WORRIED ABOUT stocks after this week's roller coaster ride? Well, here's one ray of hope: The oil sector is anticipating good news in the form of production cuts when OPEC meets Wednesday.
Dan Rice, portfolio manager of State Street Research Global Natural Resources (SSGRX), says that major oil producing countries could cut 1.5 million or more barrels a day from production. Already, a handful of countries have announced they would cut production by 800,000 barrels. Rice sees oil prices spiking to $15 to $17 a barrel, from $12, in the next three to four months, if more production cuts are promised.
That's not the only action in the oil sector expected next week. After Schlumberger (SLB) announced Friday it will acquire Camco International (CAM) for $3.1 billion, speculation immediately began about which oil services companies will follow. Portfolio manager John Segner, who manages Invesco Strategic Portfolios Energy (FSTEX), sees Cooper Cameron (RON), Smith International (SII) and BJ Services (BJS) as likely candidates because of their cheap valuations.
Rice agrees, and adds EVI (EVI) to the list of potential takeover targets. "They cannot be a major player on their own," Rice says. Don't rule out more acquisitions from the companies that have already announced purchases such as Schlumberger, Baker Hughes (B/si/tools/eqsnaps/charts.cfm?symbol=For more information and analysis of companies and mutual funds, visitSmartMoney Interactive at smartmoney.com and Halliburton (HAL). Rice says they may try to grab even more oil services companies as they transform themselves into one-stop shops for oil producers. The portfolio manager has boosted his fund's holdings of oil services and oil equipment stocks from just 2% in mid-March to 20% because they have become so undervalued.
Rice also sees land drillers such as Nabors Industries (NBR) looking to buy offshore drillers as a way to diversify. Good fits for Nabors are Cliffs Drilling (CDG) and Pride International (PDE), Rice says.
From SmartMoney |
