NBR also says it will limit severance payments for executives to 2.99x their salary and bonus.
NBR has dealt with a series of corporate governance issues in recent years, including awarding former CEO Eugene Isenberg a $100M severance payment (later waived) upon being replaced as CEO but retained as chairman.
The firm is positive on U.S. land drillers and think the group has the best fundamental industry momentum, and it especially likes NBR due to improving international operations, prospects for a streamlined business structure and a strong U.S. land drilling position.
The move follows NBR's warning yesterday that Q1 earnings likely will not meet analyst expectations, explaining severe winter weather hurt its pumping business as well as its northern-tier frac sand mine operations, but RBC thinks investors are focused on a positive 2014 outlook and will give a pass on Q1 weather.
NBR says the impact is confined to its completion services segment, citing persistent bad weather and the resulting delays in some customers' well completion activity; the shortfall is seen at ~$0.07/share.
NBR says improving underlying demand for pressure pumping gives it a constructive, though tempered, outlook for the business through the rest of 2014.
Nabors Industries (NBR +1.1%) is upgraded to Neutral from Underperform with a $22 price target, raised from $12, at Credit Suisse, which cites strong international execution, especially in key markets such as Saudi Arabia, continuing to contribute to EPS growth throughout 2014.
NBR also is expected to announce a restructuring at the conclusion of its strategic review, lending additional optimism, the firm says; at this point, the catalysts are well understood by the market and are currently reflected in the valuation.
Nabors Industries (NBR +3.4%) extends yesterday's big gains after posting strong Q4 results, and Morgan Stanley thinks shares can move a lot higher, upgrading NBR to Overweight from Equal Weight and raising its price target to $28 from $18.
NBR has underperformed peers Helmerich & Payne (HP) and Patterson-UTI (PTEN) by ~25% since Q3 2013 on poor operational execution and a muddled corporate strategy, but Stanley sees signs that NBR's North America results have bottomed and execution has gained relative traction.
The firm also expects operational streamlining to gain momentum over coming quarters and is encouraged by the appointment of a new CFO.
Nabors Industries (NBR +11%) surges to 52-week highs after reporting Q4 results that beat Wall Street expectations and offering an optimistic near-term outlook.
“We believe we’ve seen the bottom” in the drilling rig market, CEO Tony Petrello said in today's earnings call, adding that rig rates increased modestly in Q4 but could rise higher this year.
Daily rates for highly specialized walking rigs have begun to increase as more U.S. oil companies use multiwell drilling platforms, Petrello says; a turnaround in the drilling business could lift land drillers out of their earnings slump.
NBR's fleet of ~150 pad-compatible walking rigs saw 94% utilization in the Q4, while demand for its older, mechanical rigs continues to lag behind.
Most other deepwater drillers also are higher: PKD +2%, HP +1.7%, PDS +1.2%.
NBR's completion and production services, which includes its U.S. well servicing and pressure-pumping operations, posted a Y/Y adjusted operating income drop of 21%; adjusted operating earnings at the drilling and rig services business rose 11%.
While its international rig count was flat in Q4, NBR was able to boost margins due to lower costs to move rigs and other items.
Says it reinvested $1.4B in new rigs and technological upgrades while cutting its debt level by $870M.
Last year should represent "the low point in Nabors' protracted five-year tough," CEO Tony Petrello says, adding that he sees "substantial, year-over year quarterly improvement" in results starting next quarter.
Among Goldman's reasons: WTI saturation is unlikely in 2014; negative revenue surprises during the year may be offset somewhat by positive margin surprises; and capex should rise by mid-single digits but companies with exposure to horizontal completions on U.S. land and with high Gulf of Mexico and Middle East exposure should see revenue growth at the upper end.
The firm recommends owning Halliburton (HAL) and Schlumberger (SLB) into earnings, and likes NBR, RES, CJES, BAS, PES and OII.
Cowen lowers its estimates on oil service and drilling stocks (OIH) after an internal survey estimates slower than expected 4% growth in exploration and production spending in 2014, presenting a difficult scenario for the stocks to perform well (Briefing.com).
The firm downgrades and cuts earnings estimates for Baker Hughes (BHI -1.5%), Cameron (CAM -0.4%), Nabors Industries (NBR -2%), CGG (CGG -0.2%), Superior Energy (SPN -1.9%) and Helmerich & Payne (HP +1.1%) to Market Perform from Outperform as it reduces industry growth estimates for 2014 and 2015.
Oil services analysts at Deutsche Bank are very positive on the sector for next year, despite pervasive fears of weakening U.S. oil prices.
Baker Hughes (BHI), Halliburton (HAL), Hercules Offshore (HERO) and Nabors Industries (NBR) are the firm's highest conviction choices and include price targets much higher than consensus; NBR's $27 target is the highest on Wall Street and would represent a 60% gain from current levels.
The firm also sees strong upside potential in Patterson-UTI Energy (PTEN), Pioneer Energy Services (PES) and Schlumberger (SLB).
ISI Group turns bullish on the U.S. land rig and oil services sector after two years at neutral, as "E&P capex budgets finally appear poised for meaningful increases in 2014 driven by higher WTI prices, solid domestic production growth, and continued success in select basins." (Briefing.com)
Saudi Aramco is reportedly set to raise the rig count in Saudi Arabia to more than 200 by the end of next year and energy service companies are ready to take advantage of the opportunity.
Saudi Arabia is under pressure to plug a supply hole left by disruptions in Libya, Iran, Nigeria, and Yemen and "is investing heavily to preserve the world's largest spare oil production capacity cushion at more than 2M bpd," Reuters says.
Industry heavyweights looking to capitalize on a potential boom in drilling include: Halliburton (HAL), Nabors (NBR), Rowan (RDC), Ensco (ESV), Baker Hughes (BHI), and Schlumberger (SLB).