Bottom Seen in Oilfield Services Demand - Evercore ISI (PES) (NBR) (HP) (PDS)

Evercore ISI analyst, James West, is calling a bottom in Oilfield Services demand.

The analyst notes Pioneer Energy Services (NYSE: PES) disclosed that its month-to-date utilization for its well servicing rigs was 40%, up 300 bps from this time last month. The increase is consistent with conference call commentary from the other well servicing companies with one noting that while revenues in April were lower than in March, they are up slightly in May and expect another $2-$3 million increase in revenues in June (equating to a high-single digit sequential increase). The analyst sees this uptick as a sign that the bottom is imminent for broader U.S. activity levels.

"We view the uptick as a sign that the bottom is imminent for broader U.S. activity levels," he said.

Uncertainty in the recent rally and a tepidness to spend any discretionary capital have driven decisions to avoid maintenance but mechanical failures are a reminder of the dangers of deferring maintenance expenditures, particularly in production infrastructure. The analyst considers production services a leading indicator of a broader recovery as the large backlog of well maintenance inventory provides operators with a variety of capital-efficient opportunities to stem production declines.

Related Stocks:

Helmerich Payne (NYSE: HP)
Nabors Industries (NYSE: NBR)
Precision Drilling (NYSE: PDS)

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