Nabors Reports a Mixed Bag - Analyst Blog
20 Februar 2013 - 10:00AM
Zacks
Land drilling contractor
Nabors Industries Ltd. (NBR) reported mixed
fourth-quarter 2012 results, as strong operational execution was
offset by weak market conditions and lower pressure pumping
activity.
Earnings per share from
continuous operations (excluding special items) came in at 30
cents, just ahead of the Zacks Consensus Estimate of 29 cents.
However, comparing year over year, the results declined 42.3% from
52 cents (adjusted) earned in the fourth quarter of 2011.
Revenues of $1,627.1 million were
below the fourth-quarter 2011 sales of $1,739.9 million, due to the
decline in activities in most of the business units. The results
were also below the Zacks Consensus Estimate of $1,660.0
million.
Segment:
Analysis
Nabors reports its operations
into 2 major segments: Drilling and Rig Services – comprising U.S.
Lower 48 Land Drilling, U.S. Offshore, Alaska, Canada, and
International; and Completion and Production Services – including
U.S. Production Services and Completion Services.
During the quarter, Drilling and
Rig Service revenues were down 7.2% year over year at $1,152.5
million, while the segment’s operating income decreased
approximately 34.5% to $138.9 million. The company’s rig years fell
to 345.9 from 390.1 in fourth quarter 2011.
The company’s U.S. Lower 48 Land
Drilling division registered year-over-year downsides in its sales
(down 15.6%) and profits (down 27.2%).
Nabors’ U.S. Offshore operations
recorded quarterly revenues of $61.2 million, up 13.5% from the
year-ago level. However, the segment experienced a loss of $14.3
million, as against a profit of $3.4 million in the fourth quarter
of 2011 due to lower margins on a platform construction project and
reversal of earlier accrued profits.
The revenues of the Alaska
operations were down 12.7% at $25.5 million from the prior-year
quarter and operating income decreased 58.9% year over year.
The Canadian market registered a
year-over-year decline of 9.8% in revenues of $152.1 million and
23.2% in operating profit of $28.1 million.
The company’s international
operations saw a substantial improvement in revenue generation (up
10.0% year over year) but operating income moved down 0.3% from
fourth-quarter 2011. Payments received due to early termination of
contracts aided the segment’s revenue.
Revenues of the U.S. Production
Services segment improved 7.3% year over year, while operating
income decreased 16.0% from the prior-year quarter. The results
were down due to lower average truck hours partially offset by
improved average rig rates.
Completion Services posted
revenue and operating income of $295.8 million (down 20.0%) and
$30.3 million (down 60.4%), respectively.
Balance
Sheet
As of Dec 31, 2012, the company
had $778.2 million in cash and short-term investments and $4,379.7
million in long-term debt (inclusive of current portion), with a
debt-to-capitalization ratio of approximately 42.4%.
Zacks
Rating
The company currently retains a
Zacks Rank #3 (Hold), implying that it is expected to perform in
line with the broader U.S. equity market over the next one to three
months.
Nabors Industries is the leading
North American land drilling contractor, having a large,
high-quality fleet of drilling and workover rigs. Over the years,
the company has grown through cash flow reinvestments and
acquisitions. In the process, Nabors has not only increased its rig
fleet, but also extended its geographic reach and diversified its
operating assets beyond land rigs.
However, an imbalance in the
demand-supply of rigs in the U.S. land drilling market presents
considerable risk for the company. Moreover, the challenging
near-to-intermediate term outlook for Nabors’ international
business will likely hamper its profitability in the coming
months.
Meanwhile, some other companies
in the energy sector are expected to perform well in the coming 1
to 3 months. These include ARC Resources Ltd.
(AETUF) with Zacks Rank #1 (Strong Buy) as well as
McDermott International (MDR) and Technip
Ads (TKPPY) with Zacks Rank #2 (Buy).
ARC RESOURCES (AETUF): Get Free Report
MCDERMOTT INTL (MDR): Free Stock Analysis Report
NABORS IND (NBR): Free Stock Analysis Report
TECHNIP NEW (TKPPY): Get Free Report
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