C&J Energy (CJES) +8% AH and Nabors Industries (NBR) +6.2% after the companies agree to merge, creating a diversified completion and production services provider.
NBR will receive total consideration of $2.86B in cash and stock, comprised of ~62.5M CJES shares and $940M in cash; the combined company will retain the C&J Energy name and management team.
CJES expects the deal to be accretive to EPS during the first full year of combined operations, as it will leverage identifiable cost and revenue synergies through the achievement of operational efficiencies and capex savings.
C&J Energy (CJES +2.3%) is upgraded to Buy from Neutral with a $35 price target, up from $22, at Global Hunter based on the company's leverage to an acceleration in North American onshore unconventional development.
Global Hunter see CJES as well positioned after it decided two quarters ago to ramp its capacity ahead of a potential North American upturn; the company has recently built high-quality fleets it can package in multi-service operator arrangements and is able to add capacity rapidly in-house at a ~20% discount to market prices.
Among Goldman's reasons: WTI saturation is unlikely in 2014; negative revenue surprises during the year may be offset somewhat by positive margin surprises; and capex should rise by mid-single digits but companies with exposure to horizontal completions on U.S. land and with high Gulf of Mexico and Middle East exposure should see revenue growth at the upper end.
The firm recommends owning Halliburton (HAL) and Schlumberger (SLB) into earnings, and likes NBR, RES, CJES, BAS, PES and OII.
Barclays expects the oil services group (OIH) to significantly outperform the broader equity market over the next several years, and raises its price targets for several sector leaders (Briefing.com).
The industry remains in the early days of a prolonged global upcycle, the firm says, and consequently market fundamentals should favor oil services, equipment and drilling companies.
SLB target to $138 from $124; SPN to $42 from $39; OII to $103 from $96; NOV to $102 from $93; HAL to $86 from $76; GLF to $63 from $58; DRQ to $77 from $64; CAM to $82 from $77; CJES to $34 from $30; BHI to $81 from $71.
C&J Energy Services Inc provides hydraulic fracturing, coiled tubing, well stimulation and cased-hole wireline services. The Company also manufactures refurbishes & repairs equipment's & provides oilfield parts & supplies to own & third-party customers.