Nabors Industries Ltd. (NYSE: NBR) is the world's largest land-drilling contractor, engaging in oil, gas, and geothermal land drilling operations in the U.S., South/Central America, the Middle East, and Africa.
Analysts like NBR's increasing dayrates for U.S. land drilling rigs, which rose $1,056 per day to $21,135 in Q1 2008.
Further, analysts expect Nabors' flat-to-lower North American drilling revenue to be offset by its international business, with an 8-12% income increase expected for FY 2008.
Nabors' economies scale (fleet size: 535 land drilling rigs, 35 platform rigs, 12 jack-up, 4 barge rigs), unconventional natural gas opportunities, large geographic footprint, and diversified client base, also bode well for future revenue growth. The Reuters F2008/F2009 EPS consensus estimates for NBR are $3.19/$3.91
The risks? Analysts are keeping an eye on Nabors' new rig delivery pace and skilled labor costs. A substantial, sustained decline in oil / natural gas prices would also hurt NBR's results.
The First Call mean rating for NBR is: Buy [20 firms]. Mean 2008 target: $45 [high: $51, low: $40].
Stock Analysis: Nabors Industries is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from NBR's shares. Note: More-cautious investors may wish to wait until NBR pulls-back to $36, but keep in mind that NBR may not retreat to that level. Sell/Stop Loss if you were to purchase shares in this company: $26.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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