Excerpt from Lehman report on the sector:
The oil service index (OSX) jumped by 13% in April (compared with a 9% gain in the
S&P 500) on the back of strong earnings reports by the vast majority of oil service and
drilling companies. Carbo Ceramics and Petroleum Geo-Services led oil services stock
performance while Transocean Sedco Forex was the strongest performer among the
drillers. For the first four months of 2001, the OSX has risen by 4% versus a 4% drop in
the S&P 500. Year-to-date, the strongest stocks have been Key Energy Services, and
Parker Drilling.
Given the significantly improved earnings picture and the supportive commodity price
environment, we are surprised that the outperformance of the group has not been
greater. Nevertheless we remain very bullish on the group as we believe that we are still
early in the cycle and valuations are attractive. Among larger-cap oil service companies,
our top stock picks are Weatherford International, Halliburton and BJ Services. Among
smaller-to-mid caps, we like Grant Prideco and Tidewater. In the contract drilling, we
consider a number of stocks quite attractive including Transocean Sedco Forex, Ensco,
Global Marine, UTI Energy, Nabors Industries, Rowan Companies, Key Energy Services
and Parker Drilling. |
