Nabors Industries(NBR) Message Board

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Gold/Mining/Energy : Nabors Industries(NBR)

NBR 48.52

-1.7%

Oct 31 9:30 AM EDT

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From: Dennis Roth	5/7/2007 11:05:08 AM
	of 174

Outlook still uncertain; Maintain Neutral May 07, 2007 Goldman Sachs What's changed Our 2007 EPS remains unchanged at $3.76 as lower tax rate was offset by North American weakness. We increased our 2008 EPS to $4.55 from $4.35 driven by a lower tax rate. Our 12-month price target remains unchanged at $33 (8.0X 2007E EV/DACF). Implications (1) The outlook for the land drillers is still very unclear and despite low valuation multiples, we continue to prefer the offshore drillers and oil services stocks. Our key near term concern is that capacity additions may continue to put pressure on margins despite stable activity levels. And even though some may argue that mid 2007 could be the bottom for North American land drilling results, a recovery is still highly dependant on natural gas prices and earnings momentum is unlikely to improve at least until 3Q07. (2) Strong International growth should continue to offset N. American weakness. Nabors remains confident in doubling EBIT in 07 as pricing power should remain strong. Management is also looking at international acquisition opportunities to expand in regions where the company has a small presence. Valuation Nabors trades at 8.2X/7.0X our 2007/2008E EV/DACF, -3%/+14% relative to the offshore drillers and at a 36%/26% premium to Basic Energy. Key risks Risks to our thesis and target price include: (1) capacity additions could result in a flattening or depression of leading edge dayrates and (2) a severe correction in commodity prices.

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