The extremely low price of natural gas is causing upheaval in numerous industries. One group of companies that appears to be feeling a squeeze from the shift is oilfield service companies, notes Raymond James analyst J. Marshall Adkins in a note today.
“Based on recent channel checks with smaller pumpers, we believe this will: 1) exacerbate logistical issues (sand, chemicals, and people), 2) cause more significant inefficiencies than previously expected (think utilization during moves), and 3) accelerate pricing competition in oilier basins.”
Pressure pumping prices are on the way down, and that could hurt some big service companies.
Adkins downgraded Baker Hughes (BHI) to Market Perform and Halliburton (HAL) to Outperform from Strong Buy.
“A slowdown in pressure pumping may be the worst kept secret on
Wall Street. In fact, both Halliburton and Baker Hughes (proxy for North America) sold off meaningfully in 2H11 as the market
was seemingly in front of this shift. We believe that the near term results may in fact be worse than some expect.”
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