Sector Wrap: Shares of oil services companies rise

Shares of oil services companies rise as analyst forecasts improvement

• By Sandy Shore, AP Energy Writer
• On 3:20 pm EDT, Thursday October 15, 2009

DENVER (AP) -- Shares of several natural gas and oil services companies rose Thursday after an analyst initiated coverage of the sector, saying he was cautiously optimistic that activity soon will improve.

The industry should be near the bottom of its downturn and demand for oilfield services will pick up, BMO Capital Markets analyst Alan Laws told clients in a research note.

"The North American oilfield services industry continues to be hampered by an oversupply of capacity and margins at break-even levels, but optimism is beginning to creep in that the worst could be over," he wrote.

The industry has suffered during the recession from low oil prices and diminishing consumer demand. Oil prices have risen for the past six days, buoyed by an improving stock market and the falling dollar.

Laws set a $30 per-share price target for Nabors Industries and rated it outperform; a $22 per-share price target for Patterson-UTI with an outperform rating; and a $15 per-share price target for Complete Production Services, with a market perform rating.

The analyst also set a $91 per-share price target for Schlumberger, with an outperform rating, and a $40 per-share price target for Halliburton with an outperform rating.

In a separate note, Citigroup Global Markets analyst Robin Shoemaker increased Schlumberger Ltd.'s target price to $80 from $65.72 and the rating to "buy/medium risk" from "hold."

The analyst retained Schlumberger's earnings per share estimate at $2.70 for 2009 and raised the 2010 estimate to $2.70 from $2.65.

Shoemaker said exploratory drilling could rebound in 2010 and 2011 if oil prices remain above $70 a barrel.

"We believe that Schlumberger's lagging performance in 2009 is potentially setting the stage for a stronger 2010 tied to resurgent international oilfield services markets," Shoemaker wrote in a note to clients.

In afternoon trading, shares of Nabors rose 86 cents, or 3.9 percent, to $22.89; Patterson-UTI, up 70 cents, or 4.2 percent, to $17.48; Schlumberger rose $2.68, or 4.1 percent, to $68.72; and Halliburton rose 59 cents, or 2 percent, to $29.78.

Complete Production gained 10 cents to $12.40.

Buzz up!