Uptick in Demand for Oil Services that Target Deepwater Frontier Regions

Wall Street Transcript

67 WALL STREET, New York - February 28, 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: Baker Hughes Inc. (BHI), Halliburton Company (HAL), Schlumberger Limited (SLB), Weatherford International Ltd. (WFT), Atwood Oceanics Inc. (ATW), Diamond Offshore Drilling Inc. (DO), Ensco International Inc. (ESV), Hercules Offshore, Inc. (HERO), Noble Corp. (NE), Rowan Companies Inc. (RDC), Transocean Ltd. (RIG), Helmerich & Payne Inc. (HP), Nabors Industries Ltd. (NBR), Patterson-UTI Energy Inc. (PTEN), Cameron International Corporat (CAM), Lufkin Industries Inc. (LUFK), National Oilwell Varco, Incorp (NOV), Oceaneering International, Inc (OII), Chesapeake Energy Corporation (CHK) 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 mentioned these stocks underperformed last year. What's your take on current valuations for the group?

Mr. Browne: I think valuations right now are still relatively low on a historical basis, especially names levered to North America. In contrast, we have also seen that investors have grown very comfortable with the outlook for not only the deepwater drilling names - such as Ensco, Transocean, Atwood - but also the subsea-levered equipment providers such as Cameron and NOV, and even Oceaneering, who reported earnings today.

In my opinion, investors have really embraced the whole deepwater drilling story, which in turn reflects confidence in sustained crude oil demand. The most prolific, new sources of oil are in the deepwater frontier regions and we are starting to see the huge uptick in demand for services that target those reserves.

In short, we've seen stock prices in the deepwater/subsea segments increase go up over the past two years or so. However, the large-cap diversified names have lagged and current stock prices do not fully reflect their exposure to the inflection in growth - especially deepwater rig count, which is forecast to grow ~12% per year over the next two years.

TWST: You're pretty comfortable with North America over the short to medium term?

Mr. Browne: North America is actually a very exciting story, one that the average investor may not be aware of. During the financial crisis, we started to see the development of unconventional fields and shale drilling. Chesapeake (CHK) was the most prolific independent E&P company targeting gas. If you look at the unconventional rig count since the financial crisis in 2008-2009, it has doubled since then...

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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