Citi sees 30%-plus drop in U.S. shale well average cost in 2015

• Citi analyst Scott Gruber reiterates his cautious view on the oil services sector (NYSEARCA:OIH) as it “digests the likelihood of domestic E&P spending declining 15%-20% next year, driving activity lower and maintaining pressure on rates.”
• Gruber now sees a better than 30% drop In the average cost of a U.S. shale well in 2015 and another 5%-10% drop in 2016 compared to the forecast he made in March of a 20%-25% drop in 2015 and another 2%-3% decline next year.
• The analyst sees a need for “material negative revisions” across the universe of mid- and small-cap oil services stocks he covers, including Superior Energy (NYSE:SPN), RPC (NYSE:RES), Patterson-UTI (NASDAQ:PTEN), Nabors Industries (NYSE:NBR), C&J Energy (CJES) and Aspen Aerogels (NYSE:ASPN).
• Gruber recommends taking advantage of negative sentiment to buy “premiere franchises” Schulmberger (NYSE:SLB) and Halliburton (NYSE:HAL).