Nabors Industries’s revenue growth
Nabors Industries’s (NBR) Drilling & Rig Services segment witnessed a 43% revenue fall in 1Q16 over 1Q15, while the Completion & Production Services recorded an ~58% revenue fall during this period. By comparison, Schlumberger’s (SLB) 1Q16 revenues declined by 36% versus 1Q15.
NBR comprises 0.19% of the iShares Core Aggressive Allocation ETF (AOA). Equity assets make up 80% of AOA, while fixed income assets make up 19% of AOA.
Factors that affected Nabors Industries’s performance
- operating loss in North America due to declining activity and margin erosion following the expiration of term contracts
- ~188 rigs operated by NBR in 1Q16 compared to ~223 rigs in 4Q15, or down by 15.6%
- additional pricing concessions, unfavorable cost impacts, and rig moving activity in NBR’s international operations
Partially offsetting these negative factors were cost savings in NBR’s Rig Services operations.
What will Nabors Industries’s strategy be for 2Q16?
- In Latin America, NBR’s workover rigs, which generate marginal income, can decrease significantly.
- NBR’s EBITDA[1. earnings before interest, tax, depreciation, and amortization] in international markets can drop by ~6%–8% in 2Q16 over 1Q16. NBR’s management believes that an additional 10–12 drilling rigs are vulnerable in the current market environment.
- NBR expects its technology initiatives to result in a near-term revenue advantage.
Next, we will discuss how NBR’s management outlook transpired in the past few quarters.