Offshore drillers Atwood Oceanics (ATW +1.9%) and Rowan (RDC +0.3%), as well as Oceaneering International (OII +3.1%), Helix Energy Solutions (HLX +0.3%) and Flotek Industries (FTK -2.9%) are the favorite takeout candidates among oilfield services stocks for Stephens analyst Matthew Marietta.
As Marietta says today's Patterson-UTI (PTEN -7.3%) "well-priced takeout" of Seventy Seven Energy attests, the firm believes M&A in the sector will remain prevalent and continues to see deal-flow potential in well-capitalized companies with technology differentiation or top tier asset quality.
Marietta believes confidence is becoming restored in oilfield services company management teams and that the potential accelerates for the IPO market to heat up.
Helix Energy (HLX +7.6%) is upgraded to Outperform from Neutral with a $10 price target, doubled from $5, at Credit Suisse, which cites HLX's leading position in the well intervention segment.
The firm says many deepwater wells are now 8-9 years old and in need of well intervention, which should boost volumes allowing oil companies to slow down decline rates, and sees 2016 as the earnings trough for HLX as well intervention activity picks up in 2017.
Credit Suisse raises its EPS estimates for 2016 and 2017 to $0.50 loss from a$0.70 loss and to a $0.15 loss from a $0.64 loss, respectively.