The last two months have been painful for oilfield investors. Recent conversations with clients indicate an almost weary investor base, dizzy from the recent volatility and seemingly futile attempts to answer the only question that matters: "Will Europe suck us into another financial black hole similar to 2008/2009?" While we remain skeptical of Europe's ability to fix its problems without more pain, we find it impossible to handicap the depth and timing of that pain. In fact, many investors believe we are only about halfway through the type of correction that the oilservice stocks experienced in 1998 and again in 2008. Even though we recognize the potential for more short-term downside to the energy stocks, we would argue that the underlying fundamentals for the oilfield service industry are meaningfully better today than they were in 2008. Additionally, it appears that the market is already pricing in a meaningful decline in oilfield service earnings.
IMO, unless there is a significant drop in oil prices, the oilfield service companies (especially the onshore drillers) are going to do quite well. If the natural gas price will get back over $4/mcf, they will do even better.
Winter is just ahead and so is an uptick in demand for oil.
Market comments from Raymond James
Market comments from Raymond James
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group