Nabors (NBR) Q4 Loss Wider Than Expected, Revenues Beat

Nabors Industries Ltd. (NYSE:NBR) reported fourth-quarter 2017 adjusted loss from continuing operations of 34 cents per share, slightly wider than the Zacks Consensus Estimate of a loss of 33 cents. Weaker-than-expected results can be attributed to lower than anticipated rig counts and margins in the International segment. The reported loss was also wider than the year-ago adjusted loss of 30 cents per share.

Quarterly revenues of $709.3 million were above the Zacks Consensus Estimate of $706 million. Further, the top line was 31.5% higher than the year-ago quarter level of $539.2 million. Improvement in the top line was primarily driven by increased rig activities and margins in the U.S. segment.

Nabors Industries Ltd. Price, Consensus and EPS Surprise

Nabors Industries Ltd. Price, Consensus and EPS Surprise | Nabors Industries Ltd. Quote

Segments

Beginning this quarter, the company has segregated the reporting for ‘Rig Services’ into two segments namely ‘Drilling Solutions’ and ‘Rig Technologies.’

Nabors’ U.S. operations generated quarterly revenues of $233.2 million, up 56.5% from the year-ago level. This was mainly driven by an increase in dayrates and margins in Lower 48. Though U.S. operations incurred an operating loss of $41.1 million, it improved from the loss of $42.9 million in the prior-year period.

Canadian market witnessed 17.8% year-over-year growth in revenues to stand at $19.9 million in the quarter under review. Moreover, the segment’s quarterly loss of $5.7 million was narrower than operating loss of $8.5 million in the year-ago quarter on the back of higher average daily rig margins and increased revenues.

International operations registered 11.1% year-over-year increase in revenues to $381.4 million due to higher average daily rig margins. Further, operating income rose 25.9% from fourth-quarter 2016 to $27.9 million. However, operating income declined from the prior-quarter figure of $32.3 amid reduction in rig counts and average daily margins.

Revenues at the Drilling Solutions segment increased to $44 million in fourth-quarter 2017 compared with $17.6 million figure recorded in the year-ago quarter. As such, the unit turned around from a loss of $2.7 million in the year-ago quarter to an operating profit of $8.1 million in the quarter under review.

Revenues at the Rig Technologies segment increased to $79.2 million against the prior-year quarter’s level of $46.1 million. However, the segmental loss widened to $7.3 million compared with the prior-year loss of $2.8 million amid high development expenses related to the Robotics Drilling Systems acquired in the prior quarter.

Expenses

Total costs and expenses decreased 9.1% to $847.1 million from $931.9 million in the year-ago quarter on the back of lower impairment charges. However, the results were partly offset by direct expenses, general/administrative expenses, research/engineering expenses and interest costs, which increased in the reported quarter.

Balance Sheet

As of Dec 31, 2017, the company had $365.4 million in cash and short-term investments, and $4,027.8 million in long-term debt, with a debt-to-capitalization ratio of approximately 57.8%.

Zacks Rank & Key Picks

Drilling contractor Nabors, whose peers include Diamond Offshore Drilling, Inc. (NYSE:DO) and Parker Drilling Company (NYSE:PKD) among others, carries a Zacks Rank #3 (Hold). A better-ranked player in the same industry is Helmerich & Payne, Inc. (NYSE:HP) , holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Helmerich & Payne delivered an average positive earnings surprise of 37.06% in the trailing four quarters.

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