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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To: Dennis Roth who wrote (162)	4/23/2008 8:49:47 AM
From: Dennis Roth	of 174

Nabors Industries, Ltd. (NBR): Raising estimates and price target on positive NAM outlook - Goldman Sachs - April 23, 2008 What's changed Nabors reported 1Q2008 EPS of $0.81, above our $0.77 estimate and $0.76 consensus. We have increased our 2008-2010E EPS to $3.40/$4.15/$4.26 and raised our EBITDA estimates by ~5% each year to reflect our more bullish North America outlook. We have raised our 12-month price target to $40 from $35, which is between our “mid” and “high” trading ranges. Implications (1) The US land drilling market is steadily improving and the outlook appears to better than management’s guidance. Management commented that they are “comfortable” with 2008 consensus of $3.10, which we view as overly conservative. While our new 2008 estimate is 9.6% above consensus, we believe that investor expectations are higher given the stock’s 51% rally since January lows despite flat consensus estimates. (2) We expect US margins to bottom in 2Q as 16 rigs re-price and expect margins to begin moving higher in 4Q2008. We expect the pace of newbuilds to pick up and ultimately prevent margins from reaching peak levels (3Q06 margins were 25% above our 2Q08E). (3) Nabors’ outlook for Canada also appears to be a worse-case scenario as we expect higher natural gas prices to boost activity in 2H2008. Our 2008 EBIT estimate of $63 million is 15% above guidance. (4) The international segment continues to be plagued by delays and fell short of expectations once again in 1Q08 causing us to lower our 2008 EBIT assumption by 4% to $480 million. While the longer-term growth will continue to face delays, near-term performance should be more achievable given recent start-ups. Valuation Nabors trades at 7.4X/6.2X 2009E and 6.6X/5.5X 2010E EV-DACF/EV-EBITDA vs. the offshore driller averages of 7.8X/6.4X and 7.1X/5.8X. We see 6% upside to our $40 12-month target (7.75X 2009E EV/DACF). Key risks Risks include capacity additions or a decline in commodity prices.

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