Nabors Industries Stock Falls 12% in a Year: Time to Hold or Sell?

Core Insights - Nabors Industries Ltd. (NBR) has significantly underperformed compared to its peers and relevant benchmarks, with a share price decline of 12.4% over the past year, while the Oil and Gas – Drilling sub-industry grew by 4.8% [1][8] - The company faces operational challenges, market volatility, and ineffective business strategies, impacting its market position [3] Financial Performance - NBR's adjusted EBITDA decreased from $248 million in Q2 2025 to $236 million in Q3 2025, indicating pressure on profitability despite divesting a high-margin business [4] - The company is projected to have breakeven adjusted free cash flow for the full year 2025, limiting its capacity for debt reduction or shareholder returns [10] Market Challenges - The U.S. Lower 48 drilling market is experiencing muted activity and ongoing pressure, with a decline in average rig count and daily margins due to labor inefficiencies and harsh drilling conditions [5] - Operations in Mexico are facing significant uncertainty, with potential suspensions of offshore platform rigs and collection issues from PEMEX, leading to cash flow challenges [6][9] Capital Expenditures and Debt Management - NBR's capital expenditures are high, estimated at $715-$725 million for 2025, with no expected decline in 2026, consuming cash and limiting financial flexibility [10] - The reduction in net debt to a decade low was primarily due to a one-time asset sale, raising questions about the sustainability of leverage improvement without further divestitures [11] Segment Performance - The Drilling Solutions segment's EBITDA showed only modest growth, with competitive pressures limiting pricing power in a challenging market [12] - The Rig Technologies segment reported a decline in EBITDA due to reduced demand for aftermarket offerings, reflecting a broader slowdown in capital equipment spending [16] Future Outlook - Management's guidance for Q4 2025 indicates stagnation in total EBITDA, with expectations of a decline in specific segments, suggesting a lack of operational momentum [15] - The company's dependence on the SANAD joint venture in Saudi Arabia raises concentration risk, as its success is tied to the capital spending plans of a single national oil company [14]