The stock is down almost 18% since May and could be offering the best entry price point since last January. Halliburton Co. (NYSE: HAL) now seems to be in the final stretch of getting the merger with Baker Hughes completed, as mentioned above, and the trick is to find the right buyers for the businesses that the U.S. Department of Justice requires be divested.
The oil field giant announced last year a $1 billion investment to develop huge potential oil fields in Ecuador, and it has entered into a long-time deal with Petroamazonas, an Ecuador-based company involved in the exploration and development of the country’s oil reserves. With oil being absolutely demolished over the past year, this top oil service company is a great stock to buy on sale.
The company remains one of the top holdings in Jeffrey Ubben’s $19 billion ValueAct Capital’s portfolio. It was also a new position added to Simon Sadler’s Segantii Capital hedge fund. Value buyers and bottom fishers are actively buying the stock at current levels.
Halliburton investors receive a 1.8% dividend. The UBS price target is $60, and the consensus target is $53.80. Shares closed Wednesday at $39.21.
This is hardly a company that many investors would view as a value stock, but given the debacle in the energy sector over the past year, the decline in share prices has pushed it almost to value levels. Schlumberger Ltd. (NYSE: SLB) remains the largest oilfield services company in the world for now, with far-reaching operations all around the globe.
Schlumberger could be poised for years of solid growth, despite the huge turn down in oil pricing. Jefferies and a host of other Wall Street analysts think the company will continue to drive margins on execution, technologies and efficiencies. Russia, Saudi Arabia, Iraq and China are expected to be the strongest markets, if geopolitical concerns remain somewhat in check.
The company announced in August it was buying oil field services giant Cameron International in a deal expected to cost about $12.7 billion in cash and stock. Wall Street analysts note what they term the company’s “drive to disrupt the status quo,” which includes transformation initiatives like the purchase of Cameron. They actually raise the price target and forward estimates as they see lower capital needs. Trading at a low 6.6 times the firm’s normalized EBITDA estimates, the stock looks cheap.
Schlumberger investors are paid a solid 2.56% dividend. The $100 UBS price objective is higher than the consensus target of $89.84. Shares closed Wednesday at $80.31.
Weatherford International Ltd. (NYSE: WFT) has been cut almost 50% since the highs the stock printed last summer, and it was forced to cut 8,000 jobs back in early February, almost 15% of the company’s total workforce. The company still offers customers a wide range of global capabilities, including a proprietary system for pressure management in the mushrooming arena of subsea production. The changes in government oil policy in Mexico last year may provide some favorable tailwinds for the company, despite the huge downturn in oil pricing.
One of the ways that Weatherford has continued to stay relevant after over a year of declining crude prices, and capital expenditure slowdowns from customers, is by lowering corporate costs. According to management, the company has now reduced its workforce by 11,000 employees in 2015, which will translate to a reduction in annual operational costs of $803 million.
The UBS price objective is $15, and the consensus target is $12.39. The stock closed on Wednesday at $11.25.
The oil services trade is still a contrarian one, to say the least. Oil seems to have hit bottom and turned higher, and that’s a plus. The pain in the industry is not going away anytime soon, so sticking with the top names that weathered downturns before makes the most sense.