Nabors Knocked by Earnings Warning

The drilling contractor notes a shortfall in its business with North American gas producers

Nabors Industries (NBR) warned on Jan. 3 that it will have to announce lower earnings than expected, as the Bermuda incorporated drilling rig contractor's business slows in the gas markets.

Nabors estimates its fourth quarter earnings to be in the range of 95 cents to $1.00 per diluted share. The mean analyst estimate for the quarter had been $1.11 per share, according to the San Francisco research firm StarMine, which aggregates data from Thomson Financial.

The company's full year 2006 earnings estimate will be between $3.53 and $3.58 per diluted share, compared to the mean of $3.71 per share according to StarMine.

"A lower level of activity in our North American directed gas markets is the primary factor leading us to reduce our expectations," said CEO Gene Isenberg in a press release.

The shortfall in operating rigs was equally split between Nabors' U.S. Lower 48 and Canadian operations, with each operating 13 fewer rigs.

After the news investors sold Nabors' stock 5.8% to $28.06 per share in early afternoon trading on the New York Stock Exchange.

Standard & Poor's equity analyst Stewart Glickman slashed earnings estimates for the fourth quarter and 2007, bringing a 12-month target price down $2 to $39 per share. "We have reduced our expectations for dayrate and margin growth in the Lower 48 and in Canada, but we still view the International segment as likely to generate strong growth in 2007," Glickman explained in a research note. (S&P, like, is owned by The McGraw-Hill Companies.)

The Nabors companies own and operate around 600 land drilling and 800 land workover and well-servicing rigs in North America. Offshore, Nabors operates 46 platform rigs, 22 jack-up units and 5 barge rigs in the United States and many markets abroad.

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