A Pre-Earnings Analysis of Nabors Industries before Its 1Q17 Release

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Part 3
A Pre-Earnings Analysis of Nabors Industries before Its 1Q17 Release PART 3 OF 7

Factors That Affected Nabors Industries in 4Q16

Nabors Industries’s segment-wise performance

The Drilling & Rig Services segment accounted for nearly all of Nabors Industries’s (NBR) revenues in 4Q16. NBR comprises 2.5% of the iShares US Oil Equipment & Services ETF (IEZ).

In the Drilling & Rig Services segment in the US, NBR witnessed a 33% decline in revenues in 4Q16 over 4Q15. Its revenues from its International Operations segment fell 23.5% during the same period.

Factors That Affected Nabors Industries in 4Q16

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In comparison, Baker Hughes’s (BHI) 4Q16 revenues from North America fell ~19% versus 4Q15, while Halliburton’s (HAL) North America revenues fell 16% during the same period.

The energy sector makes up 6.6% of SPX-INDEX, which rose 11% in the past one-year period versus a 15% rise in NBR’s stock price.

Why NBR’s operating income declined in 4Q16

Looking at Nabors Industries’s adjusted EBITDA,1 its International Operations segment was more resilient with a 20% decline. EBITDA is a measure of operating income. 

The company’s US operations registered an ~48% fall from 4Q15 to 4Q16, which can be attributed to:

  • activity declines and margin erosion in North America
  • ~21% fewer rigs working in 4Q16 compared to 4Q15

The factors affecting NBR’s 4Q16 results positively include:

  • Although lower than in 4Q15, the number of rigs increased in 4Q16 over 3Q16.
  • NBR saw reduced costs and higher revenues from its service and repair operations.

Nabors Industries’s fiscal 2016 performance

In 2016, Nabors Industries (NBR) recorded $2.2 billion in revenues, which was 42% lower than in 2015. In 2016, the company’s net loss was $1.0 billion, a steep deterioration over its $372.6 million net loss in 2015. In 2016, NBR’s earnings were affected by nonrecurring items like $487 million after-tax impairments and other charges.

In the next article, we’ll discuss NBR’s implied volatility and stock price forecast in the near term.

  1. earnings before interest, tax, depreciation, and amortization

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