4 Oil Service Stocks to Buy as Rig Count Continues to Plunge

By Lee Jackson Published May 6, 8:25AM EDT

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It never fails, the minute that the game is called “officially over” on Wall Street, then you know it is time to buy. As oil broke above the $60 mark, very few of the voices that recently called for $20 a barrel prices had much to say. Throw in the fact that the U.S. horizontal oil rig count is down 53% from its peak to 530, and it is easy to see why prices have strengthened.

In a new report, SunTrust Robinson Humphrey concedes that its recent “range bound” call on oil might be in jeopardy, in part due to the plunging rig count. The analysts also stay with themes that make sense in the oil services world: well productivity and pressure pumping. Four stocks rated Buy at SunTrust fit nicely into these two themes: C&J Energy Services Ltd. (NASDAQ: CJES), Core Laboratories N.V. (NYSE: CLB), RPC Inc. (NYSE: RES) and U.S. Silica Holdings Inc. (NYSE: SLCA).

C&J Energy Services

This company is an independent provider of premium hydraulic fracturing, coiled tubing, wireline, pumpdown and other complementary oilfield services, with a focus on complex, technically demanding well completions. In addition to its suite of completion, stimulation and production enhancement services, the company manufactures, repairs and refurbishes equipment and provides parts and supplies for third-party companies in the energy services industry. Earlier this year C&J announced the purchase of Nabors Industries’ production services unit.

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The company fits nicely into the SunTrust pressure pumping theme and the company has been mentioned in takeover chatter from time to time. While having traded up nicely from the lows, that stock is still down almost 50% from highs printed last summer.

The SunTrust price target for the stock is $21, and the Thomson/First Call consensus price target is $17.38. Shares closed near that Tuesday at $17.30.

Core Laboratories

This leading provider of proprietary and patented reservoir description, production enhancement and reservoir management services used to optimize petroleum reservoir performance has over 70 offices in more than 50 countries, and it is located in every major oil-producing region in the world.

The stock has been cut in half over the past year and may be providing investors with a longer term time horizon and perhaps the best entry point in the past decade.

Core Lab investors are paid a solid 2.2% dividend. SunTrust has the price target set at $146. The consensus target is just $123.54, but shares closed Tuesday at $130.71.

RPC

RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest, Appalachian and Rocky Mountain regions, as well as in selected international markets.

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This is another stock that fits well in the SunTrust pressure pumping arena. The company posted revenue of $406.3 million in the most recent reporting period, though that fell short of Wall Street forecasts for $478.4 million.

RPC shareholders are paid a 1.26% dividend, which was recently cut. The SunTrust target price $19, and the consensus target is $15.92. Shares closed Tuesday at $15.83.

U.S. Silica

This company does not have the uber-high yield of some of its peers, but it is also considered one of the premier frac sand companies in the industry. It is a leading producer of commercial silica used in the oil and gas industry, and in a wide range of industrial applications. Over its 115-year history, U.S. Silica has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 260 products to the firm’s customers across all end markets.

The company posted solid earnings, but left Wall Street analysts with an outlook that, while not horribly negative considering the state of the current industry, did concede that this year will be challenging.

Shareholders are paid a 1.4% distribution. The SunTrust price target is $41, near the consensus target of $41.77. The stock closed Tuesday at $36.69.

ALSO READ: 5 Oil and Gas Stocks Analysts Want You to Buy

While oil could certainly become range bound at some point, the dire predictions of $20 a barrel sure seem to have missed the mark. With most people seeing $50 to $65 for the next two years, the oil services companies that help the most maximizing well production and yield could be the best stocks to buy.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.