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Additional Upside For Helmerich And Payne (HP) And Patterson (PTEN); Energy Expert Identifies His Oil Services Stock Ratings In An Exclusive Interview

67 WALL STREET, New York - August 18, 2011 - The Wall Street Transcript has just published its 2011 Global Energy Review offering a timely review of the sector to serious investors and industry executives. This exclusive feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online. Topics covered: 2011 Global Energy Review Companies include: Exxon (XOM); PetroChina (PTR); Petrobras (PBR); BHP (BHP); Chevron (CVX); Shell (RDS-A); and many more. In the following brief excerpt from the 2011 Global Energy Review, interviewees discuss the outlook for the sector and for investors. Scott Gruber, CFA, is a Senior Research Analyst for Sanford C. Bernstein & Co., LLC, and he covers U.S. oil services. He joined Bernstein in 2004 as a Research Associate on the energy team before taking on the primary coverage of oil services in 2009. Mr. Gruber was voted the Best Up and Comer Analyst within his sector in Institutional Investor's All-America Research Team poll in 2010. In 2003, he graduated with honors from the economics department at Princeton University, where he minored in environmental studies. TWST: Please start with a brief overview of your coverage universe. Mr. Gruber: We cover the large-cap oil services companies: Schlumberger (SLB), Halliburton (HAL), Baker Hughes (BHI), Weatherford (WFT). We also cover the land and the offshore drillers. TWST: What is your overall sentiment on the space right now? Mr. Gruber: I'm still bullish, despite the macro risks. I'm generally a believer that the economic recovery continues, albeit at a moderating pace at least near term. But fundamentally I don't foresee crude prices falling below the marginal cost of supply, which we believe is around $85 to $90 a barrel. And if that is the case, the revenue opportunity for the oil services companies continues to grow, both near term and over the medium term. So I remain bullish, even given what some view as rising macroeconomic risks. TWST: What are your favorite names right now? Mr. Gruber: We really like Baker Hughes. The company is, I think, in the early innings of reaping the benefits of buying one of the largest pressure-pumping providers in BJ Services. They purchased BJ back in late 2009. They took some time to integrate BJ due to BJ having assets in the Gulf of Mexico that had to be divested, so they only brought BJ under their umbrella in the third quarter of 2010. I think there are still some great revenue synergies and market share gains that could be gleaned by putting together Baker's drilling suite of products and services with BJ's pumping services. They've also executed a reorganization of the management structure. They moved away from a product-line structure and toward a geo market structure, so they now have geo market heads that are selling the full product suite and acting as liaisons with customers to execute more complex multiservice packages. It's a much more efficient, much more customer-friendly approach. This should yield market share gains, both domestically and abroad. So I really like Baker Hughes amongst the large-cap services.When you look within the land drillers, who are obviously benefiting from the expansion in onshore drilling activities in North America, one of the names that I think has flown under the radar is Nabors (NBR). Helmerich And Payne (HP) and Patterson (PTEN) are the two high-flying stocks, and although they have performed very well, we still see additional upside because I think expectations are too low. Nabors has struggled a bit on a relative basis, because they have international exposure. They're not a pure play on North American drilling. They are actually the largest international driller. But their biggest customer abroad is Saudi Aramco, and with the Saudis going back to work to expand their oil production capacity to make up for the lost Libyan volume, as well as to expand their domestic gas production because their domestic gas demand is surging right now, Nabors is going to be the primary beneficiary on the drilling side. They're also putting rigs to work in Iraq. So right now they have already contracted about a 15% expansion pending in the international activity. TWST: You discussed Baker Hughes and its BJ acquisition. What are your thoughts on Ensco's acquisition of Pride International? Is it a good buy and strategic fit? Mr. Gruber: It's definitely a very good strategic move. They certainly paid a healthy premium for Pride. But ultimately they now have a premium suite of assets on the floating rig side of the business, between their new build semisubmersible program now combined with the deepwater drill ships Pride has recently constructed. There are still a few left to be delivered. They have one of the newest high-spec deepwater fleets. They have limited exposure to the older generation semisubmersibles - what we call the midwater rigs - and the midwater is going to be a market that simply lags the broader offshore market. So I think they're less exposed to one of the lagging markets, and they've done a much better job at maintaining the operational fitness of their jackups, which I think is a huge relative positive for them versus some of their peers, who just haven't invested sufficiently in their jackups. TWST: The deal also added some presence in overseas markets such as Brazil, considered a fairly high-growth market. Mr. Gruber: Yes. They penetrated Brazil. They penetrated the West African deepwater market as well. So they definitely expanded their deepwater footprint, which was previously confined to the Gulf of Mexico, and now they're a global deepwater player. Plus, Pride was simply an inefficient operator, and they are going to glean tremendous cost synergies as they bring them under the Ensco (ESV) umbrella. I think management's guidance on cost synergies is overly conservative. The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This exclusive issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online . The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations. For Information on subscribing to The Wall Street Transcript, please call 800/246-7673