NBR’s management was cautiously optimistic about 2023: Nabors Industries’ (NBR) U.S. Drilling rig count fell marginally by ~2% in Q1 2023 compared to Q4 2022. The management expects the US onshore rig count and adjusted gross margin to revise downwards in Q2 compared to Q1. However, the management was more optimistic about the international drilling market recovery as it expects the adjusted gross margin per day to improve in Q2. The cautiousness in its approach is captured by the CEO’s remarks about “value-based rig pricing and disciplined capital spending” to achieve its goals in 2023. Read more about this in our recent article here.
Steady fundamentals metrics in Q1 can percolate to Q2: Quarter-over-quarter, NBR’s revenues increased by 2.6% in Q1. The company’s adjusted EBITDA margin increased incrementally by 50 basis points. Improved pricing for onshore drilling, broad-based improvement in U.S. Drilling and the commencement of the second new build rig in Saudi Arabia led to performance improvement in Q1. In Q2, the management expects international and Drilling Solutions segments to deliver solid results, although the adverse impact of lower natural gas prices can hinder its performance.
NBR’s cash flows and leverage: NBR’s cash flow from operations decreased by 23% in Q1 2023 compared to a year ago. Free cash flow declined more steeply (by 64%) in Q1 2023 following an increase in capex. The company’s debt-to-equity (including redeemable noncontrolling interest in subsidiary) remained high at 2x as of March 31.
Thanks for reading the NBR take three, designed to give you three critical takeaways from NBR’s earnings report. Soon we will present a second update on NBR earnings highlighting its current strategy, news, and notes we extracted from our deeper dive.
