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Nabors (NBR) Q4 Earnings Miss on Weak International Unit

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Nabors Industries Ltd. (NBR - Free Report) reported fourth-quarter 2018 adjusted loss from continuing operations of 55 cents per share, much wider than the Zacks Consensus Estimate of 16 cents due to weak performance of the international drilling segment. The reported figure was also wider than the year-ago adjusted loss of 40 cents per share.

Quarterly revenues of $776.6 million missed the Zacks Consensus Estimate of $810 million. However, the top line was higher than the year-ago level of $709.3 million, which can be attributed to higher total average rigs working. During the fourth quarter, the company ran an average of 223.6 rigs all over the world compared with 210.8 in the year-ago period.  

Segments

Nabors’ U.S. Drilling segment generated quarterly operating revenues of $303 million, up from the year-ago level of $233.2 million. The segment recorded operating income of $8.9 million, reflecting significant improvement from a loss of $41.1 million in the prior-year period. This was mainly driven by an improvement in drilling performance in the Lower 48 and Gulf of Mexico.

Canadian Drilling segment revenues came in at $29 million in the quarter under review, recording an uptick from the year-ago figure of $19.9 million. Moreover, the segment’s income of $929,000 witnessed a turnaround from the year-ago loss of $5.7 million.  

International Drilling segment’s operations attributed to revenues of $345.1 million, which decreased from the year-ago quarter’s $381.4 million. Further, the segment incurred an operating loss of $481,000 in the quarter under review vis-a vis operating income of $27.9 million in the prior-year period. Expiration of many contracts, disruptions in Venezuelan activities as well as reduced dayrates impacted its results.

Revenues at the Drilling Solutions segment increased to $66.8 million in fourth-quarter 2018 from $44 million recorded in the year-ago period. However, the unit’s operating income of $8.1 million in the year-ago quarter improved to $11.8 million in the quarter under review. This can be attributed to higher activities across most of the segments’ product lines and greater contribution from certain services of Tesco.

Revenues at the Rig Technologies segment decreased to $61.4 million from the prior-year level of $79.3 million. However, the segment’s loss narrowed to $5.2 million from the prior-year quarter’s $7.3 million. The segment’s results were impacted by the synergies from the Tesco acquisition.

Expenses

Total costs and expenses increased to $920.2 million from $847.1 million in the year-ago quarter on the back of increased direct and depreciation costs, as well as higher impairment charges.

The company used $122 million for capital expenditure in the quarter under review. Full-year capex amounted to $453 million.

Balance Sheet & Credit Facility

As of Dec 31, 2018, the company had $388.6 million in cash and short-term investments, and $3,737.3 million in long-term debt, with a debt-to-capitalization ratio of approximately 55.7%.

Notably, following the end of the quarter, along with amendment of its existing revolving credit facility, the company secured a new $1.3-billion revolving credit facility for five years.

Zacks Rank & Key Picks

Nabors currently carries a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the energy space may opt for some better-ranked players that include Repsol SA (REPYY - Free Report) , Jones Energy, Inc. (JONE - Free Report) and YPF Sociedad Anonima (YPF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Repsol’s 2019 earnings are expected to increase 13.69% on a year-over-year basis.

Jones’ 2019 earnings are expected to grow 18.95% on a year-over-year basis.

YPF Sociedad delivered average positive earnings surprise of 210.38% in the trailing four quarters.

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