Deutsche Bank’s top picks for oil ser­vices up­cy­cle

Financial Mirror (Cyprus) - - FRONT PAGE - By Lee Jack­son

If there is one thing that has played out be­fore, it is the boom and bust cy­cle in the oil in­dus­try. As a re­sult there have al­ways been some pre­dictable “play­book” trades to take ad­van­tage of the up and down stock moves. In a new re­port, the an­a­lysts at Deutsche Bank agree his­tory re­peats it­self, but this time may be a lit­tle dif­fer­ent.

While the Deutsche Bank team be­lieve oil mar­ket sup­ply and de­mand fun­da­men­tals are be­gin­ning to tighten, and in the past this was the time to begin buy­ing en­ergy stocks for the re­ver­sal, they think this up­cy­cle will be far more sub­dued in the over­all pace of the move. The also think that the well ser­vice com­pa­nies could be the big­gest ben­e­fi­cia­ries.

The Deutsche Bank an­a­lysts’ three top oil ser­vice stock picks are Ba­sic En­ergy Ser­vices Inc. (NYSE: BAS), Key En­ergy Ser­vices Inc. (NYSE: KEG) and Su­pe­rior En­ergy Ser­vices Inc. (NYSE: SPN).

This com­pany pro­vides well site ser­vices es­sen­tial to main­tain­ing pro­duc­tion from the oil and gas wells within its op­er­at­ing area. It em­ploys more than 5,100 em­ploy­ees in more than 100 ser­vice points through­out the ma­jor oil and gas pro­duc­ing re­gions in Texas, Louisiana, Ok­la­homa, New Mex­ico, Arkansas, Kansas and Ap­palachian re­gions.

Port­fo­lio manager Dmitry Balyasny just bought a sig­nif­i­cant chunk of the stock. In a fil­ing with the Se­cu­ri­ties and Ex­change Com­mis­sion, the firm re­ported buy­ing a whop­ping 2.6 mln shares of the stock.

The Deutsche Bank price tar­get is $10, which is down from $14. The Thom­son/First Call con­sen­sus tar­get is $7.99. Shares closed on Fri­day at $6.89.



Rocky Moun­tain and

In­vestors may ben­e­fit from a sub­stan­tial fall in this stock’s price since last sum­mer. Down a gi­gan­tic 80% from highs posted a year ago, the com­pany may be a way for in­vestors look­ing to get sub­stan­tial lever­age on an oil ser­vices stock, and at this price level, Key En­ergy Ser­vices could be a takeover can­di­date.

The com­pany



Colom­bia, Ecuador, the Mid­dle East and Rus­sia.

The Deutsche Bank price tar­get is $3. The con­sen­sus tar­get is posted at $2.45. Shares closed Fri­day at $1.85

Su­pe­rior En­ergy Ser­vices serves the drilling, com­ple­tion and pro­duc­tion-re­lated needs of oil and gas com­pa­nies world­wide through its brand name drilling prod­ucts and its in­te­grated com­ple­tion and well in­ter­ven­tion ser­vices and tools, sup­ported by an en­gi­neer­ing staff who plan and de­sign so­lu­tions for cus­tomers.

The Deutsche Bank an­a­lysts feel that the com­pany should ben­e­fit on both the pump­ing and well ser­vice side of the in­dus­try. They also feel that Su­pe­rior could be the sin­gle big­gest ben­e­fi­ciary of po­ten­tial di­vesti­tures com­ing from the Baker Hughes Inc. (NYSE: BHI) and Hal­libur­ton Co. (NYSE: HAL) merger.

In­vestors are paid a 1.6% div­i­dend. The Deutsche Bank price tar­get is $27, and the con­sen­sus tar­get is $25.18. The stock closed Fri­day at $22.06.

With two stocks trad­ing un­der $10, in­vestors not only have a way to put to­gether a larger po­si­tion of th­ese top picks, they may also have a way to play con­sol­i­da­tion in the in­dus­try as well.

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