Before the Call: Nabors in a Nutshell

If you just looked at Nabors Industries' (NYSE: NBR) historic revenue mix, you might conclude that the company is set to report a lousy second quarter. Last year, the company derived 65% of its income from natural gas projects, with a fair amount of that coming from Canada. Drilling activity up in the Great White North hit an eight-year low in April because of a combination of low gas prices, severe cost inflation, and some abysmal weather. Nabors reacted early to the signs of weakness, however, and has meaningfully shifted its work toward oil projects this year. The fleet is very well-diversified geographically, and I expect strong international results to mostly offset the quarter's Canadian malaise.

We'll get all the details on Wednesday, but it's just as important to take a deep breath, step back, and look at the bigger picture. To help us do just that, I've enlisted the Motley Fool CAPS community. At more than 60,000 strong, this group of participants has rated the performance potential of more than 4,700 different companies. So what does the community think of the largest of land drillers?

Up or down?
More than 600 players have weighed in on Nabors. Ninety-seven percent of All Star-rated members, the creme de la creme of CAPS, are bullish on the stock. As you'll see below, this favorable opinion extends to the entire group. While we don't see quite the level of unbridled enthusiasm for the land drillers as for their offshore brethren, it's still a strong showing by Nabors and its neighbors:

Wall Street vs. Main Street
Of the analysts we track, all six are positive on Nabors. That's caused some of these folks some pain in the short run, because the stock has turned in a fairly meager performance this year. But it's early innings yet. Let's take a look at the investment theses of some of our CAPS players.

Bull pitch
Several top-ranked players, including PearlandTX, point to a historically low P/E ratio for the stock. While cyclical companies tend to have low multiples when they're performing at their best, these commentators still make a valid point. Nabors shares have been getting steadily cheaper for years now. The company hasn't ignored this fact -- they've bought back tens of millions of shares since 2005. On a related note, fauxtr8r points out, "CEO Gene Isenberg has expressed an interest in possibly taking the company private if the valuation remains flat."

Finally, RothInvestor notes Nabors' potentially rewarding "recent partnership with First Reserve," a reference to NFR Energy, the two firms' exploration and production joint venture. This diversification into the upstream business seems like a wise deployment of capital to me, particularly given First Reserve's experience with this market.

Bear pitch
pobeda1 believes that management "applied desperate measures to turn around sentiment" with its buyout comments in late 2006. If we were talking about a management team that's all talk, then I would be more receptive to this skeptical point of view. Gene Isenberg speaks quite plainly, and when he mentioned the possibility of a buyout, I think it was and remains a serious option.

The Foolish last word
Thanks to Baker Hughes, we already know that the Canadian market was extremely soft this past quarter. If Nabors drops on a weaker-than-expected report, I would view that as a buying opportunity. We don't invest by looking in the rearview mirror. The company's global prospects are bright indeed, and the long-term trend for natural gas prices is decidedly upward. Yes, even in Canada.

Related Foolishness:

• Hi-Diddly-Ho, Nabors!

Fool contributor Toby Shute doesn't own shares in any company mentioned. The Motley Fool has a neighborly disclosure policy.