10 Oilfield Services Stocks to Ride Through an Upturn

With oil prices approaching the $50 per barrel mark, is it time to jump back into oil and gas stocks, particularly those of hard-hit oilfield services companies?

Seaport Global Securities analysts Mark Brown and Garrett Williams think the time is opportune given that upper $40's oil prices seem to be spurring more drilling activity in the second half of this year. As a result, they're recommending 10 small- to large-cap oilfield services stocks that could benefit from a recovery.

The firm ranks the companies on what it expects they will return - including share price upside and dividend yield -- based on its updated price targets for the sector after companies' second-quarter earnings announcements.

Topping the list is small capper Eco-Stim Energy Solutions (ESES) (77.8% estimated return; 0% yield), which it thinks will be a major beneficiary of shale growth potential in Argentina. The second is mid-cap Nabors Industries (NBR) (37.5%; 1.7%), whose significant discount compared with peers Patterson-UTI (PTEN) and Helmerich & Payne (HP) is unwarranted now that the overhang of bankrupt affiliate C&J Energy Services (CJES) is behind it and it has a promising new rig platform technology it will introduce in November. Third is the mighty Halliburton (HAL) (30.3%; 1.2%) given its low-cost positioning for a recovery in North America, particularly in well completions.

The next three include Patterson-UTI (27.8% estimated return; 0.3% yield) because of its significant North American completions exposure (pressure pumping accounts for more than a third of its revenues); Hornbeck Offshore (HOS) (27.3%; 0%) for management's prudent moves to amend its revolver before breaching the interest coverage covenant and pushing some of its spending into 2018 by deferring the delivery of two new vessels; and Flotek Industries (FTK) (26.4%; 0%) whose shares have more room to run, despite their 172% surge since January.

Seaport's last four recommendations include giant Baker Hughes (BHI) (22.1% return; 1.1% yield), which is well-capitalized and can also benefit from a North American recovery due to its strengthen in artificial lift and production chemicals; Emerge Energy Services (EMES) (21%; 0%), a "deleveraging story" with underappreciated earnings growth potential; Superior Energy Services (SPN) (19.8%; 0%), another U.S. turnaround beneficiary that could even become a consolidator in the industry; and offshore driller Rowan (RDC) (17.6%; 0%), which has strong liquidity and a high-spec fleet.

The firm also has buy ratings on Weatherford International (WFT) (18.4%; 0%) and Schlumberger (SLB) (15.4%; 2.1%). But it's concerned about Weatherford's negative free cash flow last quarter (due to national oil companies delaying payments to contractors) and its debt situation and Schlumberger's already high valuation, "which tempers our applause," the analysts said.

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