UBS Has 4 Diversified Oil Services Stocks to Buy

A new report from UBS remains positive on the big diversified oil service companies, and the analysts note that even if oil lifts to $65 from the current $50 range, overcapacity still will be an issue. The UBS team thinks that there is an attractive opportunity, and the stocks can move with oil prices from current levels. They caution though that we are likely in what they call a “new world” for the next few years, and the old levels of activity are history for the foreseeable future.

Here are the four big diversified oil services stocks to buy at UBS.

Baker Hughes Inc. (NYSE: BHI) agreed back in November to a friendly merger with fellow oil field giant Halliburton in a deal worth an astounding $34.6 billion. The tie-up between the two oil field giants raised big questions about whether the takeover could survive antitrust scrutiny, given the level of consolidation that it promises within the oil production services business. Created in 1987 with the merger of Baker International and the Hughes Tool company, it created innovative products like a rotary bit for drilling wells through rock. While most think now that regulators will allow the merger, the break-up fees for both companies are stiff. Shareholders should be winners either way.

Baker Hughes investors are paid a 1.08% dividend. The UBS price target for the stock is $74. The Thomson/First Call consensus price target is $69.38. The stock closed Wednesday at $62.46 a share.

ALSO READ: How Low Crude Prices Affect Nations, States and Companies

Halliburton Co. (NYSE: HAL) shares are down almost 45% since July, and now Halliburton seems to be in the final stretch of completing the merger with Baker Hughes. The oil field services giant announced last year a $1 billion investment to develop huge potential oil fields in Ecuador, and it has entered into a long-term deal with Petroamazonas, an Ecuador-based company involved in the exploration and development of the country’s oil reserves. With oil prices being absolutely demolished recently, this top oil service company is a great stock to buy on sale.

Halliburton shareholders are paid a 1.67% dividend. The UBS price target for this sector leader is $50, and the consensus target is at $47.96. The stock closed Wednesday at $43.07.

Schlumberger Ltd. (NYSE: SLB) has bounced off the lows printed in January, but shares are still down almost 30% from the highs of last summer. The company remains the largest oilfield services company in the world for now, with far-reaching operations all around the globe, and it could be poised for years of solid growth despite the huge turn down in oil pricing. UBS and a host of other Wall Street analysts think the company will continue to drive margins on execution, technologies and efficiencies. Russia, Saudi Arabia, Iraq and China are expected to be the strongest markets, if geopolitical concerns remain somewhat in check.

Schlumberger investors are paid a 2.35% dividend. While the UBS price target is $95, the consensus target is slightly lower at $93.37. The stock closed Wednesday at $85.14.

Weatherford International Ltd. (NYSE: WFT) shares have dropped almost 50% since the highs the stock printed last summer, and the company was forced to cut 8,000 jobs in early February, almost 15% of the company’s total workforce. It still offers customers a wide range of global capabilities, including a proprietary system for pressure management in the mushrooming arena of subsea production. The changes in government oil policy in Mexico last year may provide some favorable tailwinds for the company, despite the huge downturn in oil pricing.

The UBS price objective for the stock is $15, while the consensus is posted at $13.67. The stock closed on Wednesday at $12.83 a share.

ALSO READ: 5 Clean Energy Stocks That Are Potential Buyout Candidates

The oil services trade is still a contrarian one, to say the least. Oil seems to have hit bottom and turned higher, and that is a plus. Yet the pain in the industry is not going away anytime soon, so sticking with the top names that weathered downturns before makes the most sense.