Revenue Growth and Free Cash Flow Opening for Integrated Oil Service Companies as a Result of Operations Investments Domestically and Internationally

Wall Street Transcript

67 WALL STREET, New York - February 26, 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), Baker Hughes Inc. (BHI), Halliburton Company (HAL), Weatherford International Ltd. (WFT), Diamond Offshore Drilling Inc. (DO), Ensco International Inc. (ESV), Noble Corp. (NE), Transocean Ltd. (RIG), Rowan Companies Inc. (RDC), Cameron International Corporat (CAM), FMC Technologies, Inc. (FTI), National Oilwell Varco, Incorp (NOV), Helmerich & Payne Inc. (HP), Nabors Industries Ltd. (NBR), Patterson-UTI Energy Inc. (PTEN), Petroleo Brasileiro (PBR) 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: Broadly speaking, what's your overall sentiment on the space right now?

Mr. Gruber: I'm bullish. I'm most bullish on the integrated service companies. I think that segment is poised to post the greatest outperformance in 2013. I'm generally positive across the remaining segments but believe that stock picking will be key within capital equipment, offshore drillers and land drillers.

TWST: What separates the integrated group for you?

Mr. Gruber: The integrated service companies fit a powerful investment theme, namely companies that have had their multiples and earnings performance weighed down by the weakness in North America following the collapse in gas prices about a year ago, but have very good exposure to the strength in spending within the international markets, particularly deepwater, the Middle East and Russia.

What I believe happens this year is that the North American drag ends and turns from significant headwind to a slight tailwind while growth continues at a very robust pace within many of the international markets.

In addition, the capital intensity of the integrated services' business lines is falling. They've made significant investments to expand operations in North America, particularly within pressure pumping. Internationally, they've made significant investments in infrastructure to support growing operations in Brazil, East and West Africa, Australia, etc. Now they're reaping the benefit of that investment, so their revenues are growing and their capital intensity is declining, and thus free cash flow is opening up. We saw Schlumberger announce a nice dividend increase. I think others, such as Halliburton and Baker Hughes, will follow suit...

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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