Top exploration and production companies have been hit hard over the past month as West Texas Intermediate crude, which hit $72.35 in late May, has drifted back to $64.93. Fears of OPEC and Russia moving in to replace lost production from Iran and Venezuela have helped shove the price down. Toss that threat in with the problems of capacity issues in the Permian Basin, and it has been extra bad for the top oil service land drillers.

In a new research report, Jefferies makes the bold contrarian call of advising clients and investors to take advantage of price drops in some of the top land drillers and buy shares now. While not discounting the current issues, the firm feels long-term investors can benefit and explained why in the report:

With Permian differentials at $8-10/ per barrel, and new pipeline capacity coming (albeit only in the second half of 2019), we recognize the risk that operators might trim Permian activity. The behavior of Privates (35% of the Permian rig count) is most in question—channel checks suggest that at least one has begun retrenching. Yet earnings risk is likely modest (<10% to second half 2018 EBITDA for Drillers), and we see recent weakness in Land Driller shares as a buying opportunity.

Four of these stocks are rated Buy at Jefferies, and all make sense for more aggressive growth accounts looking for a contrarian energy play.

Helmerich & Payne

This large cap sector leader is the safe and more conservative play, and it was just raised to a Buy rating at Jefferies. Helmerich & Payne Inc. (NYSE: HP) is the largest U.S. land driller and provides onshore drilling services primarily in the United States. It also offers land rigs internationally, as well as offshore platform rigs in the Gulf of Mexico.

The company 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 analyst cite the 13% price drop over the past month as unwarranted, and this could be the best play for more conservative accounts that like the contrarian call.

Helmerich & Payne investors are paid a very big 4.43% dividend. The Jefferies price target for the shares was raised to $80 from $72, and the Wall Street consensus price objective is set at $68. The stock closed Tuesday’s trading at $64.04 a share.

Nabors Industries

This company provides drilling and rig services, and some feel it could be a takeover target. Nabors Industries Ltd (NYSE: NBR) owns and operates the largest land-based drilling rig fleet in the world, and it is a leading provider of offshore platform workover and drilling rigs in the United States and select international markets. Revenues in 2016 were $2.23 billion.

Nabors markets approximately 400 rigs for land-based drilling operations in the United States, Canada and approximately 20 other countries worldwide, as well as 41 rigs for offshore drilling operations in the United States and internationally.

The share price is down over 50% in the past year, which reflects investor focus on its balance sheet and ability to generate free cash flow and pay down debt. This concern has been exacerbated recently by a softer-than-expected earnings report and focus on 2018 non-cash deferred revenues. While most don’t see a quick fix for the company, the worst surely looks to be over.

Nabors investors are paid a 3.80% dividend, though that could be lowered going forward. Jefferies has a price target of $10, while the posted consensus price objective is at $9.76. Shares closed well below those levels on Tuesday at $6.31 apiece.

Patterson-UTI Energy

This company remains a top oil services pick across Wall Street. Patterson-UTI Energy Inc. (NASDAQ: PTEN) is the second largest land driller in North America and a large pressure pumping provider. Its operations are particularly focused in the Marcellus and in Texas.

Patterson-UTI 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-UTI remains the fifth largest pressure pumper, with a 1.5 million HHP frac fleet (currently 83% utilized) with exposure to ancillary rental equipment business through Great Plains Oilfield Rental. Its recent acquisition of MS Energy (directional drilling) complements its contract drilling business and provides attractive growth opportunities for investors.

Jefferies analysts have stayed positive on the company, citing this recently:

We expect the company’s drilling fleet-wide EBITDA to improve over the next 12-24 months as the US rig count continues to move higher and high-end AC rig day rates continue to strengthen (Patterson and the wider industry is currently nearly fully sold out of such high-end “super-spec” AC drilling rigs).

Investors are paid a small 0.89% dividend. The $25 Jefferies price target is essentially in line with the consensus price objective of $25.53. The stock closed most recently at $17.92 a share.

Precision Drilling

Canada’s leading oilfield services firm provides contract drilling, well servicing and strategic support services to its customers. Precision Drilling Corp. (NYSE: PDS) provides customers with access to an extensive fleet of contract drilling rigs, directional drilling services, well service and snubbing rigs, coil tubing services, camps, rental equipment and water treatment units backed by a comprehensive mix of technical support services and skilled, experienced personnel.

Despite the company’s large Canadian exposure, 54% of its U.S. drilling fleet is located in the Permian Basin, which remains the hottest shale area in the United States. This stock may be a top pick for aggressive accounts looking for low-priced stocks to gain more shares.

Jefferies has set its price objective at $4.50. The consensus target price is $4.44, and the stock was last seen trading at $3.15 per share.

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Four plays that range from reasonably conservative to highly speculative. The bottom line is the current issues that are weighing on share prices won’t last forever, so now is the time to buy stock while they are so very out-of-favor.

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