Nabors to Form Onshore Drilling Venture With Saudis
(Bloomberg) -- Nabors Industries Ltd., the world's biggest operator of onshore oil rigs, will form a joint drilling venture with Saudi Arabia's national oil company, Saudi Aramco, cementing its presence in one of the industry's largest markets.
The two companies will be equal partners in the venture to own, manage and operate oil and natural gas rigs in Saudi Arabia, Houston-based Nabors said in a statement Monday. Saudi Aramco and Nabors will each contribute land rigs in the first years of operation and will commit capital toward future rigs to be manufactured in Saudi Arabia, according to the statement.
Businesses that drill wells for oil explorers have been among the hardest hit over the last two years as a global petroleum glut more than halved prices. The Nabors venture was announced on the day that General Electric Co. and Baker Hughes Inc. said they would combinedrilling operations into a new service giant with $32 billion in annual revenue in hopes of weathering the downturn.
The Aramco venture “solidifies Nabors' presence in what is arguably the world's most important international land rig market," Tudor Pickering Holt & Co. analysts led by Dave Pursell wrote in a note to clients Monday. With the Saudis focused on building up their domestic oil industry, “this agreement is a win-win for both parties," the analysts said.
The venture will begin operations in the second quarter of 2017, the companies said. Nabors slipped 1.2 percent to $11.81 at 10:43 a.m. in New York trading. Before today, the stock had gained 19 percent for the year.
For Saudi Arabia, whose economy has faltered during the crude slump, the deal “supports the wider development and localization of industries such as rig and rig equipment manufacturing and casting and forging," according to the company statement.
To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Susan Warren
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