UPDATE: Nabors Sees 15%-20% More Rigs Working In '05
By DAVID BOGOSLAW
February 1, 2005 1:33 p.m.
Of DOW JONES NEWSWIRES
NEW YORK -- Nabors Industries Ltd.'s (NBR) top executive said Tuesday that he would be disappointed if the number of rigs it has working in the U.S. in 2005 doesn't increase by 15% to 20% over 2004 numbers.
The world's largest land-drilling contractor had an average of 199 rigs working last year, a 39% increase over the 2003 average that helped drive a 55% surge in operating income to $329.7 million in 2004. The company hopes to have 230 to 240 rigs drilling in 2005, Chairman and Chief Executive Gene Isenberg said during an earnings conference call.
And with gross profit margins soaring as worries about rig availability push daily rental rates for rigs higher, he said he would also be disappointed if gross margins don't average $1,500 a day above the $2,800 average in 2004.
"Everything is hitting on all 12 cylinders and manifesting itself in the bottom line," Isenberg said.
He projected that return on capital employed - the key metric Nabors uses to evaluate its progress - would rise to 14% in 2005 from 7.5% last year. He also promised that operating income would more than double this year from 2004.
As many producers seek to drill deeper wells, demand for more sophisticated drilling technology and greater hydraulic power, as well as for horizontal drilling, has climbed.
"More of the rig requirements are moving into our sweet spot, which is bigger wells," he said. "That's been a major contributor to our market position going from 14.5% to 22%" in the lower 48 U.S. states.
Operating income from international rigs jumped 28.6% to about $90 million last year and is expected to be up another 33% in 2005.
A large portion of the year-over-year improvement in net income last year came not from Nabors' core businesses but from a boost in income from financial investments it has made.
Isenberg credited rising interest rates for the windfall and said he expected larger gains from the company's investments this year.
Earnings for the third and fourth quarters, however, will be reduced by 6 cents to 8 cents a share as a result of starting to expense stock options in conformity with new accounting rules, he said.
"We will go to (offering employees) less options, probably more restricted stock and more cash," he said.
Capital spending is expected to be roughly $545 million, essentially flat with the 2004 level. The company doesn't plan to construct any new rigs to relieve tight supply in the future, seeing more benefit from investing half as much cash as a new rig would cost to upgrade existing rigs and enhance their capacity.
Shares recently changed hands up 7 cents at $50.47. Volume was 1.6 million, compared with average daily volume of 1.9 million. |
