2023-04-28 15:53:15 ET
Summary
- Nabors Industries Ltd. reported first-quarter 2023 operating revenues totaling $779.14 million, up from $568.54 million in the same quarter last year.
- The average daily revenue for the first quarter was approximately $36,500, up from 32,700 sequentially.
- I recommend buying Nabors Industries between $99 and $97 to accumulate again, with potential lower support at $92.
Introduction
Nabors Industries Ltd. (NBR) released its first quarter of 2023 results on April 24, 2023.
Note: This article is an update of my article published on February 9, 2023. I have followed NBR on Seeking Alpha since September 2014.
Nabors Industries CEO Thomas Petrello said in the 1Q23 conference call:
Our segments continued to perform well in the face of a challenging environment in the Lower 48. Sequential growth in the drilling businesses drove the increase in EBITDA. For the first quarter, adjusted EBITDA totaled $240 million. This result was in line with our outlook for the segments on last quarter's call. Our global average rig count for the first quarter declined by 1 rig.
1 - NBR's 1Q23 results snapshot
Total revenues were $789.01 million in the first quarter of 2023, up from $568.70 million a year ago.
NBR reported a first-quarter 2023 income of $69.07 million, or $4.11 per share, compared with a loss of $22.51 last year. The figures missed analysts' expectations even if revenues were higher year-over-year. Nabors' adjusted EBITDA was $240 million, up from $130.5 million last year.
Nabors Industries exited 1Q23 with 95 rigs running in the U.S. The daily margin increased to $16,700 per day, up 14.4% from $14,600 in 4Q22. This performance does not reflect the growing Lower 48 margin from NDS. Combined, that margin is significantly higher.
For the International segment, NBR exited 1Q23 with 76 rigs with a daily margin improving at $15,200 daily. Saudi Arabia was helping.
NBR Rig count (NBR Presentation)
2 - Stock performance
Nabors Industries has dropped significantly on a one-year basis, down 38%. However, HP did a little bit better and is down 22%. Both companies turned bearish in 2023, with oil and gas prices weakening due to a possible recession by 3Q23.
3 - Investment thesis
The investment thesis for Nabors Industries continues to be challenging, especially if we compare NBR with its direct competitor, Helmerich & Payne, Inc. (HP). The business outlook is worsening as we enter 2023.
The onshore drilling business is notoriously volatile, with low-profit margins, which experiences wild and unpredictable swings. To make things worse, the company is not paying a dividend, and therefore, It must be considered attractive only for those who trade short-term the stock.
Thus, I recommend NBR as an excellent trading tool. Still, it should be avoided as a long-term investment, especially as we sail through 2023, which looks increasingly bearish with a potential global recession in H2 2023.
As I said in my preceding article, NBR is highly associated with oil and gas prices. Therefore, I suggest trading LIFO over 60% of your long-term position to reduce the risk attached to this industry. This dual strategy is what I am offering in my marketplace and forms the backbone of my Gold and Oil marketplace.
Nabors Industries - Balance Sheet History ending 1Q23: The Raw Numbers
Nabors Industries | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 |
Total Revenues and other income in $ Million | 568.64 | 630.94 | 694.14 | 760.15 | 779.14 |
Net income in $ Million | -184.50 | -82.92 | -13.78 | -69.07 | 49.22 |
EBITDA $ Million | 50.27 | 144.33 | 221.59 | 181.09 | 129.22 |
EPS diluted in $/share | -22.51 | -9.41 | -1.80 | -7.87 | 4.11 |
Operating cash flow in $ Million | 41.35 | 120.80 | 138.95 | 199.99 | 154.05 |
CapEx in $ Million | 84.26 | 76.63 | 111.19 | 101.37 | 118.73 |
Free Cash Flow in $ Million | -42.90 | 44.16 | 27.76 | 98.62 | 35.32* |
Total cash $ Million | 394.04 | 417.98 | 425.07 | 452.32 | 475.73 |
Long-term debt in $ Million | 2,610.1 | 2601.5 | 2,585.5 | 2,537.5 | 2,562.3 |
Shares outstanding (Basic) in Million | 8.31 | 9.08 | 9.10 | 9.10 | 9.87 |
Courtesy: NBR 10-Q .
*Estimated by Fun Trading.
Balance Sheet Snapshot
1 - Revenues and other income were $779.14 million in 1Q23
NBR Quarterly Revenues history (Fun Trading)
Note: Operating income plus investment income was $789.01 million.
Nabors Industries reported first-quarter 2023 operating revenues totaling $779.14 million, up from $568.54 million in the same quarter last year (please see the chart above).
The first quarter adjusted EBITDA was $240 million compared to $130.5 million in the first quarter of 2022.
Gross margin improved by $14 million, or 5%, compared to 4Q22.
1.1 - NBR revenues per segment
NBR 1Q23 Revenue per segment (Fun Trading)
As we can see, U.S. drilling and International Drilling represent 86% of the total output.
U.S. Drilling revenue increased by $17.8 million to $350.65 million, a 5.3% improvement. Lower 48 revenue grew by almost 7%, reflecting an increase in daily revenue of over $3,700 or 11.4%.
The average daily revenue for the first quarter was approximately $36,500, up from 32,700 sequentially.
The improvement in the International segment was driven primarily by higher day rates and activity and performance improvements in Saudi Arabia ((SANAD)).
NBR expects 2Q23 Drilling adjusted gross margin of $16,900 to $17,000 daily, excluding the Lower 48 solutions margin.
2 - Free cash flow was estimated at $35.32 million in 1Q23.
NBR Quarterly Free cash flow history (Fun Trading)
Note: The Generic free cash flow is cash from operations minus CapEx. The company indicated an adjusted free cash flow of $37 million.
NBR's trailing 12-month free cash flow was $205.86 million, with $35.32 million in 1Q23. The company is not paying a dividend which makes it less attractive to its main competitor, Helmerich & Payne, which pays a 3% dividend yield.
3 - Net debt is now down to $2.09 billion at the end of 1Q23
NBR Quarterly Cash versus Debt History (Fun Trading)
As we can see in the chart above, NBR is reducing debt. Total debt in the first quarter was $2,562.3 million. The total cash was $475.73 million.
Technical Analysis (Short Term) and Commentary
NBR TA Chart short-term (Fun Trading StockCharts)
NBR forms a descending wedge pattern, with resistance at $115 and support at $98.25.
A falling wedge pattern is bullish, although it appears after a bearish trend. It signifies that bulls have lost their momentum, and bears have temporarily taken control over the price. As a result, the price starts to make new lower lows, but at a corrective pace.
Thus, I suggest selling over 50% of your position between $114 and $116, with possible higher resistance at $134.2, and waiting for a retracement between $99 and $97 to accumulate again, with potential lower support at $92.
It is crucial to watch oil prices like a hawk.
Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
For further details see:
Nabors Industries: Back To Earth