Energy

Oilfield Services Stocks Have Been Crushed - 4 To Buy Right Now

Lee Jackson

Published: June 15, 2018 8:14 am

Last Updated: January 11, 2020 10:19 pm

We have written in detail about some of the issues in the Permian Basin as the ability to transport production is being hampered by pipeline capacity issues. As a result, some of the top stocks working in the Permian Basin have been hit hard and investors are literally being offered some of the best entry points in years.

That holds true not just for the top exploration and production companies, but for some of the top oil services companies as well, especially the pressure pumpers.

In a new research report from Ken Sill, the much-respected oilfield services analyst at SunTrust, he believes that now may be an outstanding time to take advantage of some of the selling in the oil services sector, and he said this when discussing the issues surrounding the sector:

We expect any impact on Permian completions from potential takeaway capacity constraints will be limited to fourth quarter of 2018 to the second quarter of 2019. Growth in completions may need to slow, but it will not stop. Producers can grow production more slowly, choke back production until the bottleneck evaporates in late 2019, or deploy capital to other basins. With many pressure pumping stocks down 20% or more since mid-May, we think this is a good entry point for investors who can look past these timing issues to activity re-accelerating in mid-to-late 2019.

The SunTrust team feels that focussing on the high-quality companies makes the most sense now, and they highlight four they would be buying shares of now.

Halliburton
This company is down over 15% since late May, and remains a top large cap oil services pick at SunTrust. Halliburton Company (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry. The firm 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.

Halliburton is the second largest provider of oil services and the number one pressure pumping services provider worldwide. For investors looking for an oil field services company to add, this is arguably the best, and top analysts feel they will be a huge benefactor as the fracking market has tightened significantly and prices are 20% to 30% off the lows.

The company reported first-quarter 2018 results of adjusted diluted earnings per share (EPS) of $0.41 on revenues of $5.74 billion. In the same period a year ago, the company reported EPS of $0.04 on revenues of $4.28 billion. First-quarter results also compare to consensus estimates for EPS of $0.41 per share and $5.75 billion in revenues.

Halliburton shareholders are paid a 1.51% dividend yield. The SunTrust price target is $69. The Wall Street consensus is at $62.13. The shares closed Thursday at $47.73.

ProPetro
This is a smaller cap stock that is down almost 25% in a month, and could be a solid pick for aggressive accounts. ProPetro Holding Corp. (NYSE: PUMP) provides hydraulic fracturing and other complementary services to upstream oil and gas companies, which are engaged in the exploration and production (E&P) of North American unconventional oil and natural gas resources.

The company operates through seven segments: hydraulic fracturing, cementing, acidizing, coil tubing, flowback, surface drilling and Permian drilling. Its pressure pumping segment includes cementing and acidizing operations. The company’s operations are focused in the Permian Basin. ProPetro’s fleet consists of 10 hydraulic fracturing units with an aggregate of 420,000 hydraulic horsepower (HHP).

The SunTrust price objective is $28, and the consensus price target is $23.30. The shares closed trading on Thursday at $14.62.

RPC
This is another small cap, off-the-radar stock that has solid upside potential. RPC Inc. (NYSE: RES) provides a range of specialized oilfield services and equipment primarily to independent oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets.

The company’s segments are Technical Services and Support Services. The Technical Services segment consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline and fishing.

The Support Services segment includes all of the services that provide equipment for customers’ use on the well site without RPC personnel and services that are provided in support of customer operations off the well site, such as classroom and computer training, and other consulting services.

Shareholders are paid a reasonable 2.82% dividend yield. The SunTrust price target is $25, and the consensus is posted at $19.61. The stock closed trading on Thursday at $14.19.

Superior Energy Services
Superior Energy Services, Inc. NYSE: SPN) provides a range of services and products to the energy industry related to the exploration, development and production of oil and natural gas. The company’s segments include Drilling Products and Services, which rents and sells bottom hole assemblies, drill pipe, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, production and workover activities.

The Onshore Completion and Workover Services provides pressure pumping services used to complete and stimulate production in new oil and gas wells, fluid handling services and well-servicing rigs that provide a range of well completion and maintenance services.

Lastly, Production Services provides intervention services, such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, and remedial pumping services, and Technical Solutions, which provides services requiring specialized engineering, manufacturing or project planning.

The SunTrust price target for the stock is $13, and the consensus is at $12.89. The shares closed Thursday at $9.80.

These are 4 stocks to buy for big potential gains this summer and the rest of 2018. They run the risk gamut, so investors need to gauge their capital investment to their current risk tolerance. One thing is for sure: the sector offers far more value than many and makes sense to buy now after being hit so hard over the last month.