NEW YORK (AP) ¿ Shares of oil service companies advanced on Tuesday after an analyst upgraded the sector on an expected rebound in commodity prices and a belief that uncertainty in oilfield services stocks will decline. Goldman Sachs analyst Daniel Boyd said his stock preference is shifting more toward more volatile stocks which have reached attractive prices and away from more defensive stocks. Boyd upgraded Weatherford International Inc. and Halliburton Corp. to "Conviction Buy" from "Neutral." He said Halliburton is trading at a discount compared to its peers, which he believes is unjustified considering its market share and solid balance sheet. Shares of Weatherford jumped $1.28, or 9 percent, to $15.45. Halliburton shares rose $1.01, or 5.4 percent, to $19.80. Land drillers Nabors Industries Ltd. and Patterson-UTI Energy Inc. also received upgrades from Boyd, to "Buy" from "Neutral," based on expectations that the gas rig count will trough in the second quarter and pick up materially in 2010. Boyd said he believes natural gas production supply and demand is improving from extreme lows and that returns on these stocks could be very attractive. Even though land drillers have rallied in recent weeks, Boyd insisted that there is still meaningful upside in these names. Since the beginning of March, shares of both Nabors and Patterson-UTI have rebounded more than 50 percent.
On Tuesday, shares of Nabors gained 92 cents, or 6.8 percent, to $14.32. Patterson-UTI shares climbed 97 cents, or 8.3 percent, to $12.94. Boyd upgraded Ensco International Inc. to "Buy" from "Neutral," saying that he prefers offshore drillers with jackup rigs and deep water fleet. Boyd expects companies with a large jackup rig count to outperform in the beginning of a sector rebound. He also favors Ensco's low cost structure and strong balance sheet. Shares of Ensco jumped $1.42, or 4.8 percent, to $30.96. Boyd removed both Schlumberger and Transocean Ltd. from its "Conviction Buy" list, giving both stocks a "Neutral" rating. He praised Schlumberger's international exposure, strong relationships with national oil companies and solid balance sheet, but believes the stock has risen too far, citing concerns about the company's operations in Russia and exploration spending levels. "Schlumberger receives nearly 7 percent of its revenue from Russia, which now appears to be one of the worst oil service markets in the world, on par with the US," Boyd said. Boyd expects the company's 2010 profit to fall by 20 percent.
Shares of Schlumberger rose $1.40, or 3.2 percent, to $45.50. Transocean shares gained 79 cents to $64.92. Other oil services stocks Boyd downgraded include Noble Corp. to "Buy" from "Conviction Buy," Diamond Offshore Drilling Inc. to "Sell" from "Buy" and Pride International Inc. to "Neutral from "Buy." Noble shares climbed 99 cents, or 4 percent, to $26.57. Shares of Diamond Offshore Drilling gained 77 cents to $70.11. Pride International shares rose 91 cents, or 4.2 percent, to $22.63.