Oil Patch Offers No Great Earnings Assurances (NBR, NE, ESV, PDE)

By Douglas A. McIntyre Updated Apr 28, 3:05AM EDT · Published Oct 2, 10:14AM EDT

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Oil_well_logo_2 Oilfield services company Nabors Industrial (NYSE:NBR) revised its guidance downward after the market closed yesterday and its share price is approaching a new 52-week low. And its bringing its competitors down with it. Noble Corporation (NYSE:NE) is off more than 7%, Ensco International (NYSE:ESV) is off more than 5%, and Pride International (NYSE:PDE) is off nearly 7% in early trading today. Both Pride and Noble have touched new 52-week lows.

Nabors now expects third quarter EPS of $0.65-$0.68, below analysts’ expectations of $0.80. The biggest component of thedownturn is an expected mark-to-market loss of $22 million on Nabors’s450 million-share investment in Honghua Group Ltd. Nabors alsoestimates $13 million in property losses due to Hurricanes Gustav andIke. The company also plans to record a tax adjustment of $0.06/share.On more than 280 million shares outstanding, that amounts to about $17million.

The nearly 19% drop in EPS is the headline number here. The componentsof that drop are probably unique to Nabors and don’t really have anyrelevance to other oilfield services companies. Operationally, evenNabors appears to be doing okay, although its international segment hasexperienced "excessive" downtime in Mexico and Saudi Arabia and otherdelays elsewhere.

The problem looks like cash flow. With the exception of Noble, theseoutfits had negative cash flows in the June quarter. It’s no secretthat credit is hard to get. Crude pricesare falling because of recession fears, and that means less drilling.Even if the US Congress approves the bailout/rescue plan, globaleconomic growth is likely to continue to be slow. E&P companieswon’t spend as much on capex or new exploration, and the drillers arelikely to contract even more. Growth looks to be out of the picture.

Paul Ausick
October 2, 2008

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.