Supply Outstrips Demand For Oil Services; Q2 Reports May Be Catalyst
With demand outstripping the supply of oil field services, Bank of America said Wednesday it's likely that many companies in the sector will offer bullish commentary on pricing power as companies report earnings for the second quarter.
The market for land rigs is "effectively sold out" while spare capacity for hydraulic fracturing equipment is below 10 percent, according to Bank of America's Douglas L. Becker.
The exception: mobile offshore drilling rig demand has deteriorated and the sector faces increasing down time and declining day rates for their equipment. Companies in the group "remain consensus shorts," Becker said.
Becker rolled out a second-quarter preview for the sector in which many of his nearly two-dozen earnings estimates were ahead of consensus views.
Becker's Patterson target is $40 and $64 for U.S. Silica.
Becker sees U.S. Silica 2015 earning $3.30 per share compared with a consensus forecast of $2.91. For Patterson, Becker forecast 2015 earnings of $2.50 per share, versus a consensus of $2.02.
Becker has an $80 target on Halliburton and $133 on Schlumberger.
Recent spin-off NOW (NYSE: DNOW) "looks vulnerable" according to Becker, who expects the company to post second-quarter earnings of $0.30 per share compared with a consensus of $0.33.
Schumberger reports July 18, Halliburton on July 21, Patterson-UTI on July 24 and U.S. Silica and NOW on July 29.
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