Non-NAM’s Upward Trudge
Logging While Investing
OFS Weekly Analysis
42 pages, 34 exhibits
Link: sendspace.com
excerpt:
Our take on the group. We see enduring value in exposure to non-NAM markets —and
we look for signs of spending growth to emerge more strongly after mid-year —which
continues to steer our preferences — now nearer term and longer term — to diversified
services, land-based construction, and strongly free cash-flowing offshore drillers. Having
said that, the Macondo disaster has the potential to meaningfully undermine upstream
spending momentum, most obviously in offshore markets. We await better clarity of the
impacts before recommending buying the group, despite the recent sell-off. Our top
picks, with investment theses unrelated to the well disaster are as follows. In diversified
service large caps, HAL (top pick) and SLB appear well positioned to outperform in the
nearer term, particularly with 1Q10 caution already being reflected in shares. We prefer
NE among drillers. And in European OFS, we favor the defensiveness (including versus
expectations) and backlog outlook for onshore-exposed names including PFC.L.
Macondo Update. BP claimed last week that it was collecting 5,000 barrels of oil per day
from a suction hose that is attached to the ruptured riser, however it believed that a
significant amount of oil was still escaping. This week, the company plans to put a top kill
operation into place (perhaps as early as tomorrow), which would involve pumping heavy
drilling mud into the well in an effort to kill it. Despite the ongoing efforts, it appears as
though the government is growing frustrated with the challenges faced in stopping the oil
spill, as U.S. Interior Secretary Ken Salazar has stated that the federal government might
take over the operation if it decides that BP is not operating as it should. From a permitting
perspective, 3 permits were approved in the U.S. GOM last week according to data from
the MMS, including one for the GSF Development Driller III, which is drilling a relief well for
BP at Macondo. The other two permits were on the ENSCO 82 and Spartan 208 jackups.
U.S. Congressional hearings on the oil spill continue this week in both House and Senate
Committees. Schedule is TBA. |
