Two oilfield services stocks raised, three cut in BofA ratings shuffle

Jul. 15, 2022 2:44 PM ETChampionX Corporation (CHX), FTIOII, PTEN, HAL, RIG, BKR, CLB, HP, NOV, SLB, GTLS, HLX, NEX, LBRT, WHD, ACDCBy: Carl Surran, SA News Editor6 Comments

Jackup Offshore Oil Rig

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ChampionX (NASDAQ:CHX) +4.3% and TechnipFMC (NYSE:FTI) +2.1% in Friday's trading, as Bank of America upgrades shares of both oilfield services companies to Buy from Neutral with respective $22 and $8 price targets, as part of a ratings reshuffle prompted by concerns that a recession and related downward pressure on oil prices could pose downside risk to U.S. drilling and completions activity.

On the other hand, BofA believes the international market is set for accelerated growth into year-end 2022 and 2023, even under a base case for a mild U.S. recession.

The bank downgrades Patterson-UTI (PTEN), NexTier Oilfield (NEX) and ProFrac (PFHC) to Neutral from Buy, saying all three have some of the most negative revision risks under a recession scenario, and the bank revises price targets for several other names in the group.

BofA's Chase Mulvehill believes ChampionX's (CHX) "growth opportunities along with easing supply chain bottlenecks in PCT and a relatively stable production levered revenue base, strong balance sheet and newly initiated shareholder returns program offer a strong investment case."

On TechnipFMC (FTI), the analyst cites its leading market position in subsea, especially on integrated projects, as well as its improved balance sheet and free cash flow outlook that provides opportunities to return cash to shareholders within the next year, absent a recession.

BofA adds Schlumberger (SLB) to its US 1 List while removing Halliburton (HAL), although both remain Buy-rated; the firm cuts stock PTs to $43 from $55 and to $34 from $47, respectively.

Price targets also are cut at (RIG), (BKR), (CLB), (WHD), (OII), (NOV), (LBRT), (GTLS), (HP) and (HLX).

Recent weakness in Schlumberger (SLB) shares despite the company's strong performance presents an opportunity for investors, Daniel Jones said in a bullish analysis published recently on Seeking Alpha.

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