Nabors: New Rigs, New CEO
05/02/2014 7:00 am EST
Our latest featured stock has the opportunity to benefit from a very big fundamental shift in a very big industry, asserts Timothy Lutts, editor of Cabot Stock of the Month.
Today, a new energy boom is underway, driven by increased global appetite for oil and gas, increased use of advanced technologies (i.e. fracking) and increased willingness to use energy as a political tool.
Nabors Industries (NBR) is poised to take full advantage of this boom. It owns the largest collection of land drilling rigs in the world, marketing more than 500 rigs in 25 countries. It’s also one of the largest providers of hydraulic fracturing, cementing, nitrogen, and acid pressure pumping services.
Lastly, and perhaps most importantly, Nabors has a new proprietary high-tech rig, named PACE-X, that’s specifically designed for pad drilling, where multiple wells are drilled at the same time, a practice that’s all the rage among shale drillers.
PACE-X provides the driller with unprecedented flexibility in batch drilling operations by allowing the rig to easily “walk” over existing wellheads, moving as much as 100 feet on both its X and Y axes.
With 20 more PACE-X rigs set to hit the market this year, Nabors appears to have the leading technology in the industry, just as the industry begins a new boom.
The company also has a new CEO, Anthony Petrello, who took the job in October 2011 after learning the ropes from CEO Eugene Isenberg, who controlled the company for nearly 25 years and grew the company from bankruptcy to inclusion in the S&P 500 (SPX).
Petrello has been steering the company to real gains, both technologically and financially. Most important on that front were the company’s fourth-quarter results, which crushed analysts’ expectations.
Even better are the projections for the next couple of years. Analysts’ consensus earnings estimate for 2015 is now $1.72, more than twice 2013’s earnings, and $2.00 per share in 2015 isn’t out of the question.
The shockingly good fourth-quarter report sparked a massive wave of buying, which effectively woke up investors who had been ignoring the stock for years. Keeping it simple, our portfolio will buy the stock here.
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