Oil and gas driller Nabors Industries Ltd. (NBR) expects its second quarter results to fall short of the market projections, bruised by the poor performing Pressure Pumping segment and low contributions from the International markets. Impressive activities at the U.S. Land Operations are expected to partially negate these effects.
Nabors – which will release its second quarter results on July 24, after the close of trading – expects to generate operating income of $220 million to $230 million for the June quarter, impacted by rising costs.
As a part of the restructuring strategy, Nabors had earlier announced plans to merge its U.S. well-servicing and pressure-pumping businesses into one unit, naming it – Nabors Completion and Production Services. This amalgamation coupled with the withdrawal of inoperable Canadian drilling rigs likely show a non-cash charge of about $150 million in the second quarter.
Additionally, the company will also record a ceiling test charge of $150 million for the drop in the valuation for a part of its natural gas reserves controlled by the NFR Energy affiliate.
Combining these two factors, Nabors’ quarterly earnings will also be influenced by one-time charges totaling almost $300 million.
The Zacks Consensus earnings estimate for the second quarter is 42 cents, on revenue of $1,741 million.
In a separate announcement, Barbados-based Nabors stated that its board of directors has approved of a shareholder rights plan or poison pill, which will provide shareholders the right to buy new preferred stock.
Nabors, which competes with peers such as Patterson-UTI Energy (PTEN) and Ensco plc (ESV), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
Nabors remains well positioned with a sound mix of high performance rigs and new rigs working in the key shale plays. The company also enjoys good exposure to oil plays with its presence in the Bakken, Permian and International plays.
However, with natural gas fundamentals remaining weak, we do not see any significant price upside for the Nabors stock during the next few quarters.
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