Shares of this energy-services firm look cheap, analysts say. By Lisa Dixon March 15, 2006 Nabors Industries, which provides land-drilling gear and services to oil and gas companies, has fattened up on increasing demand for its rigs. Earnings more than doubled last year as the company scored lucrative contracts for use of its equipment. But Nabors' stock, ever-sensitive to swings in energy prices, has suffered lately, sinking 19% since January. And worries of falling energy prices later this year aren't helping. That makes the shares, recently $67, look abnormally cheap, say analysts at investing newsletter Dow Theory Forecasts. Dow Theory analysts don't recommend going overboard with energy stocks, but they do think oil prices should remain strong as long as demand grows steadily and energy producers struggle to increase reserves. They recommend focusing on "best-of-breed" energy companies that are well-positioned in their markets and whose stocks are still attractively priced. Nabors is their favorite drilling stock. Nabors' size is an advantage. The largest land driller in the world, it owns nearly 600 land drilling rigs, plus 870 land-workover and well-servicing rigs and a fleet of offshore rigs. To take advantage of high demand, the company plans to roll out 100 additional rigs over the next couple of years and has already signed three-year contracts for 82 of them. The firm makes most of its money drilling in the U.S. and Canada, but it's also expanding its presence in such places as the Middle East and Africa. Analysts, on average, expect earnings to grow 55% in 2006, to $6.21 per share, according to Thomson First Call. Yet the stock (symbol NBR) trades at just 11 times that earnings estimate. Despite their ability to shoot the lights out when oil and gas prices are surging, energy-services stocks aren't for everyone -- share prices often collapse during lean times. For more information about Nabors and other service companies, see Big Energy's Enablers from the April issue of Kiplinger's Personal Finance.