Fitch Lowers Nabors Rating Outlook To Negative
Fitch Ratings has lowered its rating outlook on Nabors Industries Inc. to negative from stable, citing the oil driller’s long-term trend of declining market share in the US and low utilisation on older equipment.
The credit rater also noted the Bermuda-based company is poised to record a lower average US rig count this year and faces risks to the rig count from the transition to pad drilling and other higher efficiency operations, leading to lower earnings before interest, taxes, depreciation and amortization expectations for the year.
Oil-field services have been grappling with a slowdown in North American activity along with stiff competition for services such as pressure pumping used in hydraulic fracturing that have strained margins.
Fitch affirmed the oil-and-gas drilling contractor’s issuer default rating at triple-B.
The current rating reflects Nabors’s leverage, free cash flow and capital expenditure profile, and position as a major onshore rig operator in North America and internationally, Fitch said. It noted that Nabors has adequate liquidity and an extended maturity profile.
Nabors has long been dogged by criticism over its executive compensation. Earlier this month, shareholders again rebuked the driller’s leadership and executive pay, with a majority of voters rejecting its compensation plan and opposing the re-election of two directors at its recent annual meeting.
In April, Nabors struck a “standstill” agreement with its largest shareholder, Pamplona Capital Management LLP, when it agreed to appoint a director, Howard Wolf, recommended by the investor. Nabors also agreed to nominate a second director next year who would be approved by Mr. Wolf. In exchange, Pamplona agreed to vote its holdings –8.4 percent of Nabors’ shares — in favour of each director nominated by the board, against shareholder proposals not approved by the board, and in line with a majority of the board’s independent directors on other matters.
Increasing uncertainty around shareholder activism and corporate governance could increase the risk of a change in financial policy such as an increase in debt levels, share repurchases, or dividends, according to Fitch.
Nabors Industries Ltd., founded in 1968 as Anglo Energy, Ltd., and currently based in Bermuda with its operational headquarters in Texas, is an S&P 500 oil, natural gas and geothermal drilling contractor operating on land throughout the Americas, the Middle East, the Far East, and Africa.
