Large Companies Servicing U.S. Gulf of Mexico Oil Drilling Experience Good Sequential Growth: an Expert Analyst Discusses This Trend and Others Driving Upside for Oil Equipment and Service Providers

Wall Street Transcript

67 WALL STREET, New York - February 25, 2013 - The Wall Street Transcript has just published its Oil & Gas: Drilling Equipment and Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Capital Expenditures and Consolidation Activity - Frontier Exploration and Development - Shale Drilling Capital Expenditures - Oil Price Expectations - Shale Drilling Dynamics - Shale, Offshore and Deepwater Drilling - Oil and Gas Price Divergence - Offshore Deepwater Oil Discoveries

Companies include: Schlumberger Limited (SLB), Halliburton Company (HAL), Baker Hughes Inc. (BHI), Weatherford International Ltd. (WFT), Cameron International Corporat (CAM), Noble Corp. (NE), Hornbeck Offshore Services, In (HOS), Lufkin Industries Inc. (LUFK) and many more.

In the following excerpt from the Oil & Gas: Drilling Equipment and Services Report, an expert analyst discusses the outlook for the sector for investors:

TWST: You talked about those four themes that feed into your capital expenditure thesis. Which ones are you focusing on heaviest?

Mr. West: The one that's probably most controversial is the continued growth in activity in North America. Certainly there is a great debate ongoing in the market whether the North American business will recover from the downward momentum we had in 2012. I think a lot of investors are kind of fighting that idea.

The area of most controversy, quite frankly, is whether North America is really going to recover. The companies that are on record say they will see a recovery. Schlumberger (SLB), for example, suggested 100 to 150 rigs could be added to the rig count in the first quarter. Halliburton (HAL) said some 100 rigs could be added during the first quarter. Baker Hughes (BHI) has suggested flattish conditions for now, but that the rig count will start to rise as we get into the second quarter. The industry debate is more around timing whereas the investor debate seems to be whether it's going to happen at all.

I can tell you that permit activity is suggesting an increase; permits are up about 7% in January versus December, which is usually a good lead indicator of an increase in overall activity levels. Several of the companies we've spoken to in recent weeks have indicated that while December and late November were pretty miserable for the industry in North America, January was very strong and February is getting even better. Of course, we have good seasonal effects in Canada, which is always very strong in the first quarter, but U.S. completion activity is also rising.

TWST: Which segment is the best way to get exposure to the sector this year, and why?

Mr. West: We think the...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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