NEW YORK (AP) -- Some oil service companies still look like good investments, even though oil prices are sinking and the petroleum industry is cutting back on production, a Bernstein Research analyst said Thursday.
Analyst Scott Gruber said Halliburton Co., which has a leading position in services such as deepwater drilling, well stimulation and shale development, will fare better than others. He upgraded Halliburton to "Outperform" from "Market Perform," telling investors to "buy quality when there's blood in the streets."
Halliburton shares closed Wednesday at $27.21, down 21 percent since the start of the year. In morning trading, the stock added 53 cents, less than 2 percent, to $27.73, while the broader markets declined.
The price of oil has dropped roughly 25 percent since May 1 and natural gas tumbled this year to the lowest level in 10 years. Those declines convinced may petroleum companies to pull their rigs and cut back on production.
Gruber said those projects will eventually ramp back up. Meanwhile, the industry is expected to keep drilling offshore as long as oil prices stay close to where they are.
"The deepwater service market is expected to double from 2011-14 while gas drilling is surging in the Middle East and Asia," he said.
Gruber also cut his rating on Weatherford International Ltd. to "Market Perform" from "Outperform," citing to relatively high debt and unresolved federal investigation under the Foreign Corrupt Practices Act.
"The appetite for highly levered, low-return companies with a recent history of accounting mishaps is low," he said.
Weatherford, which closed Wednesday down 16 percent for the year, added 18 cents to $12.42 in morning trading Thursday.