Jefferies Oulook On Oil Services & Equipment

Jefferies issued a note on Oil Services and Equipment Thursday and saw the near-term outlook worsening.

Analysts led by Eduardo Royes commented that with “Brent down 25 percent since early-Dec, we expect "patchwork" floater demand dries up in '15 and so we revise our floater rigcount/driller estimates down...jackups, the Middle East/ SE Asia look relatively better than W Africa/the GoM.”

Royes believed that “with the oil price slide continuing, smaller oil & gas co's that played a key role in keeping the 2014 floater rigcount flattish likely pull back materially.”

“We now model a peak-to-trough (mid-2014 to mid-2015) floater rigcount decline of 25 rigs/-9 percent. However, we believe that if there is a silver lining to commodity price weakness in what was an already increasingly oversupplied market, it is that stacking could accelerate— we believe ~25 rigs could be removed from competitive supply in 2015 and ~50 in the next two years,” according to the note.

Royes concluded that “until the commodity price finds a floor and the macro outlook stabilizes, we likely continue to chase
fundamentals lower.”

The firm maintained Buy ratings on two companies:

Atwood Oceanics, Inc. ATW with a $40 price target. ATW recently traded at $27.23, up 0.33 percent.

Rowan Companies PLC RDC with a $28 price target. RDC recently traded at $23.80, down 0.34 percent.

Diamond Offshore Drilling Inc DO, ENSCO PLC ESV, Hercules Offshore, Inc. HERO, Noble Corp plc NE, Paragon Offshore PLC PGN and Transocean LTD RIG were all rated Hold.