Simmons sees further gains for oil service stocks
(This is from Monday, but I don't remember seeing it posted here.
....A little optimism to season the API #s <g>
Crude down only $.16 from Tues close as of 7AM @ $17.50 --d )
biz.yahoo.com
HOUSTON, June 7 (Reuters) - Energy services investment bank Simmons & Co said on Monday it saw average potential gains for oilfield service stocks of 17 to 40 percent by the year's end.
The sector has already posted strong gains, triggered by the recovery in oil prices since March. Even so, Simmons analysts said stock prices did not yet fully reflect the extent of the likely recovery in earnings over the next two years.
''I think the street has probably dramatically underestimated the growth potential for service earnings,'' analyst Dan Pickering said in a conference call with institutional investors, referring to Wall Street analysts.
Pickering was discussing the outlook for seven of the biggest oilfield service companies: Schlumberger Ltd., Halliburton Co., Baker Hughes Inc., Weatherford International Inc., Smith International Inc., Cooper Cameron Corp. and BJ Services Inc.
Pickering said Simmons expected these companies' to benefit from increases of 15 percent in oil companies' exploration and production spending in both 2000 and 2001.
Cost-cutting measures implemented during last year's severe downturn for the energy sector are expected to lead to even greater increases in profits during both years.
''On average for the seven companies we believe 2001 earnings will be up almost 60 percent versus 2000,'' Pickering said.
Scott Gill, another Simmons analyst, said the estimate of gains of up to 40 percent for oilfield service stocks was based on the assumption that prices would rise to multiples of 25 to 30 times the companies' estimated earnings per share.
Multiples for oilfield service stocks previously reached levels of 29 to 33 times earnings per share during the peak of the previous cycle, he said.
Gill said the stocks of medium-sized companies were likely to outperform the stocks of bigger companies such as Schlumberger and Halliburton.
Simmons expects Cooper Cameron and Smith International to show the greatest stock price appreciation, with gains of 53 to 84 percent, and 35 to 62 percent, respectively.
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