As 2013 comes to an end, oil prices and natural gas prices have surged due to demand and extremely cold weather across the nation. With exploration and production (E&P) companies hitting all-time usage levels in the major shale plays around the country, the top oil field services names may be poised to have an outstanding 2014.
In a new research report, the oil services analysts at Deutsche Bank are clearly very positive on the sector for next year. Although, the market has been negative to energy stocks as fears of weakening U.S. oil prices remain pervasive, the outlook for activity next year continues to improve. The Deutsche Bank team continues to think North American leverage will outperform next year, but fighting sentiment is a losing battle at the moment. So they are focused on stocks with events and catalysts for 2014.
Here are the seven top stocks in the sector to buy for 2014 from Deutsche Bank. The first four are the high conviction stocks to buy and have among the highest price targets on Wall Street.
Baker Hughes Inc. (NYSE: BHI) is a top four name in oil field services. The company reported solid third-quarter earnings. Cash increased by $245 million to $1.37 billion as debt decreased by $334 million to $4.58 billion, sequentially. While Baker Hughes is a $25 billion oilfield services company, it never hurts to improve your balance sheet. The company is well positioned for the shale revolution and for the possible return of natural gas drilling activity. Investors are paid a 1.1% dividend. The Deutsche Bank price target is $86. The Thomson/First Call price target is set at $64. Baker Hughes closed Monday at $54.45.
Halliburton Co. (NYSE: HAL) is another one of the four names Deutsche Bank is very excited about. The company stands to benefit from continued robust levels of domestic drilling activity and a pickup in international markets. Management believes the company can deliver earnings per share of $6 by 2016, double the level from 2012. Investors receive a 1.2% dividend. The Deutsche Bank price target is posted at $84, and the consensus is much lower at $64. Halliburton closed Monday at $50.40.
Hercules Offshore Inc. (NASDAQ: HERO) is the top small cap name to buy for 2014. The company provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry worldwide. The company operates through five segments: Domestic Offshore, International Offshore, Inland, Domestic Liftboats and International Liftboats. The Deutsche Bank price target is posted at $10, and the consensus number is at $9.50. Hercules closed Monday at $6.39.
Nabors Industries Ltd. (NYSE: NBR) makes the top four list of the top stocks to buy at Deutsche Bank and is their top mid cap name. The company cites Nabors’ better than average fleet, including a large number of high-end rigs in the United States and strong international business to drive growth. The Deutsche Bank price target for the stock is $27, and the consensus is posted at $17. Investors are paid a 1% dividend. Nabors closed Monday at $16.87. The Deutsche Bank target is again the highest on Wall Street and would represent a 60% gain from current levels.
Patterson-UTI Energy Inc. (NASDAQ: PTEN) is another name in which the Deutsche Bank team sees tremendous upside. With strong cash flow generation and continued share repurchases to help as activity levels accelerate, the stock has solid potential for investors at this level. Deutsche Bank has a $30 price target and the consensus figure is at $23.50. Patterson closed Monday at $25.47. Investors are paid a 0.8% dividend.
Pioneer Energy Services Corp. (NYSE: PES) is another small cap name that could be a huge home run for investors in 2014. The company provides contract land drilling services and production services to independent and oil and gas exploration and production companies in the United States and Colombia. The company operates in two segments, Drilling Services and Production Services. The Deutsche Bank price target is a whopping $14, and the consensus is much lower at $9.50. Pioneer Energy closed Monday at $8.
Schlumberger Ltd. (NYSE: SLB) is another mega cap oil field services stock to buy for 2014. Strong offshore drilling activity combined with a seasonal rebound in Western Canadian activity have driven Schlumberger’s recent growth. Going into 2014, Schlumberger sees five markets providing strong growth: Russia, Sub-Saharan Africa, the Middle East, China and Australia. Shareholders are paid a 1.4% dividend. The Deutsche Bank price target is $124, and the consensus is lower at $110. Schlumberger closed Monday at $89.17.
Some of the Deutsche Bank price targets are among the most aggressive on Wall Street. Investors with little or no exposure to energy-related names should consider adding some of these top stocks to a well-rounded portfolio. As the shale boom continues in the United States, many of these top names should benefit in 2014.