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Macquarie Initiates Coverage On Oil/Gas Industry

Eric Niederer

In Wednesday's morning summary, Macquarie analyst Walt Chancellor initiated coverage on a number of players in the "fiercely competitive" oil and gas industry.

The most notable of which are Halliburton (NYSE: HAL) and Schlumberger (NYSE: SLB).

Halliburton: Outperform, $72 price target
Chancellor believes that companies that drive value through efficiency and lowered cost on high-quality service will be in a position to capture profitable growth at a disproportionate level. Moreover, he anticipates Halliburton emerging as a "relative outperformer."

In the long-term, Chancellor anticipates built-in structural cost pressures and impediments to productivity will force NOCs and IOCs to "lean heavily" on large, integrated service companies, such as Halliburton.

For a more detailed view of Macquarie's position on Halliburton, see the full article on the initiation.

Schlumberger: Outperform, $119 price target
Despite performance that has lagged the OFS group year-to-date, Chancellor believes Schlumberger is "well positioned" to lock-in gains from U.S. land and will see a disproportionate benefit from the themes dominating oil field service in the coming years.

Looking to the long-term, Chancellor says the company's "unmatched international footprint" will help position the company to capture meaningful oil field service revenue from an increase in international unconventional activity/production.

Other Companies

  • Atwood Oceanics (NYSE: ATW): Neutral, $56 price target: Although Atwood is a proven "premium offshore player," Chancellor suggests caution relating to "the potential persistence of a deepwater downturn."
  • Basic Energy Services (NYSE: BAS): Neutral, $25 price target: Chancellor believes Basic Energy's current valuation does not adequately reflect the path to incremental value capture.
  • Parker Drilling (NYSE: PKD): Outperform, $8 price target: Looking forward, Chancellor says since the bar is set "rather low" for Parker Drilling, merely meeting its 2014 guidance could act as a catalysts to send the stock above his $8 price target.

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