BP, owner of 19.75% of Russian energy giant Rosneft, is the highest profile loser, according to Adams, and any sanctions that affect oil and gas flows to Europe or banking/capital flows, would "hit Rosneft and BP early and hard.”
CVX pipeline investments could be hurt, and it signed a 50-year deal to explore and develop oil and gas in western Ukraine; "a Russian takeover spikes that deal."
Halliburton (HAL), Baker Hughes (BHI) and Weatherford (WFT) all do business in Russia that could be prohibited if it is labeled a rogue nation.
Halliburton (HAL +2.3%) and Baker Hughes (BHI +3.5%) enjoy a boost from Raymond James analysts who are big believers in the two oilfield services providers, upgrading both stocks to Strong Buy as likely to benefit from increases in prices for pressure pumping as demand for fracking services rises in the wake of the recent increases in natural gas prices.
The firm updates its North American revenue growth assumptions for HAL to 20% in both 2014 and 2015 vs. prior estimates of 10% and 3%, and revises its EPS estimates $4.30 for 2014 and $5.85 for 2015, well above Wall Street consensus.
BHI could grow its North American business at a 17% clip in 2014, the analysts say in placing an $80 price target on the shares.
Wells Fargo has a slightly different take, downgrading HAL to Market Perform from Outperform on valuation; it prefers BHI and U.S. Silica (SLCA +1.3%) among companies that obtain a significant amount of their revenue from U.S. land drilling.
Schlumberger (SLB) finished shutting down its Iranian business in Q2 last year after losing $69M and facing a U.S. probe into its activities in several sanctioned countries, its latest 10-K filing shows; SLB says it has not bid on new Iranian oil contracts since early 2009.
Economic sanctions against Iran had pushed other oilfield service firms such as Halliburton (HAL) and Baker Hughes (BHI) to finish up their contracts and exit the country; last November, Weatherford (WFT) agreed to pay $252M in penalties for violating sanctions in Iran and other countries.
Several of the world’s largest oil companies, such as BP and Shell, also pulled out of projects in Iran.
Although the U.S. struck a six-month easing of some sanctions on Iran in November, officials are privately warning some of the same executives that any business now allowed with Iran must be limited to the six-month window of the deal.
Latin America contributes a significant part to U.S.-based oil services and equipment companies (OIH), which will struggle to achieve growth in the region during 2014 as a slowdown in Mexico and Brazil will be worse than expected, Credit Suisse says.
Halliburton (HAL) is in one of the most difficult positions because of its relatively high exposure to Mexico and Brazil, and its relatively low exposure to other Latin American markets will prevent it from mobilizing operations to more robust areas.
Schlumberger (SLB) and Weatherford (WFT) have relatively high exposure to the two countries, but have the possibility of offsetting losses by moving business to other LatiAm countries.
The firm says Baker Hughes (BHI) has the lowest exposure, with only 4% of its revenue from Mexico and Brazil.
HAL's Q4 earnings beat estimates but shares slid largely because it cited several negative factors that are impacting its Latin America operations in 2014, Citi analysts say, yet the firm considers the selloff overdone and recommends being "opportunistic buyers" of HAL’s stock.
BHI's Q4 results edged expectations but investors liked the details, including the company's outlook for increased activity in 2014, and BHI's Latin American numbers looked a lot better than HAL's.
SLB was upgraded by Credit Suisse after announcing Q4 earnings last week, marked by a positive outlook and tone aided considerably by internal initiatives and efforts of better capital utilization and efficiency across the entire enterprise.
Expro International reportedly has attracted interest from Halliburton (HAL), Schlumberger (SLB) and GE as U.K. buyout firm Arle Capital Partners prepares to sell its stake in the olfield services business.
None of the potential buyers is believed to have made an actual offer for the business, which could fetch ~£3B ($4.9B), and although Arle is soliciting bids, the firm may wind up seeing an IPO as bringing the highest valuation.
Energy services companies are attracting interest from potential acquirers as exploration expands in deepwater oil and gas fields and unconventional resources such as shale gas.
Halliburton (HAL) +1.8% premarket reported a 19% Y/Y rise in Q4 earnings as revenue growth in its international operations more than made up for modest gains in North America.
North American revenue rose 2% Y/Y but slipped 1% Q/Q, as the sequential performance was hurt by seasonal activity disruptions tied to the weather and holidays.
While full-year revenue rose 3% Y/Y to $29.4B, operating incomes tumbled by a quarter, mainly due to a $1B pre-tax charge for an estimated loss contingency for Macondo as well as pricing pressure in North America.
Schlumberger (SLB) +1.2% premarket after reporting a better than expected 22% jump in Q4 earnings on strong revenue from drilling activity in the Middle East and Asia.
Revenue rose 7.4% to $11.91B, climbing 18% from the Middle East and Asia; international markets brought in about two-thirds of SLB's total 2013 revenue of $45.27B.
Says a temporary shutdown of operations in southern Iraq in November following a protest slightly hurt Q4 results.
In the U.S., SLB sees no change in fundamentals, with meaningful recovery in dry gas drilling activity "some way out in the future," CEO Paal Kibsgaard says; SLB has the lowest exposure to North America among the big four oilfield service providers, which include HAL, BHI and WFT.
Yesterday, SLB declared a 28% increase in its quarterly dividend to $0.40/share.
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.
The firm thinks WTI crude prices will remain in a fairly stable $85-$95 range over the next two years, rig growth will rise slightly in 2014 and accelerate in 2015, and deepwater drilling visibility will remain strong for several years.
The firm's favorites are Halliburton (HAL), Schlumberger (SLB) and Oceaneering (OII), with Tetra Technologies (TTI) the top pick among sector small caps.
"The Safety Bubble Deflates," goes the title of a new report from Bernstein's Seth Masters, adding his name to those voices suggesting "safe" assets have become otherwise.
Even though utilities, telecom, and consumer staples have underperformed of late, says Masters, their relative valuations are still well above the average over the last 50 years. "In periods of stress, investors tend to prize stability and safety too much. But in time, investors discover that every investment carries with it some degree of risk: if not risk of loss, then risk of inadequate growth."
Barron's Jack Hough says the "low beta" approach is a flawed one: First, volatility can change quickly as companies' or industries' fortunes shift; Second, beta tells one nothing about whether a stock's valuation is high or low. In a similar warning over low volatility stocks, BAML suggests looking for companies with smooth earnings rather than smooth stock prices. Screening for such, Hough finds CSX Corp (CSX -0.6%), DuPont (DD +0.6%), Cisco (CSCO -0.6%), and Halliburton (HAL -0.8%).
Oil services analysts at Deutsche Bank are very positive on the sector for next year, despite pervasive fears of weakening U.S. oil prices.
Baker Hughes (BHI), Halliburton (HAL), Hercules Offshore (HERO) and Nabors Industries (NBR) are the firm's highest conviction choices and include price targets much higher than consensus; NBR's $27 target is the highest on Wall Street and would represent a 60% gain from current levels.
The firm also sees strong upside potential in Patterson-UTI Energy (PTEN), Pioneer Energy Services (PES) and Schlumberger (SLB).
With the price of gas likely to remain in a narrow range next year, the firm says investors should buy high-quality, large resource-based stocks such as COG and RRC.
The net asset value race is over, and the coming year is about execution, ML says, seeing PXD and WLL as winners here.
Following 2013's wave of activism, the firm sees gains in HES and OXY.
Favorable outlooks for E&P budgets could lift oilfield services stocks focused on North America, such as HAL and SLB.
The ML team sees crude production rising to the highest level since 1989, and pinpoints TSO and VLO as the refiners to benefit the most in 2014 because they're crude-advantaged and have stock-specific catalysts.
Finally, the firm suggests investors with significant gains in CVX may want to take those and buy XOM for 2014.