We have written in detail about some of the issues in the Permian Basin as the ability to transport production is being hampered by pipeline capacity issues. As a result, some of the top stocks working in the Permian Basin have been hit hard and investors are literally being offered some of the best entry points in years.
That holds true not just for the top exploration and production companies, but for some of the top oil services companies as well, especially the pressure pumpers.
In a new research report from Ken Sill, the much-respected oilfield services analyst at SunTrust, he believes that now may be an outstanding time to take advantage of some of the selling in the oil services sector, and he said this when discussing the issues surrounding the sector:
We expect any impact on Permian completions from potential takeaway capacity constraints will be limited to fourth quarter of 2018 to the second quarter of 2019. Growth in completions may need to slow, but it will not stop. Producers can grow production more slowly, choke back production until the bottleneck evaporates in late 2019, or deploy capital to other basins. With many pressure pumping stocks down 20% or more since mid-May, we think this is a good entry point for investors who can look past these timing issues to activity re-accelerating in mid-to-late 2019.
The SunTrust team feels that focussing on the high-quality companies makes the most sense now, and they highlight four they would be buying shares of now.
This company is down over 15% since late May, and remains a top large cap oil services pick at SunTrust. Halliburton Company (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry. The firm serves the upstream oil and gas industry throughout the lifecycle of the reservoir—from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.
Halliburton is the second largest provider of oil services and the number one pressure pumping services provider worldwide. For investors looking for an oil field services company to add, this is arguably the best, and top analysts feel they will be a huge benefactor as the fracking market has tightened significantly and prices are 20% to 30% off the lows.
The company reported first-quarter 2018 results of adjusted diluted earnings per share (EPS) of $0.41 on revenues of $5.74 billion. In the same period a year ago, the company reported EPS of $0.04 on revenues of $4.28 billion. First-quarter results also compare to consensus estimates for EPS of $0.41 per share and $5.75 billion in revenues.
Halliburton shareholders are paid a 1.51% dividend yield. The SunTrust price target is $69. The Wall Street consensus is at $62.13. The shares closed Thursday at $47.73.
This is a smaller cap stock that is down almost 25% in a month, and could be a solid pick for aggressive accounts. ProPetro Holding Corp. (NYSE: PUMP) provides hydraulic fracturing and other complementary services to upstream oil and gas companies, which are engaged in the exploration and production (E&P) of North American unconventional oil and natural gas resources.
The company operates through seven segments: hydraulic fracturing, cementing, acidizing, coil tubing, flowback, surface drilling and Permian drilling. Its pressure pumping segment includes cementing and acidizing operations. The company’s operations are focused in the Permian Basin. ProPetro’s fleet consists of 10 hydraulic fracturing units with an aggregate of 420,000 hydraulic horsepower (HHP).
The SunTrust price objective is $28, and the consensus price target is $23.30. The shares closed trading on Thursday at $14.62.