Massive Surge: Will Nabors Industries Sustain Its 118% Climb?

Overview of Nabors Industries Ltd.

Nabors Industries Ltd. (NBR) stands as a prominent provider of land-based drilling services, offering advanced rigs, related technologies, automation solutions, and directional drilling expertise to oil and gas companies worldwide. The company’s revenue model is built on day-rate contracts and comprehensive drilling services, enabling exploration and production firms to operate wells with greater efficiency, safety, and cost control. Nabors’ equipment and technological offerings are integral to the upstream segment of the energy industry, supporting global energy supply and security.

Recent Stock Performance

In the past half-year, Nabors’ stock price has soared by 117.9%, outpacing the Oil and Gas - Drilling sub-industry (up 64.4%) and the broader Oil and Energy sector (up 22.9%). This remarkable growth highlights Nabors’ strong performance relative to its peers.

What’s Driving Nabors’ Rally?

Following this impressive rally, investor interest in Nabors has intensified. The key questions now are: What factors are fueling this surge, and does the stock have further upside potential? Let’s examine the main growth catalysts, underlying fundamentals, and possible risks to determine whether the momentum can persist or if caution is warranted at current levels.

6-Month Price Performance Comparison

Source: Zacks Investment Research

Key Growth Drivers for Nabors

• Major Debt Reduction and Improved Financial Health: Nabors has significantly strengthened its balance sheet, reducing net debt by about $554 million since the end of 2024—the lowest level since 2005. This was accomplished through the sale of Quail Tools, targeted debt buybacks, and refinancing that extended debt maturities, lowering financial risk.
• Operational Gains in the Lower 48: Despite industry headwinds, Nabors has increased its rig count in the Lower 48, finishing Q4 2025 with 62 rigs and recently reaching 66. This expansion, driven by contracts with major operators in the Permian, Eagle Ford, and Haynesville basins, demonstrates the competitiveness of Nabors’ high-specification fleet.
• Clear International Growth Path: Nabors anticipates adding around 10 net rigs in 2026, including new builds and reactivations in Saudi Arabia, Argentina, and Mexico. These projects, secured by multi-year agreements with national oil companies, provide predictable future revenue and EBITDA, helping to buffer against volatility in other regions.
• Successful Parker Wellbore Integration: The integration of Parker Wellbore assets has exceeded expectations, with annualized synergies reaching $63 million—surpassing the initial $60 million goal. Nabors is on track to generate at least $70 million in EBITDA from these operations in 2026, reflecting strong execution and value creation from strategic acquisitions.

Potential Challenges for Nabors

• Declining Revenue and Profit Margins: In Q4 2025, Nabors’ operating revenue dropped to $798 million from $818 million in the previous quarter, primarily due to the sale of Quail Tools and market pressures. Adjusted EBITDA also fell to $222 million from $236 million, indicating challenges in maintaining profitability.
• Ongoing Cash Outflows from SANAD Joint Venture: The SANAD partnership in Saudi Arabia continues to consume significant cash, with expectations of $100–$120 million in adjusted free cash flow outflows for 2026. This ongoing liquidity drain offsets positive cash generation elsewhere and slows debt reduction efforts.
• Margin Compression in Lower 48 Operations: Despite an increase in rig activity, Nabors is experiencing shrinking margins in its Lower 48 drilling business. The company forecasts a daily adjusted gross margin of about $13,200 for Q1 2026, down from $13,303 in Q4 2025, suggesting pricing or cost pressures persist.
• Reliance on a Single International Partner: Much of Nabors’ international growth hinges on its SANAD joint venture with Saudi Aramco. This concentration poses a risk—any changes in Aramco’s drilling plans, budgets, or contract renewals (such as the recent non-renewal of three low-margin rigs) could significantly impact Nabors’ financial outlook.

Outlook: Should Investors Buy, Hold, or Wait?

Nabors has made substantial progress in reducing debt and improving its financial position, while expanding its presence in the Lower 48 and building a robust international growth pipeline. The company has also delivered on synergy targets from recent acquisitions.

However, recent financial results show declining revenues and EBITDA, ongoing cash outflows from the SANAD joint venture, margin pressures, and a heavy reliance on a single international partner. These factors introduce notable risks.

Given the mix of strengths and challenges, investors may want to adopt a cautious stance—holding the stock and waiting for a more attractive entry point could be a prudent strategy before increasing exposure to this Zacks Rank #3 (Hold) company.

Alternative Energy Sector Picks

For those seeking other opportunities in the energy sector, consider these higher-ranked stocks:

• TechnipFMC plc (FTI) – Zacks Rank #1 (Strong Buy): Valued at $26.16 billion, TechnipFMC is a global leader in energy technology, specializing in advanced subsea and surface solutions that help oil and gas producers operate more efficiently and support the shift toward sustainable energy.
• USA Compression Partners (USAC) – Zacks Rank #2 (Buy): With a market cap of $3.91 billion, this company provides natural gas compression services across the U.S., focusing on optimizing customers’ natural gas infrastructure.
• Oceaneering International, Inc. (OII) – Zacks Rank #2 (Buy): Valued at $3.86 billion, Oceaneering delivers engineered services and products to the offshore energy, aerospace, and defense sectors, with expertise in underwater robotics and subsea engineering for oil and gas exploration.

See the full list of Zacks #1 Rank stocks here.

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Additional Resources

• For the latest stock recommendations from Zacks Investment Research, download the 7 Best Stocks for the Next 30 Days.
• Nabors Industries Ltd. (NBR): Free Stock Analysis Report
• TechnipFMC plc (FTI): Free Stock Analysis Report
• Oceaneering International, Inc. (OII): Free Stock Analysis Report
• USA Compression Partners, LP (USAC): Free Stock Analysis Report

Original article published by Zacks Investment Research.

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