Nabors Industries’ net debt-to-EBITDA
Nabors Industries’ (NBR) net debt to trailing-12-month EBITDA (earnings before interest, tax, depreciation, and amortization) has risen sharply in the past year. In fiscal 3Q15, NBR’s net debt-to-EBITDA multiple was ~10.1x. It has increased more than four-fold in the past year.
Net debt-to-EBITDA reflects how easily a company can repay its debts from its operational earnings and available cash. NBR’s peer Core Laboratories’ (CLB) net debt-to-EBITDA was 1.6x at the end of fiscal 3Q15. CLB’s long-term debt by the end of fiscal 3Q15 was $428 million, compared to NBR’s $3.7 billion.
NBR makes up only 2.9% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES tracks an index of 40 US oilfield equipment and services (or OFS) companies.
Nabors Industries’ debt
NBR’s net debt to trailing-12-month EBITDA ratio was steady from fiscal 1Q13 until fiscal 3Q14. During this period, NBR’s net debt rose marginally, while its trailing-12-month EBITDA rose 14%. This led to a slightly lower net debt-to-EBITDA multiple over the period.
From fiscal 3Q14 to fiscal 3Q15, NBR’s total debt fell 12%. Its cash and marketable securities also fell 41% from fiscal 3Q14 to fiscal 3Q15. In effect, NBR’s net debt rose. However, its trailing-12-month EBITDA crashed 80% during the same period.
The sharp fall in crude oil’s price led to a lower rig count, which negatively affected rig makers such as NBR. In effect, NBR’s net debt-to-EBITDA ratio rose significantly higher.
NBR’s recent debt issuance
In October 2015, NBR drew the available $325 million off of its unsecured term loan facility. This will increase the company’s debt burden further.
Next, we’ll discuss Nabors Industries’ free cash flow.