Oilfield services: restructuring is key

Berenberg analysts Asad Farid and Jaideep Pandya have published a note (accessible here) on the oilfield services sector, initiating coverage on Petroleum Geo-Services, TGS NOPEC and CGG, as well as downgrading both Technip and Subsea 7 to Sell ratings (from Hold).

In summary, they argue:

  • The oil services sector is heading for a lengthy period of restructuring
  • Unlike prior declines, the rate of oil price recovery is likely to be gradual
  • Middle East and North Africa (MENA region) will remain countercyclical and exhibit 7%+ pa growth over 2015-16
  • The seismic sector has been proactive in restructuring, and the sharp reduction in global fleet capacity will help limit margin erosion in 2015
  • Berenberg has Buy ratings on Petrofac and Amec for their exposure to MENA, and on seismic contractor PGS for its low cost base and strong balance sheet; and Sell ratings on Technip and Subsea 7 due to their disproportionate exposure to deepwater Oil & Gas projects.

Edited from various sources by Joe Green

Published on 09/02/2015

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