While many have remained hopeful that the damage inflicted in the energy arena would start to reverse course this year, a recent plunge in oil prices to six-year lows has pretty much pulled that off the table. In a new report from UBS, despite being in the “lower for longer” camp, the firm definitely remains positive on three top land-based drillers.

The UBS team does not sugarcoat the current situation, and they feel that the oil services sector will remain range-bound over the near to intermediate term as oil prices remain under pressure. With that caveat in place, they also are positive on the land drillers long term and think investors can selectively start to bottom-fish between now and the end of the year.

These three top land drillers remain rated at Buy.

Helmerich & Payne

This company primarily operates as a contract drilling company in South America, the Middle East and Africa. Helmerich & Payne Inc. (NYSE: HP) provides drilling rigs, equipment, personnel and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms, tension-leg platforms and spars in offshore areas.

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The drilling giant beat on fiscal third-quarter 2015 earnings. Earnings per share from continuing operations (excluding special items) came in at $0.27, surpassing the consensus estimate. Revenues in the quarter came at $659.7 million, down 30.7% from the third quarter of fiscal 2014, yet surpassing the consensus estimate. The UBS analysts acknowledge that pricing weakness will remain a struggle, but they note that land drillers typically lead the sector off the bottom.

Helmerich & Payne investors are paid a very big 4.41% dividend. The UBS price target for the stock is $80 and the Thomson/First Call consensus target is $68.15. Shares closed Wednesday at $62.29.
Nabors Industries

Drilling and rig services provider Nabors Industries Ltd. (NYSE: NBR) offers rig instrumentation, optimization software and directional drilling services. It also provides completion, life-of-well maintenance and plugging and abandonment of a well. The company markets approximately 466 land drilling rigs for oil and gas land-based drilling operations in the United States, Canada and approximately 20 other countries worldwide; approximately 445 rigs for land well-servicing and workover services in the United States; 98 rigs for land well-servicing and workover services in Canada; 42 rigs for offshore drilling operations in the United States and internationally; and seven jackup units and components of trucks and fluid hauling vehicles.

Nabors posted solid earnings recently, bolstering the generally positive outlook on the company. While it slightly missed on the bottom line, the revenues came in above expectations, and guidance was not as draconian as perhaps many analysts were expecting.

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Nabors investors are paid a 1.97% dividend. While the UBS price target is $17, and the consensus price objective is $16.13. Shares closed Wednesday at $12.20.

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 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.

Patterson also reported a smaller second-quarter loss than analysts expected. While revenues also fell to $472 million, that was higher than the consensus estimate. The outperformance could be attributed to good execution and reduction in the cost structure, and Wall Street analysts noted that the company’s pressure pumping margins improved 4%.

Patterson-UTI investors are paid a 2.21% dividend. The UBS price target is $25, while the consensus stands at $21.77. The stock closed Wednesday at $18.11.

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The oil services trade is still a contrarian one, to say the least. Oil apparently hit bottom late last year, turned much higher and has totally rolled back over to lows not seen since the recession. The pain in the industry is not going away anytime soon, so sticking with the top companies with big upside potential makes good sense, and patient investors may see giant upside from current trading levels.

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