NBR’s returns versus the industry

Nabors Industries’ (NBR) one-year stock price was down 58% as of November 16. We discussed Nabors Industries’ value drivers in Will Nabors Industries’ Weak Run Continue?

The Energy Select Sector SPDR ETF (XLE) has produced -5% returns since November 17, 2016. NBR has underperformed the VanEck Vectors Oil Services ETF (OIH). OIH has generated -21% returns in the past year. The SPDR S&P 500 ETF (SPY) has produced 18% returns and strongly outperformed Nabors Industries. The Dow Jones Industrial Average (DJIA-INDEX) rose 24% in the past year.Will Nabors Industries’ 2018 Plans Improve Returns?

Crude oil prices and US rigs

Since November 17, crude oil prices have recovered strongly, rising 21%. Read how you can trade crude oil price’s recent volatility in Crude Oil: Will the Bears Overshadow the Bulls? Prodded by the strength in crude oil prices, the US rig count rose 54% in the past year. Read how oilfield equipment and services (or OFS) companies like National Oilwell Varco (NOV) and Weatherford International (WFT) have been faring in Market Realist’s Which Oilfield Service Stocks Look Attractive in 4Q17?.

Nabors Industries’ 2018 plans

  • The bid to acquire Tesco (TESO), if successful, would be an important incremental driver. Tesco is currently running some jobs in the US onshore, which could offer plenty of room for expansion for NBR.
  • NBR received qualification for wellbore placement in the Saudi Arabian market. NBR’s management expects to generate significant revenues from this service in 2018.
  • In 2018, NBR plans to commercialize its rotary steerable technology, which could accelerate NBR’s growth.
  • NBR’s Canrig was affected negatively in 3Q17 due to part deferrals with some cancellations. NBR’s management expects Canrig to contribute positive EBITDA (earnings before interest, tax, depreciation, and amortization) in 4Q17 and after that. Canrig, part of NBR’s Rig Services segment, sells top drives, catwalks, wrenches, and draw works. Canrig sales rose in 2Q17

Nabors’ acquisition and joint venture initiatives

  • On August 14, Nabors Industries signed an agreement to acquire its OFS industry peer Tesco Corporation (TESO) in a deal valued at approximately $215 million
  • On February 1, NBR and Weatherford International signed a memorandum of understanding to form an alliance to deliver superior drilling solutions to US onshore upstream companies.

Series overview 

We’ll analyze what market indicators suggest for NBR’s stock and Wall Street’s recommendations on Nabors Industries in this series. We’ll start with Nabors Industries’ historical valuation multiples.

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