Market Overview

Credit Suisse: U.S. Oil Production Can Stay Constant With Fewer Rigs

Credit Suisse: U.S. Oil Production Can Stay Constant With Fewer Rigs
  • Credit Suisse upgraded FMC Technologies, Inc. (NYSE: FTI) and reiterated an Outperform rating on Weatherford International Plc (NYSE: WFT).
  • FMC Technologies has declined 29 percent year-to-date, while Weatherford is down 14 percent.
  • Credit Suisse analyst James Wicklund said that valuations in the oil field services space will rely on "cash flow and free cash flow generation" for the next several years.

With all eyes on oil, Credit Suisse's James Wicklund issued a new note arguing that U.S. production could stay flat through 2016 – even as rig counts continue to fall below 2015 levels. That is due to "efficiencies from manufacturing activities" that use the latest technologies. But, it also means that "crude oil prices will stay low" through late 2016 "at least," Wicklund added.

Oil Services Sector: Two In Focus

So, in the oil services sector, what matters is valuations that focus on cash flow and free cash flow generation over the next few years. That focus led Wicklund to upgrade FMC Technologies to Neutral from Underperform and reiterate an Outperform rating on Weatherford, despite lowering the price target by $2 to $13. Wicklund reiterated a $29 price target on FMC Technologies.

Related Link: Few U.S. Shale Companies Added To Hedges In Q2

More Sector Highlights

More generally, Credit Suisse said it likes "SMID names with unique technology," like Newpark Resources Inc (NYSE: NR); "advantaged cost structures," like TETRA Technologies, Inc. (NYSE: TTI); "exposure to attractive end markets," like Franks International NV (NYSE: FI).

All of those names are rated at Neutral, though Wicklund notes that the firm sees "longer-term potential."

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Latest Ratings for FTI

Jan 2020DowngradesMarket PerformUnderperform
Dec 2019UpgradesNeutralBuy
Dec 2019DowngradesBuyHold

View More Analyst Ratings for FTI
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