Recessionary Fears Hit Oilfield Service Companies

Forbes.com, Fall, 2011. This article was placed on behalf of the U.S. based equity research effort of institutional broker and investment bank Canaccord Genuity. It was part of a series of articles developed under an agreement with forbes.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week. The site, forbes.com is one of the top 500 sites in the world with nearly 10 million subscribers and approximately 100 million page views a month.

Canaccord Genuity energy analyst Scott Burke made an across the board reduction in price targets for the oilfield services companies he covers. The price target reductions were predicated on “recessionary scenarios.”

“Further sustained declines in oil prices would put our current earnings estimates at risk, especially for North American land focused providers. We are reducing our target prices and considering a recessionary downside scenario for our covered service companies.”

Recessionary price targets are as follows:

-Baker Hughes Inc. (BHI) target to $59 from $90
-Halliburton Co. (HAL) to $46 from $67
-Schlumberger Ltd. (SLB) to $73 from $104
-Weatherford International Ltd. (WFT) to $18 from $29
-Basic Energy Services (BAS) to $28 from $47
-Complete Production Services (CPX) to $33 from $45
-Key Energy (KEG) to $15 from $25
-RPC Inc. (RES) to $24 from $30
-Atwood Oceanics Inc. (ATW) to $59 from $57 (note: Price Target Raised)
-Diamond Offshore Drilling Inc. (DO) to $66 from $82
-Ensco International plc (ESV) to $68 from $82
-Noble Corp. (NE) to $40 from $55
-Transocean Ltd. (RIG) to $64 from $69

Mr. Burk added, “If the world is beginning a recession, we would expect oil prices to have downside to the $50-60/bbl range.”