NEW YORK (AP) -- Nabors Industries Ltd. said Tuesday its second-quarter financial results will miss Wall Street expectations, as a decline in natural gas prices cuts into the value of its assets and forces potential customers to suspend exploration and production.
Shares dropped in premarket trading after the statement.
Nabors, a Bermuda-based company that specializes in drilling and servicing oil and natural gas wells, said that it expects to report operating income between $220 million and $230 million in the second quarter. Analysts, on average, were expecting operating income of $251.7 million. That was already down from an average of $260.9 million a week ago, reflecting reductions in several analysts' estimates.
The company blamed weaker results in its pressure pumping business, "where pricing and utilization continued to deteriorate while costs spiked in the quarter." Pressure pumping is the process of pumping fluids into a well to increase the pressure underground and boost production of oil and natural gas. It's a highly competitive business in the United States, especially after declining natural gas prices forced many companies to cut back on natural gas drilling.
Lower natural gas prices also will force Nabors to book a charge to reflect the declining value of natural gas assets the company owns through its NFR Energy affiliate. The company will book additional impairment charges in connection with the consolidation of other businesses and the retirement of inactive rigs in Canada.
"We expect these non-cash charges to approximate $150 million," Nabors Chairman and CEO Tony Petrello said.
Nabors is expected to report its second-quarter results on July 24.
Nabors owns and operates a variety of rigs around the world that are used for drilling wells, servicing existing wells and production. The company also provides a host of other services for the petroleum industry. It specializes in hydraulic fracturing, or "fracking," operations in North America, and cementing operations to keep wells from leaking.
Shares fell 24 cents to $12.96 in premarket trading. The stock closed Monday at $13.20, down nearly 24 percent since the start of the year.