Nabors Energy

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Nabors Industries/Anglo Energy was founded in 1968. In the early 1970s the company diversified into the chemicals, electronic components, banking, and replacement auto part industries. The company succeeded in these industries, however, with the rising oil prices in the early 1970s, Nabors Industries/Anglo Energy decided to enter the oilfield equipment and service industries, and sell off the other industries in which they had success. The decision to enter the oil industry was part to do with the rising oil prices, creating higher profit margins, something that would be attractive to any investor. However, with this industry it is too dependent on the oil prices, therefore when the oil prices had a steep decline in the early 1980s, Nabors…show more content…
Apparently Martin J. Whitman thought so, hiring Eugene Isenberg, to be the CEO of Nabors Industries in 1987. Before Isenberg, got to Nabors, he worked 13 years at Exon Corporation, a major oil company, so he had relevant experience in the field. He also was the chairman and principal shareholder of Genimar, a steel trading and manufacturing company; therefore he also had experience in leading a company. So, was Eugene Isenberg’s term of his contract appropriate for his initial contract? Before answering this question, lets take a look at the industry and other companies, including fortune 500 companies CEO related pay rates. At the time some of the leading CEOs were making in the 9 digital range of pay, a dramatic increase from what CEOs made in the early 1980s. The main reason for this can be attributed to an increase in use of stock options being used to pay the executives. A stock option is a privilege that gives the buyer the right, but not the obligation, a stock at an agreed-upon price. Some people think the linkage of stock options gives the incentives for the CEOs to increase earnings, therefore increasing the stock price. Now, lets visit that question I asked. Eugene’s initial terms of his contract was a base salary of $325,000, with an annual bonus payable only in excess of the hurdle rate with the bonus equal to 10% of the excess net cash flow of the company. He also…show more content…
So, Eugene Isenberg, discussed with its creditors a plan to swap the existing debt, for equity thereby relieving the company of its interest payments, which was good because it got rid of some of the short term debt, but also diluted some of the equity, the company viewed his actions positively. Nevertheless, the company still voluntarily entered bankruptcy again, this was mainly done to reduce the costs and reduce debt, of the other bankruptcy, but in exchange the company exchanged $111.5 million in obligations for 30 million shares. At the time, Anglo shares traded at $1.25 per share giving the company a market cap of $50 million. Also coming out of the bankruptcy Anglo Energy changed its name to Nabors Industries. Another thing that Eugene Isenberg started to do was to buy out some of the competitors. An example being, Nabors Industries purchasing W.R. Grace’s drilling business for $32.5 million for 167 rigs, which was a deal because of a new rig costing 2.5 million by itself, a cost savings move of 385 million dollars. Isenberg also did not allow any of the newly acquired rigs to idle, therefore he redeployed them into higher demand markets, such as, Yemen and Venezuela. By 1992, Nabors had expanded into a lot of the important international markets, and the company was in sound financial standings, having only $47 million of long-term

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