Miller Value Partners LLC on Nabors Industries Ltd.
Thesis
Nabors provides drilling rigs and drilling technology, and Miller Value expects higher oil prices to encourage high-specification rig deployments and better pricing on legacy contracts. Nabors Drilling Solutions could expand deployments on the company’s own rigs and third-party fleets during the coming year. The manager also believes the market underestimates the long-term cash-flow potential of its Saudi Aramco joint venture and thermal-energy investments. With the shares valued below two times cash flow and near three times forecast 2027 enterprise value to EBITDA, the firm sees substantial mispricing.
“Nabors remains significantly mispriced below 2x cash flow”
Key risks
- An unexpected global recession could bring oil prices back toward $50 per barrel.
- International rig deployments and repricing of older contracts could lag expectations.
- Cash generation from the Saudi Aramco joint venture and thermal-energy investments may disappoint.