Energy

UBS Has 4 Top Oilfield Services Stocks to Buy in Anticipation of Higher Oil Prices

Lee Jackson

Published: March 10, 2016 9:15 am

Last Updated: January 13, 2020 12:07 pm

While some have dismissed the rise in oil prices as mere short covering, the reality is that production has dropped dramatically, and less of the black gold is coming out of the ground. While oil still has to trade higher to show that the bottom has indeed been put in, we are pretty close to some of the crucial price territory.

A new research note from UBS oilfield services analyst Angie Sedita maintains that the first half of this year could end up being an opportune time for investors with a long-term horizon to buy energy sector stocks. She cautions though that the stocks could remain somewhat range-bound for a few quarters to come. These four top stocks are rated Buy at UBS.

Baker Hughes

The company agreed over a year ago to a friendly merger with fellow oil field giant Halliburton in a deal worth an astounding $34.6 billion. Baker Hughes Inc. (NYSE: BHI) was created in 1987 with the merger of Baker International and the Hughes Tool company, and it created innovative products like a rotary bit for drilling wells through rock.

The tie-up between the two oil field giants raised big questions about whether the takeover could survive antitrust scrutiny, given the level of consolidation that it promises within the oil production services business. As the scrutiny forges along, the European Union is now set to investigate the mega-merger over regulatory concerns. Halliburton and Baker Hughes extended the deal’s deadline to April 30 in December, after the U.S. Department of Justice told the companies they haven’t offloaded enough assets to ease antitrust worries.

The long wait to get the deal done with Halliburton may be starting to grind on some, but many on Wall Street still think that there is a solid chance the deal is completed. It is has become clear that additional assets will have to be sold by the company in an even greater effort to get approval.

Baker Hughes investors receive a 1.52% dividend. The UBS price target for the stock is $50. The Thomson/First Call consensus target is $57.54. The stock closed Wednesday at $44.31.

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