J.P. Morgan Executive Director and Senior Analyst Sees Tougher Times Ahead in 2014 for Oil Services Stocks: A Wall Street Transcript Interview with David Anderson Covering the Oilfield Services and Equipment Sector

Wall Street Transcript

67 WALL STREET, New York - January 10, 2014 - The Wall Street Transcript has just published its Oil & Gas: Drilling Equipment and Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Oil Price Expectations - Shale, Offshore and Deepwater Drilling - Unconventional Resources - Bundled Oil and Gas Services - Oil and Gas Transportation Services - Dividend Yields for Energy Investors - Domestic Crude Prices - International Energy Opportunities

Companies include: Halliburton Company (HAL), Schlumberger Limited (SLB), National Oilwell Varco, Incorp (NOV), Chevron Corp. (CVX), Exxon Mobil Corp. (XOM), Transocean Ltd. (RIG), Ensco International Inc. (ESV), Cameron International Corporat (CAM), General Electric Co. (GE), Total SA (TOT) and many others.

In the following excerpt from the Oil & Gas: Drilling Equipment and Services Report, an expert analyst discusses the outlook for the sector for investors:

TWST: When we talked about two years ago, you said that investor sentiment for the oilfield services and equipment sector was bottoming out. What has transpired since then - has investor sentiment improved or deteriorated?

Mr. Anderson: I would say investor sentiment has really oscillated this year. I'll call it somewhere between four and maybe as high as a seven on a scale of one to 10. Recently I would say investor sentiment has certainly faded as the calendar has run out. I think what's happening here right now is there are a lot of questions that are starting to be raised about the group. North America looks good, not great; I think increased E&P spending growth of 5% to 10% is already priced in.

The overriding concern right now is a dramatic sentiment change in around the longer-term direction of oil prices. It's the first time I've really heard this level of concern, and a lot of this is driven by increasing production in North Dakota, the Eagle Ford and the Permian, and the recognition that we're just in the beginning of oil production growth in the U.S., and how does that impact longer-term oil price?

So a lot of the questions I'm getting from investors really over the last couple of weeks has been centered around, in a lower-price oil environment, who do you own? Do you even want to own energy? Do you want to be in services? I think that's a new part of the discussion that we haven't been having over the last year or two.

TWST: How do investors need to approach investing in the oilfield services and equipment differently than they would approach investing in the oil companies themselves?

Mr. Anderson: I think what you have to be looking at is service companies that are best positioned for an environment of good, but not great, topline growth. We're looking at the truly strong companies in my space that have the ability to grow margins and grow earnings in an environment where the top line is going to grow rather modestly...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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