Nabors Industries (NBR, Financial) announced its first-quarter revenue of $736 million, surpassing the consensus estimate of $717.98 million. The results were bolstered by a significant one-time, non-cash net gain of $113 million, or $9.68 per diluted share, from the Parker transaction. However, this gain was partly negated by non-cash charges of $28.6 million, or $2.45 per diluted share, stemming from the phasing out of operations in Russia, as well as additional costs associated with the Parker acquisition.
The company's adjusted EBITDA for the quarter was $206 million, compared to $221 million in the prior quarter. The firm noted an enhancement in performance in some international markets, while facing challenges in the U.S. due to rig churn affecting utilization and operating costs. Despite these challenges, there was progress with the addition of rigs in the Lower 48, following a decline in February. The company has undertaken measures to boost efficiency and optimize cost structures in light of current activity levels.
Internationally, the average daily adjusted gross margin improved to $17,421, representing an increase of over $700 per day, primarily due to better margins across most international regions. While international drilling activity remained stable, new rig startups in Saudi Arabia counterbalanced the effects of halted operations in Russia and reduced activity in Colombia. Nabors anticipates several rig startups throughout 2025 in regions including Saudi Arabia, Kuwait, Argentina, Mexico, and India, which will offset the completion of certain Eastern Hemisphere projects.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 7 analysts, the average target price for Nabors Industries Ltd (NBR, Financial) is $50.29 with a high estimate of $75.00 and a low estimate of $32.00. The average target implies an upside of 74.24% from the current price of $28.86. More detailed estimate data can be found on the Nabors Industries Ltd (NBR) Forecast page.
Based on the consensus recommendation from 8 brokerage firms, Nabors Industries Ltd's (NBR, Financial) average brokerage recommendation is currently 3.0, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Nabors Industries Ltd (NBR, Financial) in one year is $121.93, suggesting a upside of 322.49% from the current price of $28.86. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Nabors Industries Ltd (NBR) Summary page.
NBR Key Business Developments
Release Date: February 13, 2025
- Adjusted EBITDA: $221 million for the fourth quarter.
- Free Cash Flow: Consumed approximately $50 million in the fourth quarter, below expectations of generating $20 million.
- Revenue: $730 million for the fourth quarter, a $2 million sequential reduction.
- US Drilling Segment Revenue: Declined by $13 million sequentially, or 5.2%.
- International Drilling Revenue: $371 million, an increase of $2.8 million.
- Drilling Solutions Revenue: $76 million, decreased by $3.6 million or 4.5% sequentially.
- Rig Technologies Revenue: $56.2 million, up $10.4 million or 22.6%.
- Capital Expenditures: $241 million in the fourth quarter, with $143 million for Saudi new builds.
- Daily Rig Margins (Lower 48): Approximately $15,000 in the fourth quarter.
- NDS Gross Margin: Exceeded 54% in the fourth quarter.
- Lower 48 Average Rig Count: Averaged 66, a decrease of two rigs.
- International Average Rig Count: Stable at 85 rigs.
- Saudi New Builds: 9th new build deployed in the fourth quarter, with 5 more scheduled for 2025.
- Capital Expenditure Forecast for 2025: $710 to $720 million.
- Expected Free Cash Flow for 2025: Around break-even, with negative free cash flow from Saudi operations of approximately $150 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nabors Industries Ltd (NBR, Financial) reported a strong performance in international markets, with 10 international rigs activated in 2024 and plans for 10 more deployments in 2025.
- The company's technology-focused businesses, NDS and Rigtech, generated a combined EBITA of more than $43 million, with their contribution increasing to 19.5% of the company's consolidated EBITA.
- Nabors Industries Ltd (NBR) is optimistic about incremental rig awards in key geographies, which are expected to deploy in 2026.
- The company has a strategic partnership with Saudi Aramco, with a new build rig program that ensures a return on invested capital in 5 years, providing long-term stability.
- Nabors Industries Ltd (NBR) is confident in realizing annualized cost synergies of at least $35 million in 2025 from the Parker acquisition, which is expected to be accretive to free cash flow.
Negative Points
- Free cash flow fell short in the fourth quarter due to substantial receivables in Mexico and accelerated milestone payments in Saudi Arabia.
- The lower 48 market has not improved as anticipated, impacting the company's drilling rigs and NDS businesses.
- Significant delays in payments from a customer in Mexico, amounting to approximately $50 million, have affected cash flow.
- The ongoing investment in Saudi Arabia is significant, with a forecasted negative free cash flow of approximately $150 million from the SAA segment in 2025.
- The US market remains sluggish, with a lack of growth in the lower 48 market and an expected 4% reduction in rig count by major clients.
