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How Nabors Industries’ Management Views 2H17

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Oct. 17 2017, Updated 8:11 a.m. ET

What does Nabors Industries’ management think?

Nabors Industries’ (NBR) management expects the rig addition in the US onshore sector to moderate in the second half of 2017.

In the company’s 2Q17 earnings conference call, Nabors Industries’ chairman and CEO, Anthony Petrello, commented, “We expect that we will continue to add rigs on a quarterly average basis in the lower 48 through the year. We currently have 102 rigs working versus the 95 average for the second quarter.

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“We also have additional rigs contracted or committed that are currently under construction or in the yard for upgrades. However, we expect the pace of growth will continue to moderate, driven by the slower growth for the lower 48 market as a whole. We continue executing on our upgrade program, although we expect to defer upgrades on a handful of rigs in the north.”

Nabors Industries’ new focus

Nabors Industries’ management expects to increase focus on directional drilling in 2H17.

During the conference call, Petrello added, “First, additional directional drilling tools are arriving and being put to work every month. Today we have about 20% directional drilling penetration on Nabors rigs. By the end of the year, we expect to have enough directional drilling tools to execute jobs on 44 rigs, up from 27 today. NDS has tremendous operating leverage potential.”

Nabors Drilling Solutions (or NDS) is part of NBR’s Rig Services segment. NBR comprises 2.1% of the iShares US Oil Equipment & Services ETF (IEZ). Since June 30, 2017, IEZ has risen 1% versus an 11% fall in NBR’s stock price.

What are Nabors Industries’ management estimates for 3Q17?

  • NBR’s management expects to add ~8–10 rigs in North America onshore in 3Q17.
  • NBR expects to add another 8–10 rigs in 4Q17.
  • NBR’s management expects slower growth in the US onshore market may prompt moderation of rig additions in the future.
  • NBR expects its revenue per day to improve as more SMARTRigs (or advanced rigs) roll to higher spot rates.

In the next article, we’ll discuss NBR’s value drivers.

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