A Wall Street Transcript Interview with James K. Wicklund, a Managing Director at Credit Suisse Group in the Investment Banking Division: Top Picks for the Oilfield Equipment and Services Sector as Major Oil Companies Shift Strategies
67 WALL STREET, New York - January 10, 2014 - 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, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Oil Price Expectations - Shale, Offshore and Deepwater Drilling - Unconventional Resources - Bundled Oil and Gas Services - Oil and Gas Transportation Services - Dividend Yields for Energy Investors - Domestic Crude Prices - International Energy Opportunities
Companies include: Halliburton Company (HAL), Schlumberger Limited (SLB), Transocean Ltd. (RIG), Icahn Enterprises, L.P. (IEP), Weatherford International Ltd. (WFT), National Oilwell Varco, Incorp (NOV), FMC Technologies, Inc. (FTI), Cameron International Corporat (CAM), Baker Hughes Inc. (BHI) and many others.
In the following excerpt from the Oil & Gas: Drilling Equipment and Services Report, an expert analyst discusses the outlook for the sector and his top picks for 2014 for investors:
TWST: From a big-picture perspective, how should investors approach investing in oilfield equipment and services differently than they should approach investing in the oil companies directly?
Mr. Wicklund: The good part about oilfield services is that they are tied more to the volume of oil and gas produced rather than directly tied to the price, and so as long as activity is maintained, regardless of the profitability by the E&P industry, the oilfield service industry benefits. Now, I understand that historically there has been a correlation between commodity prices and activity. But starting about six years ago, with the advent of the shale revolution, the commitments being made onshore U.S. by major oil companies and major independent oil companies are different structurally than we've seen in the past. These are long-term, extremely service-intensive efforts of development.
TWST: Which company do you consider to be the bellwether for your group, and what is happening for that company that can be considered indicators of where the sector could be headed in 2014?
Mr. Wicklund: The bellwether in my industry right now is Halliburton (HAL). It's not the largest - Schlumberger (SLB) is the largest - but it is proven to be the most efficient in terms of generating return on invested capital, of which I'm a big fan. They are the second-largest oilfield services company. They are well balanced between U.S. activity and international. And so they really are the bellwether.
You've got the Eastern Hemisphere operating at record revenue and income levels for most of my industry, and so the one market that is trading well below any long-term normalized level is the U.S. completions market. Halliburton is the largest player in the U.S. completions market, so it's clearly a bellwether for the domestic business, and it's basically to a large extent tied with Schlumberger around the rest of the world. And so this is a company that recently levered up its balance sheet to take advantage of extended low interest rates and buy back $3.3 billion worth of stock, which is accretive to earnings...
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.
