For big-daddy driller Nabors Industries (NYSE: NBR), the fourth quarter more or less sums up all of 2007. Results in the North American land market, aside from Alaska, were uninspiring, while the international segment notched a fresh record.
Here at home, adjusted income from lower 48 drilling actually lifted sequentially, but it fell 27% for the full year. Workover rigs didn't fare much better in 2007. It's unfortunate that Alaska is such a small segment, because rig margins there notched roughly $18,500 per day. That smokes Helmerich & Payne's (NYSE: HP) huge U.S. land drilling margin, and doubles Nabors' rate in the lower 48.
I've oft mentioned the international segment's meteoricrise. For a slightly different perspective on this phenomenon, consider the following: In last year's fourth quarter, the segment's adjusted operating income contribution equaled 30% of that generated by lower 48 drilling. One year later, that figure is now 67%.
Mexico isn't panning out quite the way Nabors foresaw, but Russia has gone from merely promising to a meaningful procurer. Eight of 2007's 13 international term contract commitments owe to Russia. National Oilwell Varco (NYSE: NOV) had mentioned that Nabors and Weatherford (NYSE: WFT) are moving into the vast Eastern expanse that is Russia, but it's good to hear it straight from the driller's mouth. Also interesting is that of the company's 19 fresh newbuild orders, they are all from the Eastern hemisphere.
As Nabors' CEO Gene Isenberg hastened to point out, "the world didn't end" domestically, and 2008 promises "absolute signs of the bottom," if not the bottom itself. It's hard to go broke when you have 100% of Royal Dutch Shell's (NYSE: RDS-A) (NYSE: RDS-B) U.S. and Canadian land operations, and a 40% share of the vibrant California workover market.
In short, the downside looks quite limited here, and the international segment has set records for seven years running, with much more to come. It's been a tough slog, but this Eastern sojourner will ultimately reward your patience.
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