Offshore drillers haver been hardest hit by the year-long slide in crude prices but thoughts from Credit Suisse analysts point out that these are not the only drillers on rocky footing.
And not even industry leaders like Schlumberger (SLB) , which has been praised for being the first to prepare for a downturn and continues to outperform its peers , escaped Credit Suisse' criticism Wednesday.
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"Our preference order is BHI/HAL due to [North American] exposure and expectations of execution," the analysts said. "SLB has valuation headwinds and issues with exploration, deepwater and international exposure but longer-term exposure to the stock is essential."
Helmerich & Payne and Patterson UTI, along with PDS, were dropped to Underperform by Credit Suisse, which said current "spot" rates will likely fall when incremental rigs go to work.
"On valuation, HP is the worst offender, in our view, with overly optimistic assumptions for $35K spot market dayrates and forgiveness of deferred tax liabilities still not enough to justify the current price based on our rig count," analysts James Wicklund, Jacob Lundberg and Charles Foote wrote.
The firm believes Nabors is the relative winner due to its international exposure, but still downgraded the stock to Neutral.
Drillers like Helmerich & Payne and Patterson-UTI, with 347 and 161 tier one rigs in their arsenals, respectively, will find it harder than some smaller players to win enough new build awards due to the large size of their fleets, according to FBR Capital Markets analyst Thomas Curran.
Curran believes micro-cap player Independence Contract Drilling (ICD) is set to outpace these competitors in inking pad-optimal new build contracts.
Meanwhile, the market has reacted poorly to oil prices easing off Tuesday's $49.10 per barrel close ahead of a Thursday meeting by the Organization of the Petroleum Exporting Countries, or OPEC. Futures were down by more than 2% around 11 a.m. to $48.08 per barrel.
And all four of Credit Suisse's downgrades plunged in early morning trading, with Nabors leading the way down 7% to $8.74 per share. PDS followed closely, trading down more than 6.5% to $4.40 per share. And HP and PTEN both declined by more than 4% in early Wednesday trading to $58.55 and $17.84 per share, respectively.