Oilfield Profits: BAS and KEG - Analyst Blog
16 Junho 2011 - 1:49PM
Zacks
It's easy to think of energy companies in broad strokes. Either
there are the big integrated firms, or there are hundreds of
independent E&P firms, drillers, and refiners. But, of course,
in between are lots of companies that specialize in providing
services to all these firms. Names like Halliburton (HAL),
Schlumberger (SLB), and Baker-Hughes (BHI) are the
big players here.
Oilfield services is an industry group with 32
companies in it currently, according to the Zacks Industry Rank
which follows about 4,400 equities. And two smaller companies that
stand out this week -- with a better earnings front than the three
giants -- are Basic Energy Services (BAS) and Key Energy
Services (KEG), both of which are Zacks #1 Rank (strong buy)
stocks.
Doubling Profits and Then Some
Basic Energy Services provides drilling services to
US oil and gas producers that support the entire life cycle of a
well, from drilling to production and, finally, abandonment. The
$1.1 billion company, which has not yet returned to profitability
since the 2008 recession, has seen its stock more than triple in
the last nine months, rising from below $10 to a 52-week high above
$31.50 in April.
But it's the earnings visibility that has analysts
consistently raising their estimates and keeping BAS on the buy
list. In the past 90 days, earnings revisions have vaulted 2011
full-year EPS expectations from $0.61 to $1.39 and the 2012 profits
picture from $0.94 to $1.91.
BAS became a Zacks #2 Rank stock in mid-January
when shares were still trading below $17, as analysts began raising
their earnings estimates up from the recession trough. If you had
bought BAS on that recommendation, you would have made over a 50%
return inside of two quarters as the #2 Rank stuck for over three
months. Since late April, the stock has earned a #1 Rank in five of
the past seven weeks.
Onshore Drillers Gain New Ground
Key Energy Services, Inc., a $2.4 billion market
cap firm, is one of the largest providers of onshore oil and gas
well services in the United States and Argentina. In addition to
maintenance and work-over services, they also provide services
which include the completion of newly drilled wells, the
recompletion of existing wells and the plugging and abandonment of
wells at the end of their useful lives.
KEG has consistently been a Zacks #1 or #2 Rank
stock since early May as analysts boosted estimates from $0.63 to
$0.83 for this year, and from $1.03 to $1.39 for 2012. After the
company's earnings surprise in late April, the stock surged from
$16 to $18, but has spent the last two months carving out a trading
range between $15 and $18.
If the current stock market weakness should abate
or stabilize, these strong onshore drilling service companies
should be looked at for long entry opportunities. As long as their
earnings picture is strong, they are good aggressive growth
candidates and may provide balance to portfolios holding large cap
energy names.
Kevin Cook is a Senior Stock Strategist for
Zacks.com
BASIC EGY SVCS (BAS): Free Stock Analysis Report
BAKER-HUGHES (BHI): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis Report
KEY ENERGY SVCS (KEG): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
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