Nabors' Credit Facility Approved - Analyst Blog

Nabors Industries Ltd. (NBR) announced that it has received the commitment letter regarding an unsecured revolving credit facility. The principal amount of the facility totals up to $700 million and will be valid for four years.

 

With the help of an accordion feature that also forms a part of the facility, Nabors will be able to add lenders and raise the aggregate principal amount up to $850 million. Based upon the company's senior unsecured credit ratings, the interest margins and undrawn fees will be decided.

 

The credit facility will yield interest as per the company's two options – (a) and (b). Under the first option (a), interest will be one-, two-, three- or six-months LIBOR (London Interbank Offered Rate) plus the applicable margin. According to the second option (b), interest will be the highest among the prime commercial rate of UBS AG (UBS), the Federal Funds Rate plus 1/2 of 1% or one-month LIBOR, plus the applicable margin.

 

Barbados-based Nabors is a land drilling contractor and conducts oil, gas and geothermal land drilling operations all over the world. In addition, Nabors manufactures top drives and drilling instrumentation systems and provides comprehensive oilfield hauling, engineering, civil construction, logistics and facilities maintenance, and project management services.

 

We believe Nabors is well positioned in the industry, given its large, high-quality fleet of drilling and workover rigs. The company also enjoys a good exposure from the oil plays with its strong presence in the Bakken, Permian and Haynesville shale. With an efficient management team and adequate financial flexibility, we expect the company to sustain its growth momentum over the next few quarters.

 

However, a weak demand for conventional gas drilling services in the U.S. and Canada, a substantial drop in land rig activity in Mexico and low rig utilization in Alaska will continue to weigh heavily on the company’s shares in the coming months.

 

Nabors currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.