Nabors Industries: A Better Tomorrow
Summary
- Nabors Industries reported first-quarter 2021 revenues and other income totaling $460.51 million, down significantly from $718.36 million in the same quarter of last year.
- The total rigs on revenue are now 139, up 4.5% sequentially, with average utilization up from 34% to now 36%.
- Nabors' outlook is getting slightly better, but progress is not apparent enough, and I still see a struggling company trying to stay afloat.
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Investment Thesis
Nabors Industries (NYSE:NBR) released its first-quarter 2021 results on April 28, 2021.
NBR reported a first-quarter 2021 loss of $20.16 per share, which missed analysts' expectations. This setback was essentially due to weak performance at the U.S. drilling, International Drilling, and Drilling Solutions segments, as we will see later in this article.
Nabors' outlook is getting slightly better, but progress is not apparent enough, and I still see a struggling company trying to stay afloat. It may be wise to keep a small long-term position betting on a full recovery by H2 2021. However, I recommend using NBR as mainly a trading tool at the moment.
Nabors Industries has done very well in early 2021 and is still up significantly on a one-year basis, which contrasts with its direct competitor Helmerich & Payne (HP).
CEO Tony Petrello said in the conference call:
Our performance in the first quarter exceeded the expectations which we laid out on our last conference call. We made further progress on our twin priorities of generating free cash flow and reducing net debt. Our free cash flow was especially noteworthy. In the first quarter we generated $60 million. We accomplished this after funding semi-annual cash interest payments on the outstanding notes.
Nabors Fleet Status Snapshot 1Q'21
The total is 139 rigs on revenue, up 4.5% sequentially, with average utilization up from 34% to now 36%.
Source: NBR Presentation
CEO Tony Petrello said in the conference call:
we surveyed the largest Lower 48 clients. This group accounts for approximately 40% of the working rig count. Our review of these clients shows flattish activity plans for the balance of 2021 [...]
In our international markets, we saw the expected demand increase in selected geographies as measured by the number of active rigs. This trend extends across major markets in Latin America and in Saudi Arabia.
Nabors Industries - Balance Sheet In 1Q 2021: The Raw Numbers
| Nabors Industries | 1Q'20 | 2Q'20 | 3Q'20 | 4Q'20 | 1Q'21 |
| Total Revenues and other income in $ Million | 715.17 | 535.97 | 437.61 | 446.74 | 460.51 |
| Net Income in $ Million | -391.83 | -148.11 | -157.47 | -108.24 | -137.11 |
| EBITDA $ Million | -74.79 | 128.80 | 108.89 | -17.15 | 101.65 |
| EPS diluted in $/share | -56.73 | -22.13 | -23.42 | -16.45 | -20.16 |
| Operating cash flow in $ Million | 59.16 | 142.61 | 46.13 | 101.86 | 79.49 |
| CapEx in $ Million | 59.43 | 47.3 | 46.40 | 42.40 | 40.84 |
| Free Cash Flow in $ Million | -0.27 | 95.27 | -0.23 | 59.46 | 38.64 |
| Total Cash $ Million | 489.66 | 494.28 | 513.83 | 481.75 | 417.56 |
| Long-term Debt in $ Million | 3,388.0 | 3,276.1 | 3,290.3 | 2,968.7 | 2,898.9 |
| Dividend per share in $ | 0.01 | - | - | - | - |
| Shares outstanding (Basic) in Million | 7.051 | 7.052 | 7.061 | 7.067 | 7.012 |
Courtesy: NBR pr, Fun Trading.
Balance Sheet Snapshot
1 - Revenues and other income were $460.51 million in 1Q'21
Nabors Industries reported first-quarter 2021 revenues and other income totaling $460.51 million, down significantly from $718.36 million in the same quarter of last year (please look at the chart above).
The quarter's net income was a loss of $137.11 million or $20.16 per share, compared to a loss of $391.73 million, or $56.73 per share, during the first quarter of 2020.
The adjusted EBITDA was $107.73 million, compared to $108.11 million in the prior quarter.
CEO Tony Petrello said:
In our Lower 48 business, reported daily big margin of 8466 was in line with our guidance. For the International segment, adjusted EBITDA for the quarter met our expectations. Daily margin at 12,917 was near the upper end of our guidance range driven by expert performance in the field.
Revenues per segment:
U.S. Drilling: The quarterly operating revenues were $142.3 million, down 48.2% from last year of $274.9 million. The segment showed an operating loss of $23.4 million compared to an income of $7.4 million a year ago due to a change in the mix toward rigs priced at current market rates.
Canadian Drilling: The revenues this quarter were $20.99 million, down from the year-ago revenues of $25.6 million. Operating income was $3.9 million, better than the year-ago quarter’s income of $0.037 million.
International Drilling: The quarterly operating revenues were $246.8 million, down from $337.1 million last year. Operating loss came in at $18.6 million this quarter compared to a loss of $4.15 million last year.
Drilling Solutions: Revenues were $35.7 million in the first quarter, down 35.5% versus $55.4 million a year ago. The segment operating income was $4.7 million from $10.5 million last year.
The rig Technologies/Other segment plummeted again 38.9% to $25.75 million from $42.2 million last year. The segment’s operating loss shrank significantly to $2.57 million from the prior-year loss of $8.2 million.
2 - Free cash flow was $38.64 million in 1Q'21
Note: Generic free cash flow is cash from operations minus CapEx. It differs from the company calculation, which used the net cash provided by investing activities, including proceeds from sales, etc., instead of CapEx only.
Trailing yearly free cash flow was $193.14 million, with $38.64 million in 1Q'21.
The company is not paying any dividends since Q1'20.
3 - Net debt is now $2.48 billion at the end of Q1'21
Net debt in the first quarter was $2.48 billion. Total cash was $417.56 million.
Source: Company Presentation
Conclusion and Technical Analysis (Short Term)
Nabors Industries showed some signs of improvement in Q1, even if the results were not what I call stellar. This sector is highly volatile, and it isn't easy to make long time accurate projections on what the oil market could look like a year or more from now.
However, the company is confident that we have reached a bottom, and the business is improving, especially in the International segment.
The company expects a second-quarter with daily rig margins between $7,000 and $7,500. Furthermore, Nabors expects a six to seven rig increase for the second quarter or 11% to 12% sequential improvement.
Technical Analysis (short term)
NBR forms a descending channel pattern with resistance at $89.75 and support at $76. The trading strategy is to sell about 40% of your position above $90 and accumulate between $76 and $62 (200MA).
Warning: Those numbers cannot be precise, and the TA chart must be updated often to be helpful in your search for the best path strategy. I am offering here a quick interpretation only. I regularly update the TA chart for my subscribers through my over 80-stock tracker.
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This article was written by
I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.
I live mostly in Sweden with my loving wife.
I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.
“Logic will get you from A to B. Imagination will take you everywhere.” Einstein.
Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Comments (3)
Thank you, always appreciate your comment.
You know that companies never die really. One restructuring and the magic happens...