In a new report, the Deutsche Bank team pointed out that while overall industry enthusiasm remains somewhat tamped down, optimism around land rig utilization and pricing for alternating current or AC rigs seems high with both drillers and investors. We screened the Deutsche Bank list for the stocks rated Buy with the most upside to the posted price targets.
Schlumberger
This oilfield services behemoth rebounded smartly off the lows printed in January, but it has rolled over again as oil prices have weakened. Schlumberger Ltd. (NYSE: SLB) is the world’s leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide. Employing approximately 115,000 people representing over 140 nationalities and working in more than 85 countries, Schlumberger provides the industry’s widest range of products and services from exploration through production.
While the company’s operating income decreased 15.8% to $1.99 billion in the first quarter from $2.36 billion in the same period in 2014, most of the decline came from lower North American operations. That is a bright spot as global operations remained steady. The deterioration in income and margin resulted from the company’s poor showing in North American land activity. With drilling picking up, and domestic rigs expected to be added this year and next, the prospects for the company look outstanding.
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Schlumberger investors are paid a 2.38% dividend. The Deutsche Bank target price for the stock is $111. The Thomson/First Call consensus price target is lower at $101.19. Shares closed Monday at $83.49. Trading to the Deutsche Bank target would be a 42% gain.
Exterran
This is another oil field services stock with big potential upside. Exterran Holdings Inc. (NYSE: EXH) is a global market leader in full-service natural gas compression and a premier provider of operations, maintenance, service and equipment for oil and gas production, processing and transportation applications. Exterran serves customers across the energy spectrum, from producers to transporters to processors to storage owners. Headquartered in Houston, Exterran has more than 10,000 employees and operates in approximately 30 countries.
The company bought the compression assets from a division of Chesapeake Energy last year. The purchase of MidCon Compression allowed the company to offer expanded compression services across many of the top shales and basins in the United States.
Exterran investors are paid a 1.97% dividend. The Deutsche Bank price target is $47, and the consensus is set at $39.97. The stock closed Monday at $30.55. Trading to the Deutsche Bank target would be a sizable 53% gain.
Oceaneering International
This is a deep water driller and contrarian play that could have big potential for patient investors. Oceaneering International Inc. (NYSE: OII) is a global provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications. Through the use of its applied technology expertise, Oceaneering also serves the defense, entertainment and aerospace industries.
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The Deutsche Bank team points out that offshore drillers may stand to benefit from relative rate stability and a full quarter of cost savings. With many of the stocks being heavily shorted, they could enjoy a brief respite during the second-quarter earnings reporting. This in turn could benefit Oceaneering International, which reported solid first-quarter numbers.
Investors are paid a 2.37% dividend. The Deutsche Bank price objective is a massive $75, and the consensus stands at $58.92. Shares closed most recently at $45.46. Trading to the Deutsche Bank target would be a huge 65% gain.
Superior Energy Services
Superior Energy Services Inc. (NYSE: SPN) serves the drilling, completion and production-related needs of oil and gas companies worldwide through its brand name drilling products and its integrated completion and well intervention services and tools, supported by an engineering staff who plan and design solutions for customers.
Some Wall Street analysts feel that Superior could be one of the biggest beneficiaries of potential divestitures coming from the Baker Hughes and Halliburton merger. The company is one of Wall Street’s favorite small to mid cap stocks to play the U.S. land services recovery, and investors should see impact of cost reductions as this year progresses, which analysts feel could help offset pricing pressure.
Investors are paid a 1.61% dividend. The Deutsche Bank price target is $32, and the consensus target is $28.96. The stock closed Monday at $19.72. Hitting the Deutsche Bank target would be a monster 61% gain.
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The Deutsche Bank price targets are very aggressive, but for patient investors who are willing to wait for an oil rally to the $70 or more range, there could be substantial gains. Even getting close to the price targets would be outstanding in almost all cases.
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