Oilfield Services Updates from Stifel - April 29

[dan_s]

For long-term investors (horizon of more than six months) there are some "gems" in this sector that should bounce back strong in 2H 2020.

National Oilwell Varco, Inc. (NOV, $11.77, Buy; Target $16.00)
NOV Increases Cost-Cutting Targets, Takes Action to Emerge From Downturn Even Stronger; Maintain Buy - Stephen Gengaro at Stifel
NOV posted weaker-than-expected 1Q20 results largely due to global COVID-19 disruptions, and provided a fairly gloomy near-term outlook. However, management did note it has significantly boosted its cost-cutting targets, cut capital spending and has seen opportunities to boost market share given its strong financial position relative to competitors. We maintain our Buy rating on the shares and lower our target price to $16 from $18 based on our DCF analysis.

Liberty Oilfield Services Inc. (LBRT, $3.59, Buy; Target $7.00)
LBRT Initial Take - Very Positive. Excellent Results Easily Beat Expectations; Positive FCF Expected for Remainder of 2020 - Stephen Gengaro
Liberty posted 1Q20 adjusted EBITDA of $53.5 million, easily beating our $27.5 million estimate and $38.5 million consensus estimate. During the quarter, Liberty averaged 22.8 active frac fleets and delivered annualized EBITDA per fleet of $9.4 million versus our $5.5 million estimate and $5.2 million in 4Q19. While the beat is a positive for Liberty, management noted that it expects "in the next few months, very low frac activity in the oil basins". We believe that Liberty's strong balance sheet along with recent cost saving initiatives position the company well heading into perhaps the steepest downturn in the industry's history. We expect the shares to react well as the quarter demonstrated Liberty's strong execution, its close relationship with top tier customers, and its willingness and ability to react quickly to tough market conditions.