Will Nabors Drilling be next to seek bankruptcy protection?


Speculation about which oil and gas company will be next to file bankruptcy now includes Nabors Drilling, the Houston based company with major operations in Oklahoma.

Stock advisor Motley Fool, in a report this week included Nabors among three possible majors to head to bankruptcy court.

Here’s how Motley Fool reported its analysis of why Nabors might be forced into the action.

“Oilfield-service company Nabors Industry is struggling with the drilling slowdown that followed this year’s crash in crude prices. With oil companies not drilling too many new wells these days, the company had to idle a significant portion of its drilling fleet. That’s impacting its ability to generate cash to repay debt. On a positive note, the company repurchased $187 million of debt during the second quarter, cutting its remaining near-term maturities to $139 million for next year and $154 million for 2021.

However, instead of bouncing back during the second half, oil market conditions have weakened in recent weeks because COVID-19 cases continue to spike worldwide. Because of that, analysts are growing increasingly worried about Nabor’s ability to weather this storm.

For example, Goldman Sachs recently downgraded the stock to sell because of its “limited effective liquidity,” significant debt position,” and “a likelihood of breaching a net leverage ratio revolver covenant in early 2021.” Given that dire outlook, the company might not have any choice but to file for bankruptcy to restructure its debt and get some more breathing room.”

Nabors reported second quarter 2020 operating revenues of $534 million compared to $718 million in the first quarter of the year. The net loss was expected to be $152 million. At the time, the company had a 36% drop in its drilling rigs.

Source: Motley Fool