Ahead Of The Bell: Oil Services To Rebound

NEW YORK (AP) — Given expectations for a rebound in oil prices, investors should look to oil services stocks with a strong balance sheet, international deepwater exposure and low-priced shares, said an analyst as he highlighted some companies and downgraded others.

Jefferies & Co. analyst Stephen Gengaro raised his 2009 and 2010 benchmark oil price estimates to $55 and $65 from $45 and $55, respectively, based on expectations for a 2010 economic recovery and demand rebound amid weak non-OPEC supply growth.

Gengaro listed as favorites Baker Hughes Inc., Cameron International Corp., McDermott International Inc. and Weatherford International Ltd.

Baker Hughes, Gengaro said, will benefit from its attractive stock price, solid products and services offerings, improved reorganization and non-commodity exposure in North America, where activity remains weak. Gengaro maintained a "Buy" rating with a $45 price target for the company. Shares of Baker Hughes closed at $35.32 on Friday.

Weatherford International will likely show strong performance based on its presence in Mexico, where profitability is expected to climb, and its solid performance, said Gengaro. He also noted that the company's $224 million award to drill 20 wells in Iraq strategically positions it in a key Middle Eastern country. While North American activity levels will likely remain depressed, Gengaro said Weatherford is a "solid way" for investors to benefit from the eventual improvement of this market while maintaining solid international performance. He maintained a "Buy" rating with a $21 price target. Weatherford shares closed at $17.84 on Friday.