While some have dismissed the rise in oil prices as mere short covering, the reality is that production has dropped dramatically, and less of the black gold is coming out of the ground. While oil still has to trade higher to show that the bottom has indeed been put in, we are pretty close to some of the crucial price territory.

A new research note from UBS oilfield services analyst Angie Sedita maintains that the first half of this year could end up being an opportune time for investors with a long-term horizon to buy energy sector stocks. She cautions though that the stocks could remain somewhat range-bound for a few quarters to come. These four top stocks are rated Buy at UBS.

Baker Hughes

The company agreed over a year ago to a friendly merger with fellow oil field giant Halliburton in a deal worth an astounding $34.6 billion. Baker Hughes Inc. (NYSE: BHI) was created in 1987 with the merger of Baker International and the Hughes Tool company, and it created innovative products like a rotary bit for drilling wells through rock.

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. As the scrutiny forges along, the European Union is now set to investigate the mega-merger over regulatory concerns. Halliburton and Baker Hughes extended the deal’s deadline to April 30 in December, after the U.S. Department of Justice told the companies they haven’t offloaded enough assets to ease antitrust worries.

The long wait to get the deal done with Halliburton may be starting to grind on some, but many on Wall Street still think that there is a solid chance the deal is completed. It is has become clear that additional assets will have to be sold by the company in an even greater effort to get approval.

Baker Hughes investors receive a 1.52% dividend. The UBS price target for the stock is $50. The Thomson/First Call consensus target is $57.54. The stock closed Wednesday at $44.31.

Halliburton

The stock is still down over 30% since last May and could be offering investors a very tempting entry price point. Halliburton Co. (NYSE: HAL) now seems to be in the final stretch of getting the merger with Baker Hughes completed, as we pointed out, and the trick is to find the right buyers for the businesses that are required for the divestitures required by the Justice Department and the European Union.

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 that country’s oil reserves. With oil absolutely demolished over the past year, this top oil service company is a great stock to buy on sale.

It remains one of the top holdings in Jeffrey Ubbens $19 billion ValueAct Capital’s portfolio. It was also a new position added last year to Simon Sadler’s Segantii Capital hedge fund. Value buyers and bottom fishers are actively buying the stock at current levels.

Halliburton investors receive a 2.06% dividend. UBS has a $45 target price, and the consensus target is $40.13. The shares closed Wednesday at $34.69.
Schlumberger

This is hardly one that many investors would view as a value stock, but given the debacle in the energy sector over the past year, the decline in share prices has pushed it almost to value levels. Schlumberger Ltd. (NYSE: SLB) 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 turndown in oil pricing.

RBC 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 by some to be the strongest markets, if geopolitical concerns remain somewhat in check.

Schlumberger announced last August it would buy oil field services giant Cameron International in a deal expected to cost about $12.7 billion in cash and stock. Wall Street analysts note what they term the company’s “drive to disrupt the status quo,” which includes transformation initiatives like the gigantic purchase of Cameron. Trading at a low 6.6 times the firm’s normalized EBITDA estimates, the stock looks cheap.

The company reported solid fourth-quarter earnings, though revenues come in slightly under Wall Street estimates. The company said a new share repurchase program of $10 billion was approved, as Schlumberger continues to return capital to shareholders.

Schlumberger investors receive a 2.71% dividend. The $87 UBS price objective is higher than the consensus target of $82.22. The shares closed Wednesday at $72.75.

Weatherford

This stock has been absolutely demolished, but a recent successful secondary offering cheered Wall Street and shareholders. Weatherford International Ltd. (NYSE: WFT) is one of the largest multinational oilfield service companies, providing innovative solutions, technology and services to the oil and gas industry. It operates in over 100 countries and has a network of approximately 1,200 locations, including manufacturing, service, research and development, and training facilities.

The company 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 in 2014 may provide some favorable tailwinds for the company, despite the huge downturn in oil pricing.

According to management, Weatherford reduced its workforce by 11,000 employees in 2015, and that translated to a reduction in annual operational costs of $803 million. Combining the savings with the capital raise, you have a positive setup for shareholders going forward.

The UBS price target is $11, and the consensus target is $9.21. Shares closed Wednesday at $6.50.

While the ride could remain bumpy, it’s looking as though perhaps the worst is over. These top companies have gotten leaner in the downturn and can excel going forward if the market firms.

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