The firm’s stance is that the rig count in the United States advanced by 27 from the early April trough (1,738) and is basically unchanged so far in 2013 at 1,765 rigs, with oil rigs up 79 (+6.0%) and gas rigs down 77 (-17.9%). The count is expected rise is due to rising oil drilling in the near-term and higher gas activity later this year and next.
Gengaro said:
Oil rigs currently make up 79.6% of the United States total rig count versus 71.2% a year ago. The up-tick stems from operators continuing to seek out oily basins as oil prices offer a more compelling return versus natural gas resource plays. … The gas rig count in the United States appears to be bottoming as gas rigs have stood around 354 for the past four weeks.
These are Gengaro’s top three picks:
Halliburton Co. (NYSE: HAL) is the favorite large cap stock in oilfield services, with shares trading around $43, although his price target is currently only $45. That is well under the consensus price target of $51.24.
Superior Energy Services Inc. (NYSE: SPN) is considered the top mid-cap name, and the $27 price today compares to Gengaro’s $34 price target. The consensus price target is just a tad lower at almost $33 per share.
TETRA Technologies Inc. (NYSE: TTI) is the top small cap name, with less than $1 billion in market value. The $10.85 price compares to Gengaro’s $12 price target, and the consensus target is barely different at $12.11.
Stern Agee’s take is that all three companies stand to benefit from a rise in the U.S. land rig count during the second half of this year and into 2014. These three companies also have exposure to the growing deepwater and international markets.
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