Nabors NBR

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Nabors(NBR)

• By Cameron Shunta

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General Information

• Largest provider of land and platform drilling
  contracting services for exploration development
  of oil, gas and geothermal wells.
• Also conduct drilling them selves.

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Types of Oil Rigs

• Barge Rigs - 3
• Jack-up Rigs - 19
• Marine Vessels - 28
• Platform Rigs - 43
• Land Drilling Wells - 588
• Land work over Rigs - 781

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Position of Rigs

• Alaska
• United States (Lower 48)
• U.S. Gulf of Mexico
• Canada
• International (South America, Middle East, and
  Africa)

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Other Services Provided

• Selling Mud Density Sensors extremely accurate,
  little maintenance required. Detects the level
  of Mud in the pit of the Oil Well.
• Quantitative Fluorescence Technique technology
  to detect lighter fraction aromatic hydrocarbons.
  (Used in Drill Cuttings)

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(Cont)

• Projection Acceleration Software System Build
  operational plans while graphically attaching
  activities and resources.
• Moreover, this software facilitates technical
  limits, safety concerns, and learning
  initiatives.

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Current Board of Directors

• Eugene M. Isenberg, 76 CEO since 1987. Highest
  paid CEO in 2005.
• Anthony G. Petrello, 51 Deputy Chairman, Chief
  Operating Officer.
• Bruce P. Koch, 46 CFO Principal Accounting
  Officer

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(Cont.)

• Daniel Mclachlin, 68 Vice President of
  Administration.
• Mickey M. Sheinfield Senior Counsel
• 3 other Counsel members
• Other Full Time Employees 22,599

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Competitive Edge

• Hires the best employees (8 year straight
  winner of for safety of employees. Pays
  employees better then competitors).
• Provides other services besides drilling unlike
  competitors.
• Many newer rigs that are more efficient unlike
  other companies whos oil wells are getting old.
• Future Advancements

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Future Advancements

• New Technology 5c Rig incorporates
  programmable logical control systems, their
  safer, more efficient, more durable, and easier
  to operate.
• Plan on providing 40 of these innovative rigs in
  the next 2 years.

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Market Capitalization

• 9.81 Billion
• Large Cap Company (2 10 million)
• This was derived by following equation (stock
  price X Number of Shares)

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Expected Growth Rate
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Evaluating The Company

• Things Warrant Buffet looks for in a company.
• Has the company consistently performed well?
• Has the company avoided excess debt?
• Are profit margins high? Are they increasing?
• How long has the company been public?

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(Continued)

• Do the company's products rely on a commodity?
• Is the stock selling at a 25 discount to its
  real value?
• Also will include other analyst opinion on what
  to look for.

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History of the Company

• Since 1987, Nabors Industries, Ltd has been
  under the same management team.
• During 1987 it was limited to just US operations.
  However, as explained, today it is now a world
  wide company having operations across the globe.

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ROE

• Nabors ROE
• 29.01
• As Shown ROE Is above average compared to its
  competitors.
• Also, Nabors meets 15 ROE standard

• Globalsantafe Corp. (GSF)
• 17.36
• Patterson-UTI Energy Inc. (PTEN)
• 47.33
• Pride International Inc. (PDE)
• 11.34

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ROA

• Nabors ROA
• 11.14
• As Shown ROA Is above average compared to its
  competitors.
• Nabors 11.14 ROA meets the lt5 standard

• GSF 8.76
• PTEN - 33.96
• PDE - 7.13

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Debt / Equity

• Total Debt/Equity Ration (mrq) 1.2
• Ideally we would a company to have a smaller debt
  to equity ratio however, 1.2 falls within the
  analyst standards of being between .5 1.5.
• Although it is 1.2, as shown taking on this debt
  the company has provided a great return on asset
  and equity with this debt. Thus, it has been
  beneficial.
• In the near future, they plan on paying off more
  of the long term debt.

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Current Ratio

• Current Ratio (Current Assets / Current
  Liabilities) is 3.73
• This number is significantly high, which means
  the company has a large amount of cash to pay off
  short term debt.
• However, I would expect this number to go down
  slightly in the future as the company starts to
  use some of the cash to pay off the long term
  debt.

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Prices / Sales

• Nabors Price to Sales
• Ratio - 2.1
• Share Price/Revenue Per Share
• Tells a limited story, but helps show that the
  company is undervalued. Were looking for a low
  price to sales ratio. As shown. Its below the
  Industry average

• Comparing this to its Competitors
• GSF 4.45
• PTEN 1.68
• Industry 3.71

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Price / Book

• Price/Book Ratio
• Stock Price / (Total Asset Intangible Asset and
  Liabilities)
• Nabors - P/B Ratio 2.69
• Ratio tells you if the company is under valued or
  if there is something fundamentally wrong with
  the company.

• Price to Book Ratio of Competitors
• GSF - 2.75
• PTEN 2.75
• PDE - 2. 01

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PE/G

• PE/G Ratio
• Nabors - .26
• Were looking for a low number, which shows the
  company is under valued.

• Competitors PE/G
• GSF - .33
• PTEN .33
• PDE - .53
• Industry - .51

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Earning/Share

• Earning / Share
• Nabors 3.18
• Looking for a high number.

• Competitors Earning/Share
• GSF 3.39
• PTEN 3.794
• PDE - 1.561

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BETA

• Nabors Beta 1.2
• This means that this company will be 20 more
  volatile compared to the market as a whole.
• Thus, this stock choice should be combined with
  other stocks with much smaller beta in order to
  balance out the portfolio volatility.

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Risks with Investment

• Things to consider before investing into this
  company
• How the price of oil and natural gas and industry
  expectations will be in the future?
• Political Stability in the countries that they
  operate.
• Change in Laws and Regulations.
• Electric / Fuel-Efficient Cars

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Answer to these Risks

• Although these concerns may seem to hamper
  investment, Nabors Incorporated specifically is
  the best oil company ready to handle these
  challenges.
• Specifically If oil prices rise, there is a
  great chance that revenue will increase
  dramatically because oil is an inelastic good.
• Political Stability Having a diverse set of
  locations helps mitigate political instability in
  one area. However, if political instability
  arises where they are not drilling it will force
  prices to rise and generate greater revenues.

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(Continued)

• The Change in laws and regulations will only help
  this company because they have a completive edge
  in safety products.
• The last concern Efficient Fuel Cars / Electric
  Cars - This is a probably the strongest concern.
  However, I strongly believe electric cars will
  not be highly produced for several years, which
  means the United States will still be dependent
  on oil.