Susquehanna's 'Positive Bias' Toward Oilfield Services Stocks

Susquehanna analyst Charles Minervino just released a new report that details the firm’s updated take on the oilfield services industry. Outside of a sharp, unexpected spike in crude oil prices, Susquehanna does not believe that the upcoming earnings season will serve as a positive catalyst for oilfield services stocks.

Global drilling reductions
The global decline in drilling activity continued throughout Q2, which led to pricing declines for rigs, pressure pumping and other oilfield service product lines. Although these pricing pressures were widely anticipated, the latest data does not suggest that an end to low prices is in the cards any time soon.

The numbers
North American rig counts declined by 35 percent sequentially in Q2, but international rig counts fell by only 6 percent during the quarter. Susquehanna is forecasting a 34 percent sequential decline in North American drilling spend in Q2 and a 46 percent decline for the full year. The firm is also expecting a total North American rig count decline of 43 percent for the full year.

Positive bias
Overall, Susquehanna remains bullish on the oilfield services industry long-term. “We still have a positive bias towards the group for a 12-month period, but think more convincing data points need to materialize in 2H15 to drive confidence in current 2016 estimates,” Minervino explains.

Susquehanna currently prefers diversified service providers over land drillers and lists Baker Hughes In c BHI, Halliburton Co HAL and Slumberger Limited SLB as its top Positive-rated stock picks.

The firm also has Positive ratings on the stocks of Nabors Industries Ltd NBR and Patterson-UTI Energy Inc PTEN.