The oil service sector was upgraded from neutral to attractive Tuesday by Goldman Sachs.
"We recognize that the OSX
Oil Service Index is well off of the low but see considerableupside as we progress through the commodity driven phase of the cycle,which is likely to be driven by multiple expansion," wrote analyst Daniel Boyd. "While we are 23% below consensus EPS for 2010, we expect the stocks to look through thelast leg of negative revisions as investors gain confidence in oil prices andan early 2010 trough in earnings.
"Waiting for consensus estimates tobottom would likely result in missing most of the initial 50-60% rally -- aswas the case in 2002. We remain confident in our 2010 oil price forecast of$70/bbl
per barrel and our natural gas price forecast of $6.50/MMbtu
thousand British thermal units."
to buy from neutral on early-cycle growth potential, and lifted
to buy from neutral.
Patterson UTI Energy
went to buy from neutral and
Helmerich & Payne
from sell to neutral.
went to neutral from sell;
was cut to neutral.
were downgraded to neutral from buy, and
went to sell from buy.
was taken off the conviction buy list.
"Conversations with investors also suggest that there is significantdemand for energy stocks; however, many are waiting on the sidelines hoping for a pullback," Boyd wrote. "We would recommend buying on any pullback.
"We are rotating out of stocks with more defensive characteristics such as deepwater andinternational exposure and in to early cycle, higher-beta stocks. We recognize that many ofthe early cycle sub-sectors may have less leverage to the next up-cycle (relative to thepast) due to supply additions (e.g. land drilling, pressure pumping, jackups) but believethat there is still significant upside given current valuations (i.e. 100% upside as opposedto 200% upside in prior up-cycles)."