Oilfield Services Update - July 14
Posted: Tue Jul 14, 2020 11:53 am
Stifel's update on Halliburton Company (HAL, $11.79, Buy; Target $11.00)
Resetting HAL Expectations Ahead of 2Q20 Earnings - Stephen Gengaro
We are adjusting our exceptions for HAL ahead of its 2Q20 earnings release expected on Monday, July 20th. Since reporting 1Q20 results on April 19th, HAL has jumped 55.5% versus the OSX's advance of 19.2%, and since bottoming on March 18th, HAL has risen 177.4% versus the OSX's climb of 50.0% for the same period. Owing to weaker-than-expected U.S. activity in 2Q20 and continued near-term uncertainty, we are lowering our estimates. We maintain our $11 target price based on our "low case" DCF analysis.
Raymond James published a new report on the active rig count yesterday. The active rig count is the #1 driver of oilfield services. RJ believes we will see a slight increase in the active rig count in Q4 if the price of oil firms up in the low $40s. I doubt we see much of an increase (maybe ~50 rigs going back to work) unless WTI moves over $50/bbl. CAPEX budgets are now set and there is lots of pressure on upstream companies to generate free cash flow from operations. Most BOD's will not approve an increase in new well drilling this year.
We will see an uptick in DUC completions, which should give hope to HAL, SLB and the sand companies.
I like SOI because they will gain market share.
Resetting HAL Expectations Ahead of 2Q20 Earnings - Stephen Gengaro
We are adjusting our exceptions for HAL ahead of its 2Q20 earnings release expected on Monday, July 20th. Since reporting 1Q20 results on April 19th, HAL has jumped 55.5% versus the OSX's advance of 19.2%, and since bottoming on March 18th, HAL has risen 177.4% versus the OSX's climb of 50.0% for the same period. Owing to weaker-than-expected U.S. activity in 2Q20 and continued near-term uncertainty, we are lowering our estimates. We maintain our $11 target price based on our "low case" DCF analysis.
Raymond James published a new report on the active rig count yesterday. The active rig count is the #1 driver of oilfield services. RJ believes we will see a slight increase in the active rig count in Q4 if the price of oil firms up in the low $40s. I doubt we see much of an increase (maybe ~50 rigs going back to work) unless WTI moves over $50/bbl. CAPEX budgets are now set and there is lots of pressure on upstream companies to generate free cash flow from operations. Most BOD's will not approve an increase in new well drilling this year.
We will see an uptick in DUC completions, which should give hope to HAL, SLB and the sand companies.
I like SOI because they will gain market share.