OIS, OIL States International Message Board

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Gold/Mining/Energy : OIS, OIL States International

OIS 8.040

+1.4%

Jan 9 3:59 PM EST

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From: Dennis Roth	2/21/2008 8:45:50 AM
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Oil States International (OIS): Outlook overshadows disappointing 4Q07; raising price target - Goldman Sachs - February 21, 2008 What's changed OIS reported EPS of $0.95 - in-line with our estimate of $0.95. Operating results were weaker than expected, but helped by non-operating items. Variance includes Drilling Services (-$0.07), Rental Tools (-$0.02), and Offshore Products (-$0.02) partially offset by Accommodations (+$0.01), Tubular Services (+$0.02), and Corporate (+$0.01). Implications We remain Neutral rated on Oil States. We thought the 4Q07 results were mildly disappointing, but the issues were largely seasonal – i.e. holiday and weather-related downtime. A more positive outlook for Offshore and Drilling, as well as evidence of a stabilization in OCTG rallied the stock 14% today. We raised our 2008/2009/2010 EPS estimates by 4%/2%/5% to $4.29/$4.89/$5.40 to account for the improved outlook. Accordingly, we raise our 12-month price EV/DACF-based price target by $5 to $41. While we share some of the enthusiasm from the improving fundamentals, we think today’s 14% rally was a bit of an overreaction given 2009 estimates only increased by 2%. Key takeaways are: (1) It appears OCTG fundamentals, which had been an overhang for several quarters, may be nearing a bottom –though visibility is still fairly low. Pricing increases made at the mill level and solid 4Q07 shipment levels are positive signs. (2) The utilization weakness in Drilling Services was largely weather and holiday-related downtime that will likely not persist in the near-term. (3) OIS’s acquisition of a new facility should alleviate some of the Offshore Products capacity constraints. Valuation OIS is trading at P-E/EV-DACF of 9.9x/8.5x versus the group at 15.5x/12.0x. Key risks Key risks include a sustained decline in commodity prices, and the continued decline in broader stock market indices.

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