Shares of onshore contract driller Nabors Industries Ltd. (NBR) fell more than 6% to touch a 52-week low of $12.11 on Dec 5, 2014. The fall came after West Texas Intermediate (WTI) oil price dipped again when crude reached $65.84 per barrel − below the five-year low level of $66.15 that crude touched on Black Friday.
Why Nabors Fell Following Crude Price Decline?
Mario Draghi, the president of European Central Bank, decided last Thursday to keep the benchmark interest rate unchanged at 0.05%. Moreover, the most expected monetary stimulus measure − in order to boost up the European economy – this month has not been taken up.
Eventually, the WTI crude − that recovered partially last week − again returned to the losing streak.
This comes as a big blow for drillers like Nabors as the company’s revenues are highly dependent on crude prices. With a weak crude pricing scenario there will be lower exploration and production activities which in turn will drag down the demand for drilling operations.
Presently, we are concerned about Nabors’ fundamentals as its debt-to-capitalization ratio is more than 40%. Over the last few years, the company kept adding debt to its balance sheet for a fleet recapitalization program.
Zacks Rank
Currently, Nabors carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Murphy USA Inc. (MUSA), SandRidge Mississippian Trust I (SDT) and Sandridge Mississippian Trust II (SDR). All the stocks sport a Zacks Rank #1 (Strong Buy).
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