Nabors Industries Ltd. (NBR) – North America’s largest onshore oil and natural gas driller – yesterday reported marginally weaker-than-expected third quarter results on the back of lower rig demand, as producers continued to scale back operations in the midst of falling commodity prices. Earnings per share, excluding non-cash items, came in at 15 cents, missing the Zacks Consensus Estimate by a penny.   Revenue & Profitability   Compared to the third quarter of 2008, Nabors’ adjusted earnings per share declined 77.6% (from 67 cents to 15 cents) due to persistent weakness in its North American gas-centric businesses combined with less robust international results. Revenues were down 44.2% to $804 million as sales declined in all of the company’s segments.   Nabors’ main operating segment is ‘Contract Drilling’, which accounts for bulk of the company’s revenues and operating earnings. Its operations are spread across 6 sub-segments: U.S. Lower 48 ...

Yesterday, Mexico's state oil company, Petroleos Mexicanos – also known as Pemex, said it is looking for contractors to drill 200 oil wells in the country's southern district as part of its efforts to offset declining output at existing wells. According to information released, drilling is scheduled to start in early October and last for 3 years.

Pemex has vowed to stick to its $20 billion capital expenditure target for this year, despite the sharp deterioration in the macro backdrop during the last few quarters (anemic demand coupled with growing supply overhang) and the resultant weakness in commodity prices.

The ambitious investment program has provided opportunities for oil services companies at a time when they are reeling from heavy exposure to the North American market.

Pemex confirmed that international oilfield service providers, including Halliburton Company (HAL), Schlumberger Limited (SLB), Baker Hughes Inc. (BHI) and Nabors Industries Ltd. (NBR)

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Yesterday, Nabors Industries Ltd. (NBR) – North America's largest onshore oil and natural gas driller – reported second-quarter results. Recurring earnings per diluted share, excluding non-cash items, came in at $0.32, marginally better than our estimate of $0.31 and well above market expectations of $0.26. The Bermuda-based company’s outperformance was driven by strengthened margins associated with new rig deployments in its international operations and solid results from the Alaska sub-segment.  However, on a year-over-year basis, Nabors’ adjusted earnings per share declined 46.7% (from $0.60 to $0.32) due to weakness in its North American gas-centric businesses combined with less robust international results, particularly in Latin America. Revenue was down 32.6% to $878 million as sales declined in almost all of the company’s segments.  Nabors’ main operating segment is ‘Contract Drilling’, which accounts for bulk of the company’s revenues and operating earnings. Its operations are spread across 6 ...

Earlier today, one of the largest onshore contract drillers in the U.S., Patterson-UTI Energy, Inc. (PTEN) said its June 2009 drill rig count averaged 60, the same as in the previous month. The company operated 58 rigs in the U.S. and 2 in Canada in June, compared to 59 rigs in the U.S. and one rig in Canada during May.Patterson's activity levels in the U.S. peaked in early October 2008, with a rig count of 275. Since then, the company has witnessed a steep and quick decline on the back of decreased demand largely caused by lower commodity prices for natural gas.Favorable prices over the last few years led to increased natural gas drilling, with the total onshore rig count making a new all-time high in 2008. As a result, after remaining essentially flat for almost 9 years (1998-2006), natural gas production ...

Highlights include Nabors Industries Ltd. (NBR), Patterson-UTI Energy, Inc. (PTEN), BJ Services Co. (BJS), EnCana Corp. (ECA), EOG Resources, Inc. (EOG) and Chesapeake Enery Corp. (CHK).Growing optimism about the economic outlook has pushed the equity markets significantly higher from the March 2009 lows. Crude oil and most of the other commodities have been active participants in the rally.As this first chart shows, natural gas has largely been absent from this rally. In fact, natural gas prices have been particularly weak in the last couple of days, erasing the gains made in the preceding three weeks and pushing the commodity back under the $4 level.  Blue line: Oil; Red line: Natural Gas (Source: wsj.com) This decoupling of natural gas prices from other commodities in general and crude oil in particular is rooted ...

Highlights include Exxon Mobil Corp. (XOM), Schlumberger, Ltd. (SLB), Transocean Ltd. (RIG), Nabors Industries Ltd. (NBR), Patterson-UTI Energy Inc. (PTEN), BJ Services Co. (BJS), XTO Energy Inc. (XTO) and Chesapeake Energy Corp. (CHK).Oil prices have moved up impressively in the recent past, up almost 18% in the last four weeks alone, and currently at the highest point in 2009 at close to $58 a barrel. The S&P 500 has gained around 11% in the same time frame, though its overall gain from the March lows is fairly impressive. The equity market rally reflects the growing optimistic narrative about the economic landscape, with sightings of 'green shoots' and favorable 'stress-test' outcomes. Today's favorable payroll numbers reinforce that outlook.But what accounts for the oil rally, how sustainable is it, and what are its investment implications going forward?There is ...

Weakness in natural gas prices and a tentative long-term outlook for the onshore drilling scene continues to weigh on Nabors Industries Ltd. (NBR) shares and the rest of the group. In the last two months alone, the stock is down more than 30%. Despite the pullback, the stock commands a valuation premium relative to its peers.

As such, we are maintaining our Hold recommendation. While we expect to see steady onshore activity levels this year and early next year, the long-term outlook remains vulnerable to natural gas weakening fundamentals. Being the largest onshore driller, Nabors remains particularly exposed to this emerging headwind.

Having actively invested in its fleet in recent years, Nabors remains well positioned to capitalize on this upturn. The company has significantly ramped up its capital outlays to increase the size and quality of its fleet. Of the company’s original 134-rig order, 53 have already been received. Nabors

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