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

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

Reading Nabors Industries’s Stock Price on April 19

Nabors Industries’s stock price versus the industry

In the past one-year period through April 19, 2017, Nabors Industries’s (NBR) stock rose 15%. In the past year, NBR has outperformed the VanEck Vectors Oil Services ETF (OIH), which generated returns of 1%. OIH is an ETF tracking an index of 25 oilfield equipment and services (or OFS) companies.

The Energy Select Sector SPDR ETF (XLE), the broader energy industry ETF, has produced 3% returns in the past one-year period. Nabors Industries has also outperformed the SPDR S&P 500 ETF (SPY), which produced 11% returns during the same period. The Dow Jones Industrial Average (DJIA-INDEX) increased 13% in the past year. The energy sector makes up 6.3% of the DJIA-INDEX.

Reading Nabors Industries’s Stock Price on April 19

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Crude oil price and rigs

In the past one-year period, the West Texas Intermediate (or WTI) crude oil price has recovered 19%. The hike in crude oil prices partially explains OIH’s rise. The rise in crude oil prices also prompted the US rig count revival, which increased 93% in the past one-year period.

You can read the latest on crude oil prices in Market Realist’s US Gasoline Demand and China Could Drive Crude Oil Prices Higher.

Management comments

Nabors Industries’s management outlook for 1Q17 follows:

  • NBR expects the average daily margin from the US onshore rigs to drop to $4,000.
  • NBR’s management expects higher activity in Latin America.
  • NBR expects slower recovery in the international rig count.

The drivers for Nabors Industries’s returns in 2017 follow:

  • On February 1, 2017, Weatherford International (WFT) signed an alliance with Nabors Industries.
  • NBR plans to complete 100 SmartRig system upgrades by 2017 compared to 61 in 2016.
  • NBR has signed contracts for high-spec rigs at $18,500–$19,000 per day.

Analysis of the oilfield services industry

You can read how large-cap OFS companies like Schlumberger (SLB) and National Oilwell Varco (NOV) have been faring recently in Market Realist’s Energy’s Price Recovery Prompts an Oilfield Services Revival. You can read more about Schlumberger in Stumbling Blocks Could Be on the Horizon for Schlumberger.

Next, we’ll discuss what Wall Street analysts expect from NBR’s earnings in 1Q17.

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