Is Nabors on the Losing End of Industry Trends?http://www.fool.com/investing/general/2013/04/29/this-ol-services-company-is-stuck.aspx Tyler Crowe
April 29, 2013
When the original estimates for capital expenditures for 2013 came out, it looked as though oil services might be the place to be. Based on the recent earnings release from Nabors Industries (NYSE: NBR), though, you might think otherwise. Here's the problem: Nabors is stuck between two emerging trends that could put a big squeeze on the rig company. Let's look at these two trends and Nabors' one hope for a better future.
Not everybody wins with greater efficiency
Baker Hughes' most recent rig count shows U.S. onshore rigs are down by almost 200 year over year. So overall, the industry is making big strides in efficiency. Some of the most tangible evidence of this, though, is in the Bakken Region. In 2013, Kodiak Oil & Gas (NYSE: KOG) is on track to drill more wells than last year, while at the same time spending $35 million less in capital expenditures to do so.
While this may be a big help for exploration and production companies, it puts a lot of pressure on Nabors' revenue. Fewer rigs mean the competition for rig companies gets tighter, and with it comes lower day rates. In this past quarter, Nabors saw an 18% decrease in revenue year over year. The one consolation prize for Nabors is that it has a solid foothold on pad drilling-capable rigs. The company has more than a 33% market share in these particular types for rigs that are in high demand, and further construction of its PACE-X rig should improve that market share.
Potential market slowdown?