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	10/26/2007 7:33:46 AM
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Nabors Industries, Ltd. (NBR): Upside continues to be pushed out; still Neutral - Goldman Sachs - 10/25/07 What's changed We are lowering our 2007E EPS to $2.94 from $3.00 primarily due to 3Q07 underperformance and lower operating income assumptions for the US Well-servicing and Alaska segments. We are also lowering our 2008E/2009E EPS estimates to $3.26/$3.85 from $3.33/$3.95 driven primarily by lower assumptions for the US Lower 48 and International segments. Implications (1) We continue to view the $28-$30 range as a potentially attractive entry point based on recent trough trading levels and asset values. With that said, we do not have a great sense of urgency to add to positions given the choppy near-term outlook for North America. (2) Nabors' international business continues to be plagued by delays. However, we don't believe it is a question of "if" the income will grow 50%+ but a question of "when". The international segment is the future of Nabors and will begin to show its potential in 2Q2008 in our view. (3) Results in the Lower 48 were slightly weaker than expected due to higher costs. Higher costs resulted from newbuilds that required "de-bugging" and the stacking of rigs. We believe a good portion of these costs are transitory, which could be a source of upside in 2008. (4) The US land market continues to face pressure on dayrates and utilization as newbuilds push older less efficient rigs out of the market. This is causing contractors to bid lower-end rigs more aggressively, which pushes to overall rate structure downward. We do not expect spot rates to improve until mid-2008 at the earliest given the current outlook for drilling activity. Valuation NBR is trading at 7.5x/6.1x 2008E EV-DACF/EV-EBITDA. We see 19% upside to our $34 12-month price target (8.5X 2008E EV/DACF). Key risks Key risks include capacity additions, a sustained decline in commodity prices and the broader stock market indices.

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