Analysts at RBC believe it is high time to consider oil recovery and start buying oil-field services stocks like Schlumberger (SLB), Patterson-UTI Energy (PTEN), Nabors Industries (NBR) and Precision Drilling (PDS), which should trade with the price oil.
RBC says:
We are positioning for the recovery. This is based on the view that oil bottoms in 1H15, improves during 2H15, and averages $75+/bbl in 2016. US land drillers and US intensive service companies provide the best returns in early phases of cycle recovery. OFS stocks will likely trade with oil, not E&P budget/rig count cuts at this phase of the cycle…We remain bullish on North American land focused names given that US E&P spend has the highest velocity of change. Land drillers, US services, and frac sand suppliers remain our favored sub-sectors…
Historical precedence suggests that land drillers provide the best returns among OFS stocks off business cycle lows. Since 1997, three of the top five performing stocks off the lows have been Patterson-UTI Energy, Precision Drilling Corp, and Nabors Industries.
Land drilling stocks have rallied 28% since bottoming on Jan. 15, leading some investors to question whether the stocks have run too far, too fast. We think the accelerated rebound in land drilling stocks is a product of the cycle playing out more quickly than in the past, although overall cycle dynamics remain intact.
The best ideas are Schlumberger and Nabors, while Patterson-UTI Energy is a small-cap best idea, says RBC quoted by Barron's.
