Nabors Industries Ltd. (NBR Quick QuoteNBR - Free Report) has signed a multiyear drilling contract in Venezuela and plans to deploy an idle U.S. rig to support the customer’s schedule in early 2027. The deployment will mark the company’s return to drilling operations in the country, where it has maintained a local presence despite limited activity.

Nabors, a Hamilton, HM-based oil and gas drilling provider, disclosed the contract in its third-quarter 2026 results. Management said the agreement offers attractive economics and terms that meet the company’s requirements.

The initial deployment will use an existing rig rather than a newly built unit. During the third-quarter earnings call, chief financial officer Miguel Rodriguez said the rig is expected to begin work early next year to meet the customer’s drilling schedule. Without that commitment, Nabors could have redeployed one of its five idle rigs already in Venezuela.

Rodriguez said Nabors never fully left Venezuela. The company retained a workforce in the country and continued maintaining the rigs, allowing it to respond to new activity.

Venezuela Offers a Potential Growth Opportunity

Nabors said nine rigs are currently working in Venezuela, compared with more than 85 in 2013. The company is tracking more than 20 additional rig opportunities in the country, excluding possible activity by vertically integrated operators that use their own rigs. It is also evaluating opportunities to provide services to those operators.

The contract is one step in the company’s broader effort to expand its international business. Nabors said it has identified more than 80 incremental drilling opportunities across 11 countries. Venezuela, Oman, Kuwait, Algeria and Argentina account for the largest number of active tenders.

Management sees room for additional work in Venezuela as customers consider new long-term drilling programs. Nabors has five idle rigs in the country that could respond to higher activity. During the earnings call, management said some potential restarts could take place in the second half of 2027, depending on customer schedules.

Nabors is evaluating additional opportunities in Venezuela, but it has not disclosed how many will become contracts. Timing and economics will depend on customer decisions and available commercial terms.

Redeploying Existing Rigs Supports Capital Discipline

The Venezuela contract illustrates Nabors’ strategy of moving underused equipment to markets where customers need drilling capacity. The company has used a similar approach in Argentina, where it redeployed an idle U.S. rig under a multiyear contract. Management has said redeploying rigs can turn idle capacity into revenues and returns without the spending required for a newbuild.

Using an existing rig in Venezuela may create an opportunity to increase utilization while limiting the need for new construction. However, Nabors has not disclosed the rig's preparation and relocation costs or provided a specific estimate of the contract's financial contribution. Those details will be important in assessing the agreement’s impact.

Nabors has been selective about the contracts it pursues. Management said each award must meet its return thresholds and support long-term shareholder value. In the earnings call, Rodriguez said the company expects Venezuelan operations to be accretive to the international drilling segment’s reported gross margin, but did not provide rig-level financial details.

International Margins Provide a Backdrop

The agreement comes as Nabors reports improving international drilling economics. In the third quarter of 2026, the company’s international drilling daily adjusted gross margin reached a record $19,060, up $1,526 sequentially. Management attributed the increase to strong field performance and contributions from higher-margin rig deployments, including a rig in Argentina and a newbuild in Saudi Arabia.

For the fourth quarter, Nabors expects international daily adjusted gross margin of approximately $19,500, while the average international rig count is projected at 92 to 93. The company has cautioned that suspensions of five rigs at the SANAD joint venture in Saudi Arabia will create a near-term headwind, although it still expects international margins to improve.

These figures provide context for management’s view that Venezuela could become a meaningful contributor. This does not quantify the new contract’s individual impact. Any contribution will depend on the rig’s start date, operating performance, contract terms and whether Nabors secures additional work.

What to Watch Next

Investors will be watching for confirmation that the rig begins work in early 2027, as planned, and for further announcements on contracts in Venezuela. Updates on additional rig restarts, service opportunities and customer commitments could help establish whether the current agreement becomes a broader growth platform.

The main uncertainty is execution. Nabors has identified potential opportunities and maintained equipment and personnel in the country, but additional work is not guaranteed. The company has also said it remains attentive to how Venezuela progresses.

The multiyear contract gives Nabors a route back into drilling operations in Venezuela using an existing U.S. rig. If the deployment proceeds as scheduled and further opportunities convert into contracts on terms that meet its return requirements, Venezuela could add to the company’s international business over time. For now, the agreement is a concrete first step, while the scale and financial contribution of any wider recovery remain to be seen.

NBR's Zacks Rank & Other Key Picks

Currently, NBR holds a Zacks Rank #2 (Buy).

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