Nabors Industries Ltd. (NBR) reported stellar third-quarter 2014 results on the back of robust performance at its Drilling and Rig Services and Completion Services business segments. Following this positive announcement, shares of Nabors gained over 3% in the NYSE in the after hours trading session.
The land drilling contractor reported earnings from continuing operations of 39 cents per share (excluding net charges related to strategic transactions), beating the Zacks Consensus Estimate by 2 cents. The bottom line also improved significantly from the year-ago figure of 20 cents per share (from continuing operations).
Total quarterly revenue of $1,813.1 million surpassed the Zacks Consensus Estimate of $1,754 million and was up 17% from $1,550.2 million in the year-ago period.
Segment Analysis
Nabors reports its operations in two major segments: Drilling and Rig Services, comprising U.S., Canada, International and Rig Services; and Completion and Production Services.
Drilling and Rig Services
During the reported quarter, Drilling and Rig Service revenues were up 16.6% year over year to $1,268.4 million, while the segment’s operating income improved approximately 35.1% to $218.3 million. Substantial improvement in U.S. and International operations led to the improvement. Total rig years rose to 380.4 from 349.7 in the third quarter of 2013.
Nabors’ U.S. operations recorded quarterly revenues of $571.7 million, up 16.2% from the year-ago level. Moreover, operating income increased 26.4% year over year to $117.2 million. Continued improvement in rig utilization and pricing in the U.S. Lower 48 operations aided the results.
The Canadian market registered a year-over-year revenue decline of 1.1% to $80.5 million. The operating profit was $11.5 million, reflecting a fall of about 6%.
Nabors’ international operations saw substantial progress in revenue generation, up 10.7% year over year to $424.7 million. Meanwhile, operating income of $68.5 million moved up 26.1% from third-quarter 2013. Increased rig activities supported the upside.
Revenues at the Rig Services segment were up nearly 46% to $191.4 million from the prior-year quarter. The unit reported operating profit of $21.1 million, a massive increase from $2.4 million in the year-earlier quarter. Higher third-party shipments by Canrig aided the results.
Completion and Production Services
Completion Services posted revenues of $352 million, up 32.1% from the year-ago quarter. Operating profit for the segment came in at $14.2 million, up 9.1% year over year. Improved activity and a higher pricing scenario led to the improvement.
Revenues at the Production Services segment came in at $259.9 million, up 5.3% from the prior-year quarter. However, operating income fell 18.2% year over year to $21.2 million, given the adverse weather and lower spending by an important customer of Nabors owing to budget constraints.
Direct Cost
The direct expenses related to operation came at $1,182 million, up 20.4% from the year-ago quarter.
Balance Sheet
As of Sep 30, 2014, Nabors had $464.8 million in cash and short-term investments and $4,255.1 million in long-term debt, with a debt-to-capitalization ratio of approximately 42.2%.
Zacks Rating
Nabors Industries currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one could consider better-ranked players form the broader energy sector like Magellan Midstream Partners LP (MMP), Oiltanking Partners, L.P. (OILT) and Cobalt International Energy, Inc. (CIE). All these stocks sport a Zacks #1 (Strong Buy).
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