Nabors says profit to miss Wall Street, adds "poison pill"

Tue Jul 17, 2012 4:55pm EDT

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(Reuters) - Nabors Industries Ltd (NBR.N) said quarterly profits would fall short of estimates, hurt by tough competition and weaker demand for shale gas services, but it also adopted provisions for a potential takeover battle.

Its shares rose 6.6 percent.

Nabors, the world's biggest land rig owner, authorized a shareholder rights plan, or 'poison pill,' giving shareholders rights to buy new preferred stock. It also adopted a resignation policy for directors who do not win majority votes.

It presented the plan as ensuring equal treatment of all investors if there were an effort to take control of the company. But UBS analyst Angie Sedita said: "We would contend there is not an obvious buyer for Nabors if there was a potential change of control situation."

Yet Nabors shares, which had fallen 29 percent so far this year through Monday's close, jumped 6.6 percent to $14.07.

Nabors said weaker demand and rising costs for the pressure pumping systems used in hydraulic fracturing, or "fracking," would push second-quarter earnings below Wall Street forecasts.

A third of the 23 analysts who follow Nabors had already revised estimates downward for the quarter in the past week, by 10 percent on average, according to Thomson Reuters StarMine.

The problems Nabors cited have already been well flagged to the market by the industry as a whole. The company said it still had plenty of cash coming in despite a seasonal decrease of $80 million due to thawing roads in Alaska and Canada.

"Our operating cash flow remains healthy at nearly $500 million for the seasonally low second quarter and nearly $1.1 billion for the first half," Nabors Chief Executive Tony Petrello said in a statement.

The consensus net profit estimate for the second quarter had been 42 cents per share, excluding one-time items, according to Thomson Reuters I/B/E/S.

Other oilfield service companies, such as Halliburton (HAL.N), have said the slowdown in natural gas drilling, weakening prices for liquids and shortages of guar gum were hurting profits.

"This is the latest sign that we have somebody else with problems," said Phil Weiss, analyst with Argus Research.

Nabors' earnings outside the United States were also hurt by higher costs in the Middle East and start-up delay of two rigs.

The company is also taking a $150 million "ceiling test charge" for the drop in the value of its portion of gas fields held by NFR Energy, its exploration and production joint venture with private equity firm First Reserve.

Other charges, including those related to a move to consolidate U.S. well service and pressure pumping operations, would add $150 million more in one-time costs for the quarter.

"This quarter's shortfall is disappointing, notwithstanding the progress we are making in streamlining and focusing the company's operations," Petrello said.

Since replacing Eugene Isenberg at the helm of Nabors last year, Petrello has moved to streamline operations at the company and is expected to sell its natural gas assets.

Nabors has drawn anger from its shareholders over Isenberg's compensation. The former CEO agreed to forgo a $100 million severance payment and stepped down as chairman last month.

(Reporting by Matt Daily in New York and Braden Reddall in San Francisco; editing by Jeffrey Benkoe, John Wallace, Sofina Mirza-Reid and Dan Grebler)

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