FBR Capital: Black Gold Rush Volume II: U.S. Land Boom to Drive Artificial Lift Higher
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Rating Summary:
17 Buy, 19 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 17 | New: 5
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FBR Capital: Black Gold Rush Volume II: U.S. Land Boom to Drive Artificial Lift Higher
FBR analyst says, "In the first volume of our “Black Gold Rush” series, we explored the impact of the growing abundance of shale gas and liquids, continued pursuit of oil, and increasingly complex environments and rapid escalation of service intensity on the U.S. hydraulic fracturing market. Continuing on this theme, this piece explores the implications of the North American land boom in the context of the U.S. artificial lift business. We estimate the lag between drilling and lift sales is approximately six to nine months, and, given the recent increase in the U.S. land oil rig count, we believe we have yet to see an inflection point in the U.S. artificial lift business."
"The call. Among the oil service names in our coverage universe, Weatherford International Ltd. (NYSE: WFT)(Outperform) offers the greatest exposure to the North American artificial lift business. U.S. artificial lift accounts for approximately 7% of Weatherford’s overall revenue. Expanding on this theme, Weatherford is also the largest provider of rod lift, with more than 42% global rod lift market share. Based on our current growth estimates for U.S. land oil rig count, and a six- to nine-month lag between drilling and lift sales, we estimate $0.06 and $0.15 in EPS upside from lift in 2011 and 2012, respectively. Other companies with leverage to U.S. rod lift include Lufkin Industries (Nasdaq: LUFK)(Not Rated) and Dover Corporation (NYSE: DOV)(Not Rated)."
"We look for M&A to heat up - We have already seen a pick-up in M&A activity in artificial lift. Dover Corporation purchased Harbison-Fischer in January, while John Wood Group was scooped up by General Electric (NYSE: GE)(Not Rated) after a bidding war in February. We understand Halliburton Company (NYSE: HAL)(Outperform), which does not currently have any exposure to artificial lift, was among those companies interested in Wood Group. Accordingly, we would not be surprised to see Halliburton look for other opportunities to round out its product offering with artificial lift."
FBR analyst says, "In the first volume of our “Black Gold Rush” series, we explored the impact of the growing abundance of shale gas and liquids, continued pursuit of oil, and increasingly complex environments and rapid escalation of service intensity on the U.S. hydraulic fracturing market. Continuing on this theme, this piece explores the implications of the North American land boom in the context of the U.S. artificial lift business. We estimate the lag between drilling and lift sales is approximately six to nine months, and, given the recent increase in the U.S. land oil rig count, we believe we have yet to see an inflection point in the U.S. artificial lift business."
"The call. Among the oil service names in our coverage universe, Weatherford International Ltd. (NYSE: WFT)(Outperform) offers the greatest exposure to the North American artificial lift business. U.S. artificial lift accounts for approximately 7% of Weatherford’s overall revenue. Expanding on this theme, Weatherford is also the largest provider of rod lift, with more than 42% global rod lift market share. Based on our current growth estimates for U.S. land oil rig count, and a six- to nine-month lag between drilling and lift sales, we estimate $0.06 and $0.15 in EPS upside from lift in 2011 and 2012, respectively. Other companies with leverage to U.S. rod lift include Lufkin Industries (Nasdaq: LUFK)(Not Rated) and Dover Corporation (NYSE: DOV)(Not Rated)."
"We look for M&A to heat up - We have already seen a pick-up in M&A activity in artificial lift. Dover Corporation purchased Harbison-Fischer in January, while John Wood Group was scooped up by General Electric (NYSE: GE)(Not Rated) after a bidding war in February. We understand Halliburton Company (NYSE: HAL)(Outperform), which does not currently have any exposure to artificial lift, was among those companies interested in Wood Group. Accordingly, we would not be surprised to see Halliburton look for other opportunities to round out its product offering with artificial lift."
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