Rig Counts May Have Bottomed, According To Goldman Sachs

Although there are pockets of weakness, rig count is likely to have bottomed, Goldman Sachs’ Waqar Syed said in a report. The US rig count has risen for two consecutive weeks, representing the first “meaningful increase” since August 2015.

International Rig Count

International rig count also rose in May, for the first time since September 2015. “This bucks the usual trend of a 2-3 month lag between the inflection points for US/Int’l rig counts,” analyst Waqar Syed commented. LatAm continues to be weak, particularly Venezuela, where oil production has declined over the last few months due to cash flow constraints at its major producer.

Activity Ramping To Take Time

The timing of the rig count bottoming is in-line with expectations, although a sharp rebound from the current levels is unlikely, Syed mentioned. He expects US E&Ps to wait for signs of stabilization in oil prices around current levels before meaningfully ramping up activity. The ramping up can be expected in 1Q17.

2Q16 Estimates Revised

The analyst revised the 2Q16 estimates for the following companies to reflect QTD rig count and other changes:

• Schlumberger Limited. (NYSE: SLB) – Rated Buy, PT: $94. Estimate reduced from $0.26 to $0.22.
• Halliburton Company (NYSE: HAL) – Rated Buy, PT: $46. Estimate reduced from $(0.11) to $(0.17).
• CARBO Ceramics Inc. (NYSE: CRR) – Rated Sell, PT: $8. Estimate reduced from $(0.84) to $(0.86).