visibility: NBR is extending contract visibility in the Lower 48. Daily revenues improved more than $900 sequentially, while over 45% of rigs had at least six months of remaining contract duration at quarter-end. Management expects that share to reach about 50% in the third quarter, improving visibility.
Long Runway From Saudi Arabia: Saudi Arabia provides a significant international growth platform for Nabors Industries through the SANAD joint venture. SANAD operates 55 rigs with a 28% market share, including 16 newbuilds and two reactivated rigs. Another 34 rigs remain to be delivered under the 50-rig newbuild program, supporting growth.
Additional Middle East Opportunities: Nabors Industries has additional international opportunities beyond Saudi Arabia. Kuwait has three deep-gas exploration rigs on long-term contracts, while four rigs operate in Oman. Tender activity in both markets could support incremental work, giving the company multiple avenues to expand its high-specification international fleet.
Strong Position in Argentina: Argentina demonstrates Nabors Industries' ability to combine drilling and technology. The company operates 13 rigs and is mobilizing another, while serving five operators with a 30% market share. Nabors Drilling Solutions generated about 46% of the company's adjusted EBITDA in Argentina in the first half of 2026.
Factors Limiting NBR Stock’s Upside
Geopolitical Operating Risks: Nabors Industries remains exposed to geopolitical and operating risks in international markets. Its filings identify political or economic instability, civil disturbance, war and terrorism among relevant risks. Such events could interrupt operations, delay projects, affect customer spending or increase costs across its international footprint.
Limited Free Cash Flow Outlook: Nabors Industries' free cash flow outlook remains modest despite improving operations. Management expects only $20-$30 million of adjusted free cash flow for the full year, while SANAD alone is expected to consume $60-$80 million. This limits the amount of internally generated cash available for debt reduction.
Heavy Capital Spending Requirements: NBR expects significant capital spending in the second half of 2026. Third-quarter capital expenditures are projected at $245-$255 million, including about $130 million for SANAD newbuilds. High investment requirements could pressure cash generation even as drilling activity and adjusted EBITDA improve.
Exposure to Commodity Cycles: Nabors Industries' results remain sensitive to oil and natural gas activity. Its presentation states that sustained lower commodity prices could reduce exploration, development and production spending, which would materially affect financial position, results and cash flows. This creates meaningful exposure to cyclical energy markets.
International Market Concentration: Nabors Industries has meaningful exposure to international markets, particularly Saudi Arabia and other Middle Eastern operations. Saudi Arabia remains the cornerstone of its international business, with SANAD operating 55 rigs. Any slowdown or disruption in major international markets could affect activity and earnings.
Final Verdict on NBR’s Potential
NBR benefits from stronger-than-expected profitability, improving contract visibility in the Lower 48 and significant growth opportunities through SANAD in Saudi Arabia, along with additional prospects in Kuwait, Oman and Argentina. However, geopolitical risks, exposure to commodity cycles and concentration in international markets could create volatility in operations and earnings. High capital spending, particularly for SANAD newbuilds, is also expected to constrain free cash flow and limit financial flexibility. Given this mix of strengths and potential challenges, investors should wait for a more opportune entry point instead of adding this Zacks Rank #3 (Hold) stock to their portfolios.
Key Picks
Investors interested in the energy sector might consider some better-ranked stocks, such as Magnolia Oil & Gas Corp (MGY - Free Report) , Delek US Holdings (DK - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), and Oceaneering International (OII - Free Report) , carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Magnolia Oil & Gas is valued at $5.71 billion. It is an independent oil and natural gas company focused on the acquisition, development, exploration and production of oil, natural gas and NGLs in South Texas. Magnolia Oil & Gas’ operations are concentrated in the Eagle Ford Shale and Austin Chalk formations across the Karnes and Giddings areas.
Delek US Holdings is valued at $4.15 billion. It is a diversified downstream energy company engaged in petroleum refining, renewable fuels, asphalt production and logistics operations. Delek US Holdings operates multiple refineries in the United States and is committed to delivering safe, reliable energy while investing in cleaner energy initiatives.
Oceaneering International is valued at $4.60 billion. It is a global technology and engineering company. Oceaneering International provides subsea robotics, offshore services, engineered products and advanced solutions to the energy, defense, aerospace and other industries.