While things certainly have improved for the energy sector, and specifically oilfield services, the price for oil actually has faded about 10% from recent highs, as it looks like a trading range is starting to settle in. While the number of rigs in service has gradually gone higher, we are still way below the levels that were operating two years ago. While the offshore drilling recovery looks to be a much longer way off, prospects for onshore and the top companies there look very solid.

A recent Jefferies research report makes the case that North American completions demand growth through the recovery is likely to be very powerful and is not fully reflected in shares at current price levels. The report also noted the following:

We lay out our vision for Oilfield services demand through the next few years (to 2020) and we see strong relative growth in US onshore completions as a tool for greater unconventional hydrocarbon recovery. The magnitude of potential demand excites: our framework includes demand in 2020 for 21MM hydraulic horsepower (HHP) of frac equipment, 25% more than the prior cycle peak “rate” and almost 100MM tons per annum (tpa) of frac sand demand, nearly 60% more than the prior peak rate.

They raised three stocks to a rating of Buy, and also recently added another to the firm’s Franchise Picks list.

Halliburton

This company has ticked higher since the deal with Baker Hughes fell through due to regulators concerns, but it is still down almost 50% from highs printed two years ago. The Jefferies team recently added the company to the Franchise Picks portfolio. Halliburton Co. (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry.

The company serves the upstream oil and gas industry throughout the life cycle of the reservoir, from locating hydrocarbons and managing geological data to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.

The oil field giant announced last year a $1 billion investment to develop huge potential oil fields in Ecuador and it has entered into a long-time deal with Petroamazonas, an Ecuador-based company involved in the exploration and development of the country’s oil reserves. With the price of oil being absolutely demolished over the past year, this top oil service company is a great stock to buy on sale, as the oil recovery has shown some legs.

Top Wall Street analysts see the end of the Baker Hughes deal as removing uncertainty on the company, and they also think that the company still has acquisition possibilities, which could help expand the business footprint.

Halliburton investors are paid a 1.56% dividend. The Jefferies price target for the stock is $56 and the Thomson/First Call consensus price target is lower at $46.03. The shares closed most recently at $45.03.

Hi-Crush Partners

This is one of the top frac sand producers, and it was recently raised to Buy at Jefferies. Hi-Crush Partners L.P. (NYSE: HCLP) is an integrated producer, transporter, marketer and distributor of high-quality monocrystalline sand, a specialized mineral that is used as a “proppant” (frac sand) to enhance the recovery rates of hydrocarbons from oil and natural gas wells.

Hi-Crush reserves, which are located in Wisconsin, consist of “Northern White” sand, a resource that exists predominantly in Wisconsin and limited portions of the upper Midwest region of the United States. Hi-Crush owns and operates the largest distribution network in the Marcellus and Utica shales, and has distribution capabilities throughout North America.

The Jefferies price target for the stock is $20, and the consensus target is much lower at $11.82. Shares closed Friday at $12.50.
Patterson-UTI Energy

This company could see meaningful business coming from Canada this year. Patterson-UTI Energy Inc. (NASDAQ: PTEN) subsidiaries provide onshore contract drilling and pressure pumping services to exploration and production companies in North America. Patterson-UTI Drilling Company and its subsidiaries operate land-based drilling rigs in oil and natural gas producing regions of the continental United States and western Canada. Universal Pressure Pumping and Universal Well Services provide pressure pumping services primarily in Texas and the Appalachian region.

The stock has been on a solid roll since late January, and the outperformance could be attributed to good execution and reduction in the cost structure. Other Wall Street analysts have noted that the company’s pressure pumping margins improved substantially.

Patterson-UTI investors are paid a 0.4% dividend. The Jefferies price target for the stock is $25, and consensus stands lower at $20.95. The stock closed Friday at $21.25.

U.S. Silica

This is another company that has been absolutely smoked and has awesome upside potential. U.S. Silica Holdings Inc. (NYSE: SLCA) is a leading producer of commercial silica used in the oil and gas industry, as well as 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.

U.S. Silica shareholders are paid a 0.75% distribution. The Jefferies price target is $41, and the consensus target is set at $35.91. The stock closed on Friday at $34.11 a share.

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While oil could certainly become range-bound, with most people seeing $50 to $65 for the next two years, the oil services companies that help the most in maximizing well production and yield could be among the best stocks to buy.

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