According to Nabors, unsatisfactory performance from its 'Rig Services' and 'Completion and Production Services' units will lead to this lower-than-expected return. Decline in sales of capital tools along with decreased rig services and rental activities impair Nabors' Rig Services segment.
On the other hand, the Completion and Production Services unit was affected by a tough competitive environment and severe weather conditions. The company projects its operating income for second-quarter 2013 to be between $88.0 million to $91.0 million. However, Nabors has significantly lowered its gross debt by roughly $300.0 million in this quarter.
Nabors believes that the results will improve from the later quarters. The company is expected to release its second-quarter results after the closing bell on 23 Jul, 2013. The Zacks Consensus Estimate for earnings per share for the quarter stands at 15 cents.
Barbados-based Nabors' high natural gas exposure raises its sensitivity to gas price fluctuations. The company remains particularly exposed to this situation since its North American business is heavily biased to gas drilling.
Moreover, an imbalance in the demand-supply of rigs in the U.S. land drilling market presents considerable risk for the company. Additionally, the challenging near-to-intermediate term outlook for Nabors' international business will likely hamper its profitability.
Nabors currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next 1 to 3 months.
However, three firms in the energy sector with a favorable Zacks Rank are InterOil Corporation (IOC), PetroQuest Energy Inc. (PQ) and Ferrellgas Partners LP (FGP). All the stocks currently retain a Zacks Rank #1 (Strong Buy).
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