Energy

3 Top Oilfield Services Stocks to Own for Market Breakout to New Highs

Lee Jackson

Published: June 9, 2016 9:20 am

Last Updated: January 13, 2020 7:02 am

We closely follow many of the top firms on Wall Street, and we have kept a very close eye on their overall bullish or bearish leanings. Some firms have been overly bearish since the wicked sell-off that started this year. On the other hand, some of the firms have been very positive, and from a technical standpoint have predicted a breakout to new highs for the past couple of months.

One of the firms that has been consistent in its bullish posture, especially from a technical standpoint, has been RBC. The technical team, led by Robert Sluymer, has consistently preached over the past couple of months to buy any pullback in anticipation of a breakout through the old highs posted last summer.

The team recently cited three stocks in the oilfield services sector that look particularly well positioned now.

Halliburton

Shares of this company have ticked higher since the deal with Baker Hughes fell through due to regulators concerns, but they are still down almost 50% from highs printed two years ago. 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 lifecycle 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.

Halliburton investors are paid a 1.56% dividend. The Thomson/First Call consensus price target for the stock is $46.09. The shares closed most recently at $46.29.
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. Its contract drilling business operates through three reportable segments: U.S. Land, Offshore and International Land.

The company posted earnings that many felt came in much better than expected. At last report, the company’s U.S. Land rig segment, which is its largest business, had a utilization rate of 31%, compared to 68% this time last year. The International Land operations also saw utilization rates decline to 38%. What is slightly surprising, though, is that the average margin for a rig in use increased between this quarter and the same time last year.

Helmerich & Payne investors are paid a very big 4.16% dividend. The consensus price objective is $56.96, but the shares closed Wednesday way above that level at $67.36.

Schlumberger

This top oil services company came in with first-quarter results that beat expectations. 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 turn down in oil pricing. Top 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.

The solid first-quarter earnings and revenues came in slightly above Wall Street estimates. Recent reports have indicated the company may be looking to buy back its former Iranian unit. The report also noted that Schlumberger sold Well Services of Iran to Nima Energy, a Hong-Kong based holding company, when it left Iran and the sales-agreement reportedly included a provision that could give the oil services giant “first right to buy back the company when sanctions were lifted,” per Dow Jones news.

Schlumberger investors are paid a solid 2.75% dividend. RBC has a $95 price objective for the stock, and the consensus price target is $87.41. The stock closed Wednesday at $80.81 per share.

All three of these top companies make good sense for investors looking to add oilfield services stocks to a portfolio. While the potential for a market breakout to new highs is exciting, there are plenty of headline issues that could stir volatility, so safety is still smart.