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Jefferies on Oil Services & Equipment: Cutting Onshore Estimates And Targets For Slower Rig Count Growth In 2012

October 11, 2011 8:03 AM EDT
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Jefferies on Oil Services & Equipment: Cutting Onshore Estimates And Targets For Slower Rig Count Growth In 2012

Jefferies analyst said, "Although the market is discounting a more severe decline in the U.S. land rig count, we believe that 2012 is shaping up to be more like the 2007 slowdown than the 2009 collapse as larger operators remain focused on drilling out their shale acreage. That said, we are cutting estimates 30-50% for land drillers/well service companies to account for lower pricing and margin expectations in a limited growth environment next year."

"Maintaining Ratings But More Favorable Risk/Reward Found Elsewhere - Although we believe the offshore drillers offer a more compelling risk/reward opportunity and that land drillers will have difficulty stabilizing until some visibility can be garnered on oil prices and E&P budgets, we are maintaining our Buys at this point as we believe the group is oversold relative to fundamentals. By our est, we believe the mkt is currently pricing in an approx. 400-500+ rig decline in the U.S. rig count, a scenario that we believe is unlikely to unfold unless credit and capital mkts access is cut off for E&Ps like it was in 2009."

Jefferies maintains a Hold on Basic Energy (NYSE: BAS), but slashes PT from $39 to $18.

Jefferies maintains a Buy on Key Energy Services (NYSE: KEG), but slashes PT from $23 to $12.50.

Jefferies maintains a Buy on Nabors (NYSE: NBR), but slashes PT from $38 to $22.

Jefferies maintains a Buy on Pioneer Drilling (NYSE: PDC), but slashes PT from $19 to $10.50.

Jefferies maintains a Buy on Patterson-UTI Energy (NYSE: PTEN), but slashes PT from $42 to $25.

Jefferies maintains a Buy on Union Drilling, Inc. (Nasdaq: UDRL), but slashes PT from $16.50 to $8.


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