With U.S. oil and gas production leveled off in recent months but still producing at high levels, Credit Suisse named Halliburton Co. (HAL) - Get Report as its top pick for the oil services and equipment industry.
"North America has come back first and fastest; considering HAL is the biggest player in the North American onshore market, this is a major positive," wrote analyst James Wicklund in a Dec. 8 research note.
Wicklund said that the Houston, Texas-based company with a market capitalization of $38 billion has the most exposure to the fastest-growing segment of the North America market, completions, than any other large company Credit Suisse covers.
The firm has a $55 price target on the stock. Shares of Halliburton rose more than 1% to $43.93 at around 11:40 a.m. on Friday.
Wicklund sees the secular trend within North American shale of greater proppant intensity and longer laterals as well as U.S. Silica's position at the low end of the industry's cost curve as potential upside for the Frederick, MD-based company with a market capitalization of about $2.7 billion.
"Recent concerns around regional sand capacity expansions have driven multiple compression across the space," Wicklund said. "While we see these concerns as over-done, U.S. Silica is the most resilient to this shift in the market, as it has regional sand in its portfolio as well as a last-mile logistics solution to extract additional margin along the value chain."
Credit Suisse has a $40 price target on the stock. Shares of U.S. Silica rose 3% to $33.53 at around 11 a.m. EST on Friday.
SELECT ENERGY SERVICES
It might confuse investors as to why the full-service water company Select Energy Services Inc. (WTTR) - Get Report makes Credit Suisse's list, but the firm said it's a part of "one of the most misunderstood sub-segments" in oilfield services.
"Unconventional wells require huge and growing volumes of water for completions, resulting in large volumes of water that need to be removed, capturing value both ways," Wicklund said. "Those services, along with the delivery, storage, collection, and treating of water, make up the value chain of WTTR's integrated services."
Select Energy Services has the largest market share in this space at 7% to 10%, Credit Suisse estimated. Given that the Gainesville, Texas-based company with a $1.7 billion market capitalization has implemented a consolidation strategy and acquired Rockwater Energy Solutions, a chemical and environmental solutions provider and the number two player in the industry, Credit Suisse thinks that Select Energy Services "is creating and dominating what is becoming an increasing sub-segment of OFS."
The firm has a $20 price target on the stock. Shares of Select Energy Services rose 0.2% to $16.01 at around 11:40 a.m. on Friday.
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