3 Drilling Stocks to Buy Ahead of 2016 Recovery
While many have remained hopeful that the damage inflicted in the energy arena would start to reverse course this year, a recent plunge in oil prices to six-year lows has pretty much pulled that off the table. In a new report from UBS, despite being in the “lower for longer” camp, the firm definitely remains positive on three top land-based drillers.
The UBS team does not sugarcoat the current situation, and they feel that the oil services sector will remain range-bound over the near to intermediate term as oil prices remain under pressure. With that caveat in place, they also are positive on the land drillers long term and think investors can selectively start to bottom-fish between now and the end of the year.
These three top land drillers remain rated at Buy.
Helmerich & Payne
This company primarily operates as a contract drilling company in South America, the Middle East and Africa. Helmerich & Payne Inc. (NYSE: HP) provides drilling rigs, equipment, personnel and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms, tension-leg platforms and spars in offshore areas.
The drilling giant beat on fiscal third-quarter 2015 earnings. Earnings per share from continuing operations (excluding special items) came in at $0.27, surpassing the consensus estimate. Revenues in the quarter came at $659.7 million, down 30.7% from the third quarter of fiscal 2014, yet surpassing the consensus estimate. The UBS analysts acknowledge that pricing weakness will remain a struggle, but they note that land drillers typically lead the sector off the bottom.
Helmerich & Payne investors are paid a very big 4.41% dividend. The UBS price target for the stock is $80 and the Thomson/First Call consensus target is $68.15. Shares closed Wednesday at $62.29.