Nabors Industries Ltd. (NBR) Declined on a Pullback in Domestic Drilling Activity
Miller Value Partners, an investment management company, released its “Deep Value Strategy” second-quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the Deep Value Strategy was down 2% net-of-fees lagging behind the overall market and the S&P 1500 Value Index. Lower valuation and smaller cap stocks trailed the overall equity market from March to May. The firm also witnessed significant valuation compression in its holdings. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Miller Value Deep Value Strategy highlighted stocks like Nabors Industries Ltd. (NYSE:NBR) in the second quarter 2023 investor letter. Headquartered in Hamilton, Bermuda, Nabors Industries Ltd. (NYSE:NBR) is a drilling and drilling-related services provider for offshore oil and natural gas wells. On July 19, 2023, Nabors Industries Ltd. (NYSE:NBR) stock closed at $114.04 per share. One-month return of Nabors Industries Ltd. (NYSE:NBR) was 12.47%, and its shares lost 6.98% of their value over the last 52 weeks. Nabors Industries Ltd. (NYSE:NBR) has a market capitalization of $1.088 billion.
Miller Value Deep Value Strategy made the following comment about Nabors Industries Ltd. (NYSE:NBR) in its second quarter 2023 investor letter:
"Our two largest detractors during the quarter were Quad Graphics (QUAD) and Nabors Industries Ltd. (NYSE:NBR) with share prices down 12.1% and 23.5%, respectively, during the quarter. Shares of both companies are significantly mispriced in our opinion, providing potential long-term upside multiples of their current share prices.
Nabors’s underperformed during the quarter due to a pullback in domestic drilling activity from recent weakness in the oil market. The lack of incremental capacity by the land drillers over the past couple of years should allow rig margins and cash flow generation to remain strong in the near term and we expect the spending environment to improve over the coming 6-12 months. Meanwhile, we think the market is overlooking Nabors’s international operations, proprietary drilling solutions segment, and new energy transition businesses. These efforts have the potential to contribute meaningfully to total company profitability and free cash flow over the next 3-5 years. With the recent pullback in the shares, Nabors’s market cap is now below its expected 2023 EBITDA and supports an attractive >40% free cash flow yield. Over the past 4 years, management has significantly improved the balance sheet, having reduced debt by $1.8B since early 2018. Nabors should end the year below 2x net debt leverage, and looks well positioned to deliver $400M+ a year of annual debt reduction; combined, this should unlock significant equity value over the next few years."
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Nabors Industries Ltd. (NYSE:NBR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held Nabors Industries Ltd. (NYSE:NBR) at the end of first quarter which was 21 in the previous quarter.
We discussed Nabors Industries Ltd. (NYSE:NBR) in another article and shared the list of biggest offshore oil rig companies in the U.S. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
