Dec. 3, 2014, 3:59 PM
- Oppenheimer initiates coverage on Schlumberger (SLB +1.6%), Halliburton (HAL +1.4%) and Weatherford (WFT +1%) with Outperform ratings and rates oilfield services rival Baker Hughes (BHI +1.6%) at Perform.
- The firm views the drop in oil prices as an opportunity, believing investors should take advantage of recent stock price weakness and build or add to positions in SLB, HAL and WFT; on SLB, Oppenheimer says the stock tends to outperform peers in down markets, and SLB is clearly well positioned to benefit from an increase in E&P spending should oil prices rebound.
- The market is taking a myopic view on HAL's combination with BHI, the firm says, as the proposed merger will create a more valuable entity that can more effectively compete with SLB internationally.
Dec. 2, 2014, 2:07 PM
- Schlumberger (SLB +0.3%) says it expects to take an $800M charge in Q4 to write down the value of six vessels and other assets related to its plan to reduce the size of its WesternGeco marine seismic fleet.
- SLB expects to retire some older vessels, convert some others and cancel most of its third-party charters as it anticipates reduced spending by oil and gas companies in exploring for new sources of energy.
- The moves would reduce the size of SLB's WesternGeco fleet to nine survey vessels and six source vessels, compared with 15 survey vessels and eight source boats at the end of last year.
Dec. 1, 2014, 12:21 PM
- Oil prices are rebounding, with both WTI and Brent crude up ~2%, but only a handful of energy stocks are rising.
- Exxon Mobil (XOM +1.4%) and Chevron (CVX +1.3%) are both up more than 1%, but the vast majority of energy stocks - led by Denbury Resources (DNR -8.9%), Newfield Exploration (NFX -7.6%) and Goodrich Petroleum (GDP -22.3%) - are seeing heavy selling.
- The SPDR Energy Select Sector ETF (XLE -1.2%) is lower despite gains in XOM and CVX, XLE’s two most heavily weighted stocks, as 38 of its 43 equity components trade lower; the ETF has now lost 7.5% since OPEC sent oil prices plunging by agreeing last Thursday not to cut production.
- Among XLE’s most actively traded components, Kinder Morgan (KMI -3.3%), Halliburton (HAL -3.4%), Transocean (RIG -6.1%) and Schlumberger (SLB -2.1%) are sharply lower.
- Other big decliners include BBEP -17.8%, SD -12.1%, SN -13%, CWEI -8.8%, CPE -14.6%, EXXI -18.9%, LRE -22.8%, REI -16.9%, SSE -15.3%.
- Other ETFs: ERX, VDE, OIH, XOP, ERY, DIG, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Nov. 28, 2014, 10:35 AM
- Oil service companies mull OPEC's threat to the U.S. shale boom by its decision to hold production and the resulting tumble in oil prices.
- C&J Energy (CJES -17.6%), RPC, Inc. (RES -14.5%), GreenHunter Resources (GRH -9.5%), Seventy Seven Energy (SSE -16.5%), Pioneer Energy (PES -13%).
- Larger names: Halliburton (HAL -11.5%), Schlumberger (SLB -9.7%), Superior Energy (SPN -15%), Baker Hughes (BHI -9.1%).
Nov. 28, 2014, 7:25 AM
- OPEC yesterday decided to hold production numbers despite the bear market in oil. WTI crude is down about $5 per barrel to $69.
- A premarket look at the top 10 holdings of the XLE: Exxon Mobil (NYSE:XOM) -4.1%, Chevron (NYSE:CVX) -4.1%, Schlumberger (NYSE:SLB) -4.6%, ConocoPhillips (NYSE:COP) -4.4%, EOG Resources (NYSE:EOG) -4.3%, Pioneer Natural Resources (NYSE:PXD) -4.8%, Occidental Petroleum (NYSE:OXY) -4.3%, Haliburton (NYSE:HAL) -4.7%, Anadarko Petroleum (NYSE:APC) -5%, Williams Companies (NYSE:WMB) -1.6%.
- ETFs: ERX, VDE, OIH, XOP, ERY, FCG, DIG, PBW, GASL, DUG, IYE, XES, IEO, QCLN, IEZ, PXE, PXI, FENY, PXJ, PSCE, RYE, PUW, FXN, DDG, HECO
Nov. 24, 2014, 3:43 PM
- Twenty-two spinoffs have been completed in 2014, the most in a decade, and another 28 have been announced. Among the catalysts are activist investors, so Credit Suisse screened for companies with multiple business segments, slow growth, and stocks trading for lower multiples than peers, in other words, "good, quality companies that are struggling to grow."
- The list is heavy on big media names like Time Warner (NYSE:TWX) and Twenty-First Century Fox (NASDAQ:FOXA), big tech like Oracle (NYSE:ORCL), Symantec (NASDAQ:SYMC), and IBM, and big industry like Lockheed Martin (NYSE:LMT), Ingersoll-Rand (NYSE:IR), and Raytheon (NYSE:RTN), but just two financial names - Travelers (NYSE:TRV) and Torchmark (NYSE:TMK).
- The rest: MO, CA, WU, DPS, PBI, SJM, HRS, SWK, EMR, WLP, MAT, GE, SNA, LLL, ITW, STJ, PDCO, HPQ, DLPH, HAS, NAVI, GME, CBS, JNJ, SLB.
Nov. 24, 2014, 11:31 AM
- Weatherford (WFT +0.2%) is the most vulnerable among the big four oil services companies to falling crude oil prices based on price-to-book valuations, which help offer a sense of where the floor in valuations might be in a down cycle.
- The minimum price-to-book ratio WFT reached during 2010-13 was 0.87x, while today it trades at 1.62x - the potential drop of 46% is the widest of the big four.
- The smallest of the group, WFT's market share in technology-intensive services of less than 10% is about one-third that of Schlumberger (NYSE:SLB) or a merged Halliburton-Baker Hughes (HAL, BHI), according to Morgan Stanley’s Ole Slorer.
- Another factor against WFT is its net debt; using management guidance and current consensus profit forecasts, WFT should end the year still more than 2x EBITDA, while the other four are below 1x EBITDA.
Nov. 17, 2014, 7:11 PM
- The 56% premium Halliburton (NYSE:HAL) is paying for Baker Hughes (NYSE:BHI) is the largest of any merger in the past two decades worth more than $20B that targeted a U.S. company, so it’s little wonder that HAL shareholders sent the stock plunging 10% today even as most analysts reacted favorably to the deal.
- For HAL investors, the deal’s benefits will have to come from the stock being rewarded with a higher multiple down the line, as the bigger company shows it can compete more effectively; with antitrust scrutiny and falling oil prices to navigate first, that's going to take a while.
- BHI’ shares closed near $65, ~17% below HAL’s offer, with tells S&P Capital that the market views antitrust hurdles as significant; if the deal goes through, the merged firm and Schlumberger (NYSE:SLB) combined could have 70%-90% of the market in some service areas, according to the American Antitrust Institute.
- Even if the two companies can close the deal and find the promised $2B/year in cost synergies, analysts are still concerned about volatile commodity prices; also, "market share losses and execution challenges have plagued [HAL] in the past and could be an overhang going forward," a Susquehanna analyst says.
Nov. 17, 2014, 12:58 PM
- Halliburton (HAL -9.8%) must pay a $3.5B breakup fee if its deal for Baker Hughes (BHI +10.3%) falls through, ~10% of the $34.6B deal value, far higher than the usual ~4% paid by U.S. acquirers this year, according to data compiled by Bloomberg.
- The fee could be viewed as a barometer of the regulatory risk HAL faces, but it is also a sign that HAL is confident it will successfully navigate that risk.
- Once combined, HAL and BHI would dominate the $25B U.S. market for onshore fracking, and unseat rival Schlumberger (SLB +0.6%) in several key lines of business.
- Investors may be misreading the situation, says FBN Securities' head of merger arbitrage Kathy Renck, who believes a 10% breakup fee is not out of line in a situation with known antitrust issues.
Nov. 14, 2014, 12:48 PM
- Oil services companies are mostly higher as Halliburton (HAL +1.7%) is indeed in talks to buy Baker Hughes (BHI +0.5%), a deal that would provide a jolt to oilfield services companies contending with falling oil prices: SLB +0.4%, OIS +1.2%, SPN +2.3%, CAM +0.2%, FTI -0.3%, NOV -0.6%.
- Sterne Agee analyst Stephen Gengaro calls a potential HAL-BHI combo a “HAL of a Frac-ing Deal," seeing several positives for HAL including strengthening its relatively weak position in artificial lift and production chemicals which are critical to enhancing HAL’s mature field strategy, enabling it to leverage its unparalleled U.S. pressure pumping logistics chain to enhance the efficiency of BHI’s operations, and providing the opportunity for significant cost savings which likely would total $600M-$750M or more.
- While antitrust concerns could force some divestitures, Gengaro does not believe it would prevent a deal from happening.
- Other potentially attractive M&A targets among oil services companies could include Dril-Quip (DRQ +0.7%), Frank’s International (FI +2.6%) and Oceaneering (OII -0.2%), Simmons & Co. says.
Nov. 13, 2014, 6:56 PM
- Baker Hughes (NYSE:BHI) confirms it has engaged in preliminary talks with Halliburton (NYSE:HAL) about a potential business combination and will offer no further comment.
- A merger could provide HAL with a "significant advantage in gaining global share, expanding margins and competing" against Schlumberger (NYSE:SLB), UBS analysts say, but digesting such a large acquisition could take two years or more and be a distraction to HAL.
- A combination of the second and third largest listed oil services groups by market cap likely would draw scrutiny from U.S. regulators, but the biggest obstacle to a deal might come from its E&P customers worried about the potential for higher prices at a time of falling crude oil prices.
- Also, doing a deal as oil continues to slide should make it a tough sell to BHI shareholders: Why sell amid such turmoil?
- BHI +16.3%, HAL +1.3% AH.
Nov. 13, 2014, 3:20 PM
- U.S. crude oil prices break below $75/bbl for the first time in more than three years, brushing aside an IEA report showing a surprise 1.735M barrel inventory drawdown as well as remarks by the Saudi oil minister dismissing talk of an oil price war among producers.
- West Texas crude settled today at $74.21/bbl, -3.9% and breaking below an important support level; during the past three years, futures have tested but not broken through that level three times.
- Brent crude recently was trading below $78, -3%.
- Global oil majors are all lower: COP -1.9%, BP -1.4%, CVX -1.4%, XOM -1.1%, TOT -0.9%, RDS.A -0.7%.
- Oil services companies and offshore drillers suffer even sharper drops: SDRL -4.4%, SLB -4.2%, HAL -3.9%, BHI -3.9%, RIG -3.8%, DO -3.5%, NBL -2.9%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, DIG, BNO, UGA, DTO, DBO, DUG, XES, IYE, IEO, CRUD, IXC, IEZ, PXE, USL, UWTI, IPW, FENY, PXJ, UHN, DWTI, DNO, RYE, FXN, SZO, GNAT, OLO, DDG, FILL, OLEM, TWTI
Nov. 10, 2014, 11:45 AM
- A new research report from Jefferies discusses four oil services stocks which it sees having huge potential upside, even as oil prices have taken a beating.
- Jefferies believes Schlumberger (NYSE:SLB) could be poised for years of solid growth despite the recent trend in oil pricing, and thinks the company will continue to drive margins on execution, technologies and efficiencies.
- Halliburton (NYSE:HAL) leads industry peers with North American margins of 18.2% and a plan to increase its allocation for its operations in North America.
- Baker Hughes (NYSE:BHI), which reported solid numbers for the quarter although some analysts were disappointed by margin guidance, while C&J Energy (NYSE:CJES) reported a very impressive earnings beat last week.
- The firm expects stock price increases of more than 40% for each of its selections.
Oct. 20, 2014, 3:23 PM
- Halliburton (HAL +0.9%) says it sees no signs of a slowdown in drilling activity despite the recent plunge in oil prices, echoing comments made last week (I, II) by rivals Schlumberger (SLB +0.5%) and Baker Hughes (BHI -0.9%).
- "Industry fundamentals suggest that these lower prices are not sustainable," HAL CEO Dave Lesar said on today's earnings conference call, noting that North American customers and national oil companies have not indicated a slowdown in activity levels.
- HAL says North America activity levels continue to surge higher month over month due to an unprecedented level of service intensity, noting it called the turnaround two quarters ago; this quarter, activity clearly is accelerating since the turnaround, it says, and does not see momentum slowing any time soon.
Oct. 17, 2014, 5:39 PM
- Schlumberger (NYSE:SLB) finished with a solid 3.7% gain today after a strong Q3 earnings report, but investors were particularly reassured by CEO Paal Kibsgaard's declarations that oil prices will recover and stabilize.
- "The key to the overall oil market is still that the global oil demand is currently set to increase by 1.1M bbl/day in 2015, which will require growth in exploration and production investments," the CEO said in today's earnings call.
- SLB shares had slumped 20%-plus in the three months before today due to the sharp slide in crude prices, and analysts say the stock still looks cheap.
- While WTI crude prices in the low-$80s have highlighted some concerns over the willingness of upstream customers to spend through the pricing weakness, "we believe prices are still more than sufficiently high to induce customers to keep existing plans,” writes S&P Capital's Stewart Glickman, who maintains a Buy rating and $128 price target on SLB.
Oct. 17, 2014, 10:17 AM
- Oil services (OIH +4%) stocks rip higher at the open following a strong earnings report from Schlumberger (SLB +7.4%) and as oil prices stabilize.
- Tumbling crude prices haven’t shaken the faith of at least two of the top providers of drilling and production services: SLB CEO Paal Kibsgaard describes the drop as “fear of short-term oversupply” and says the company is not changing a long-term view that its earnings will almost double from last year’s level by 2017, while Baker Hughes (BHI +4.7%) CEO Martin Craighead says his company's customers don't believe crude prices will stay low.
- HAL +5.5%, SPN +5.2%, WFT +5.1%, CAM +2.1%, NOV +2%, FTI +1.8%, DRQ +1.4%.
SLB vs. ETF Alternatives
Schlumberger NV is a supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry. Its business segments areReservoir Characterization Group, Drilling Group and Production Group.
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