Assessing Nabors Industries’ Plans to Preserve Liquidity


Nov. 28 2016, Updated 8:04 a.m. ET

Nabors Industries’ operating cash flows

Nabors Industries’ cash from operating activities (or CFO) fell 22% in 3Q16 from 3Q15. NBR generated ~$68 million CFO in 3Q16. Lower revenues in the past year led to this lower CFO.

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Nabors Industries’ free cash flow

NBR’s capital expenditure (or capex) fell 49% in the past year up to 3Q16. Lower CFO more than offset capex’s shrinkage. In effect, the 3Q16 FCF deteriorated significantly compared to 3Q15. In 3Q16, NBR’s FCF was -$22 million, compared to -$90 million a year ago. In the previous three quarters before 3Q16, Nabors Industries’ FCF had been positive.

McDermott International (MDR), Nabors Industries’ lower-market-cap peer, generated a $23 million FCF in 3Q16. Nabors Industries is 0.48% of the iShares S&P Mid-Cap 400 Value ETF (IJJ).

What are NBR’s 2016 capex estimates?

In 2016, NBR expects to spend $450 million in capex. This spending would be 51% lower than in 2015.

What’s NBR’s management doing to preserve liquidity?

Nabors Industries’ plans to preserve liquidity through cost control and generating positive free cash flow. In the 3Q16 conference call, William J. Restrepo, NBR’s CFO said, “We remain cautious and we retain our focus on liquidity. This means we will continue to target positive free cash flow for the remainder of the year and a stable net debt balance through cost and CapEx control.”

Next, we’ll discuss analysts’ recommendations for NBR.


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