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Nabors Industries Ltd. (NBR): 2012 Brought a Perfect Storm for This Oil Services Company

Nabors has gone to great lengths to rein in its capital expenditures. Capex for 2012 was $700 million less than in 2012, and Nabors CEO Anthony Petrello has made it clear that management will be very prudent with its capital program going forward. While there have certainly been some snafus from Nabors’ management, one thing it should be commended for is the building of the PACE-X rig. It’s been an industry darling, as well as one of the more successful parts of the Nabors rig fleet. These new rigs, which are much better suited for the popular pad drilling technique, have a utilization rate of 92%, the highest in Nabors’ fleet.

What a Fool believes
Nabors management has done a decent job of navigating this company through a rather difficult macroeconomic situation and coming out with a strong financial position. The company seems to have the pulse of unconventional shale drilling with its PACE-X rig and its team effort with Caterpillar Inc. (NYSE:CAT) to design pumping systems that will be able to run on a multitude of fuels. This could come in handy, especially in regions like the Bakken, which is flaring off more than one-third of its natural gas.

Nabors still has some things to be concerned about going forward. The company plans to cut its international capital expenditures by 60%, which could come back to haunt it. A recent report from Barclays shows that capital expenditures for oil exploration and production will remain flat in North America, while the international market plans to expand by more 9%. That sets Nabors in stark contrast with one of its major competitors, National-Oilwell Varco, Inc. (NYSE:NOV) , 94% of whose rig backlog is destined for international markets. So it appears that Nabors hopes to gain stronger revenue through improved market share in the U.S. (NYSE:SLCA), a much tougher path to chart.

The article 2012 Brought a Perfect Storm for This Oil Services Company originally appeared on

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at under the handle TMFDirtyBird, on Google +, or on Twitter@TylerCroweFool.The Motley Fool recommends Halliburton and National Oilwell Varco.

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