Oilfield services sector: Planning for the worst, hoping for the best - Stifel
18/05/2020 13:12
** Brokerage Stifel sees a modest rise in 2021 earnings of
oil services companies after an oil price war and the COVID-19
pandemic led to a sharp drop in demand
** However, Stifel notes that a prolonged lull in demand
coupled with lowered hedged volumes in 2021 could delay a
rebound
** Says oil services companies' capital discipline should
lead to asset attrition and support a healthier market during
the recovery
** Sees possible oil services sector consolidation,
particularly in commodity businesses including pressure pumping
** Names Baker Hughes BKR.N , Schlumberger SLB.N as
favorites in the large-cap oilfield services space, and DMC
Global BOOM.O and Oil States International OIS.N among
smaller caps
** Favors BKR's geographic exposure, and a robust backlog in
the turbomachinery and process solutions segment; prefers SLB's
strong execution track record in international markets
** Brokerage says the playbook for this downturn appears
different, companies are focused on divesting noncore services
and preserving cash, while in prior downturns many companies
focused on expanding and emerging with greater market share
** Says dividends no longer sacrosanct, and companies are
planning for the worst
(Reporting by Arundhati Sarkar in Bengaluru)
((Arundhati.Sarkar@thomsonreuters.com; +1 646 223 8780 Ext:
2776; Reuters Messaging:
arundhati.sarkar.thomsonreuters.com@reuters.net))