Drilling and oilfield services firm Nabors Industries Ltd. said the continuing depressed drilling market and low margins in part led to a 75% drop in its net income in the third quarter to $26.9 million, or 18 cents/diluted share, from $108.2 million or 68 cents/diluted share in 3Q2001.
“While the recovery in our North American businesses has been delayed by at least two quarters, the enduring strength in natural gas prices is a notable indication of declining supply, reinforcing the basis for our very favorable intermediate-term outlook,” said CEO Gene Isenberg. “Robust inquiries in our Canadian, international and U.S. Gulf of Mexico businesses, as well as plans by nearly all of our customers for higher spending in the U.S. in 2003, are leading to our expectation of a much improved outlook.”
He said compared to the second quarter, Nabors’ net income, excluding tax savings related to a reorganization, was down 27%. Income from operating activities was down only 14%, he said, “as our Canadian and Gulf of Mexico units posted substantial increases” from the second quarter.
“Further mitigating the reduced level of operating performance was our U.S. Lower 48 drilling operation which was off less than anticipated, as only slightly lower activity and margins were more than offset by the collection of a significant amount of slow and partially reserved receivables.”
Isenberg said the company’s U.S. well servicing and workover business suffered from the loss of higher margin offshore platform operations due to tropical storm activity and previously deferred maintenance expenditures.
“Looking forward, we expect modest improvement in the fourth quarter, as significant improvements in international, Canada, the U.S. Gulf of Mexico and most of our auxiliary businesses are likely to be partially offset by lower results in our U.S. Lower 48 land drilling and well servicing businesses,” due to seasonal softness and other factors.
“Our international unit has at least six deployments of offshore rigs scheduled over the next two quarters, which should substantially boost this unit’s contribution,” he added. “Canada is expecting higher activity in the fourth quarter and current inquiries indicate a particularly strong first quarter of 2003. Our U.S. Gulf of Mexico operation is anticipating continued improvement in the fourth quarter and even more substantial increments through the first half of 2003. The early 2003 forecasts by most of our other businesses show higher income levels as well.”
Excluding the tax benefits related to the company’s reorganization as a Bermuda company, net income was $18.6 million, or $0.12 per diluted share, versus $108.2 million, or $0.68 per diluted share, last year. This also compares to second quarter net income of $25.4 million, or $0.17 per diluted share. The results include an adjustment to reflect a lower than anticipated year-to-date effective tax rate of 23% rather than the 25% accrued in results during the first two quarters.
Nabors owns and operates 600 land drilling and 933 land workover and well-servicing rigs worldwide.
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