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Gold/Mining/Energy : OIS, OIL States International -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (12)	5/9/2008 11:37:32 AM
From: Dennis Roth	Respond to of 13

Oil States International (OIS): Raising price target on better accommodations & OCTG outlook - Goldman Sachs - May 01, 2008 What's changed Oil States reported 1Q08 EPS of $1.31 vs. our $1.18 estimate and consensus of $1.15. The $0.13 EPS beat was primarily due to higher operating income in Accommodations (+$0.17) , which was partially offset by weaker than expected operating margins in Rental Tools and Drilling services. A faster than expected ramp-up in new room capacity in major oil sands lodges and redirection of mobile units to oil sands drove Accommodations. We raise 2008-2010 EPS estimates by 9%, 10% and 10% to $4.68, $5.39, and $6.06 on new room capacity and strength in OCTG. Implications We remain Neutral rated on OIS shares. We like the stock’s strong leverage to North American natural gas fundamentals, its exposure to the supply constrained OCTG markets, and its inexpensive valuation. However, following the stock’s 7% rally on Wednesday, we see better risk-reward in other names such as Conviction Buy-rated HAL. Key takeaways for the conference call include: (1) Tubulars should benefit from the tightness in OCTG markets where inventory stands at a bullish level of 4.3 months of supply. We are modeling $145 per ton margin in 2Q08 and as much as $160 per ton in 4Q08. (2) Accommodations should remain strong - bolstered by capacity additions and demand for the mobile units as drilling activity improves. We are forecasting 40% revenue growth in accommodation in 2008. (3) Although fundamentals in OCTG are strong, volume growth may be limited due to supply constraints. Valuation We raised our 12-month price target to $54 from $47 to be between our “mid” and “high” trading range. OIS trades at 9.3x 2009 P/E vs. group average at 14.4x. Key risks Decline in the commodity prices and a prolonged decline in equity indices.