Goldman Sachs Positive on Oil Service Names (HAL) (SLB) (NBR) (CJES) (OII)

January 16, 2014 2:52 PM EST Send to a Friend
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Goldman Sachs on Thursday released as positive research report on oil service stocks. In the view of analyst Waqar Syed, negative investor sentiment creates positive oil services setup.

"4Q earnings season kicks off on Friday, January 17, with stocks reflecting negative investor sentiment across the oil services. Key investor concerns include: (1) the US refining network may not be able to process incremental light sweet crude produced in the US, resulting in WTI price declines and E&P activity cuts; (2) EPS estimates for large caps may be too high, and will need to be revised lower; and (3) Global/US E&P spending forecasts embedded in estimates may be too optimistic and will need to come down," said Syed.

"We take a different position on some of these concerns: (1) WTI saturation: We consider WTI saturation unlikely in 2014 and believe solutions exist to push it to the 2017+ time frame; (2) Large-cap EPS estimates: We consider consensus 2014 EPS estimates for Buy-rated HAL/SLB to be reasonable (some tweaking always occurs following management guidance). While expectations for Brazil/Mexico may turn out to be too high, lower-margin revenues from LAM could be replaced by above-expectation revenues from the higher-margin Middle East. In a nutshell, a negative revenue surprise in 2014 may be offset somewhat by a positive margin surprise; (3) Capex debate: Investor views vary from budget increase of 0%-3% to 10%. We forecast mid-single digit increases, with an upward bias to high-single digits. But companies with exposure to horizontal completions in the US land, and with high GOM and Middle East exposure, should see revenue growth at the upper end," he added.

Goldman recommends owning Halliburton Company (NYSE: HAL) and Schlumberger Limited (NYSE: SLB) into earnings. Nabors Industries Ltd. (NYSE: NBR), RPC Inc. (NYSE: RES), C&J Energy Services, Inc. (NYSE: CJES), Basic Energy Services, Inc. (NYSE: BAS), Pioneer Energy Services Corp. (NYSE: PES), and Oceaneering International, Inc. (NYSE: OII) were also mentioned in the report, among others.

For an analyst ratings summary and ratings history on Atwood Oceanics click here. For more ratings news on Atwood Oceanics click here.

Shares of Atwood Oceanics closed at $50.97 yesterday.


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