Oilfield Services & Equipment
Raising Price Targets Following Recent Share Price Gains
19 December 2010 - 68 pages
citigroupgeo.com
First page text:
As a result of the surge in oil service share prices since late October, most of
our Buy-rated names have met or exceeded our price targets. In this report, we
raise price targets and discuss our rationale for doing so.
We believe oil service shares over the next year are supported by a strong oil
price/drilling outlook, leading to positive EPS revisions through 2011.
We have examined the early-cycle multiples of the 2001-2006 cycle and how
these compare to valuation multiples today. Forward P/Es have remained
closer to 13x-17x in the current cycle as compared to the 20x-30x range seen
at the same point in the 2001-2006 cycle. We now believe that our
expectations for early-cycle share price gains and P/E multiples were overly
conservative. Thus we feel justified in boosting our price targets at this time.
Once earnings growth starts to accelerate, P/E multiples should contract.
Some of the best gains in the most recent drilling cycle occurred as earnings
estimates rose and P/E multiples contracted from 2004 to 2007.
We have revised our price targets on these Buy-rated stocks (see details in the
table below): Schlumberger, Halliburton, Transocean, Weatherford, FMC
Technologies, Diamond Offshore, Noble Corp., Nabors Industries, Helmerich &
Payne, Dresser-Rand, and Superior Energy Services. |
