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What’s Driving NBR’s Revenue and Earnings?

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NBR’s revenue

Nabors Industries’ (NBR) revenue was trending upward from fiscal 2Q13 until fiscal 3Q14, when it started falling. From fiscal 3Q14 to fiscal 3Q15, NBR’s revenues fell 53%. Lower drilling activity and idling rigs pushed rates for OFS (oilfield services) companies lower, affecting their revenues and earnings negatively during this period.

In the past year until fiscal 3Q15, NBR’s revenues fell mostly in its US Drilling and Rig Services segments, while its international revenues rose. Quarter-over-quarter, NBR’s revenue fall slowed to 2% in fiscal 3Q15.

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Nabors Industries’ earnings

In the past 11 quarters, NBR’s net income fluctuated. Since fiscal 3Q14, NBR’s net income has fallen sharply. In fiscal 3Q15, it switched to a $296 million net loss from a $106 million net income in fiscal 3Q14. The fiscal 3Q15 net loss can primarily be attributed to the following factors:

  1. A $180.6 million other-than-temporary impairment of its investment in C&J Energy Services
  2. A loss on provisions related to assets and receivables impacted by the degradation of the overall economy and financial situation in Venezuela, which also affected Venezuela’s exchange rate

In comparison, NBR’s peer RPC’s (RES) net income switched to a $35 million net loss in fiscal 3Q15 from a $65 million net income a year earlier. NBR forms 0.2% of the Vanguard Energy ETF (VDE). VDE is an ETF tracking an index made up of stocks of large, mid-size, and small US companies within the energy sector.

Recent factors affecting NBR’s US operations

  • Fall in drilling activity in US onshore, led primarily by lower crude oil prices
  • Lower rig demand as customers terminated rig contracts
  • Drilling project delays

Recent factors affecting NBR’s international operations

  • Rise in international rig count
  • Acquisition of the remaining 49% equity interest in Nabors Arabia, NBR’s joint venture
  • Incremental margins from newly constructed rigs
  • Lower industry activity and pricing pressure from customers in Canada

Next, we’ll discuss NBR’s indebtedness.

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