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Energy gains to moderate, but oilfield services remain strong | OilPrice.com

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The energy sector has enjoyed extraordinary gains in the current year, with the big oil companies setting records left and right.. exxonmobile (New York Stock Exchange: XOM), Chevron (NYSE: CVX) and Shell (NYSE: SHEL) together generated $46 billion in profit in the second quarter, with the three setting new quarterly earnings records. In general, the high prices of raw materials are largely due to the large profits of oil and gas companies.
And now energy experts say the party will continue into 2023, just not as wild. In a recent Moody’s research reportAnalysts say they have changed their outlook for the Global Energy sector to stable from positive.

According to the report, industry profits will broadly stabilize in 2023, but will remain below levels reached by recent peaks. Analysts note that commodity prices have declined from very high levels in early 2022, but have forecast that prices are likely to remain cyclically strong through 2023. This, combined with modest growth in volumes, will support a strong cash flow generation for oil and gas producers. .

Moody’s estimates that US energy sector EBITDA for 2022 will be $623 billion, but will fall to $585 billion in 2023. However, analysts say low capital spending, growing uncertainty about the expansion of future supplies and the high geopolitical risk premium will continue, however. to support cyclically high oil prices. Meanwhile, strong US LNG export demand will continue to support high natural gas prices.

Bullish on OFS

One particular highlight of that report is how optimistic analysts are about the Oilfield Services (OFS) sector.

Rising demand for oilfield services (OFS) amid some growth in drilling and completion activity will continue to drive pricing power and support material earnings growth for OFS companies,” the analysts wrote.

While discipline will remain the name of the game with respect to capacity, Moody’s says that pricing power will continue to strengthen in the year ahead, “enabling OFS companies to expand profit margins, even with cost inflation rising.” labor and materials.

Moodys also expects better profit margins for OFS from increased daily rates for onshore and offshore platforms, as well as future higher rates as customers renew their contracts.

US rigs are up 30% from January and have recovered to about 95% of their January 2020 levels, according to the report.

OFS companies have been reporting that drilling and well completion activity, as well as prices, have increased, while badasses also say they are seeing an increase in job openings. Oil field workers were some of the demographic groups most affected by the Covid-19 pandemic in 2020. Nationwide, the oil and gas industry is estimated to have lost 107,000 jobs according to global consultancy Deloitte, with an estimated 200,000 ruffians losing their jobs at the height of the global lockdowns. Related: Putin Forces All Energy Workers To Register For Military Recruitment

Here are some OFS stocks to keep on your radar.

Market capitalization: $25.1 billion

YTD Returns: 15.8%

One of the largest oilfield service companies, based in Texas Halliburton Company (NYSE: HAL) provides products and services to the energy industry worldwide, including well completion drilling and appraisal services.

Halliburton offers a variety of production solutions in exploration, drilling, production software and data management services for upstream oil companies through its Landmark Software and Services product line. In addition, the company’s Testing & Subsea and Project Management product line specializes in reservoir optimization and associated technologies. Thailand PTT Exploration and Production Y Kuwait Oil Company are among the prominent oil and gas companies that have awarded contracts to Halliburton to implement digital transformation and improve efficiency and production at their oilfields.

Halliburton is among the international OFS companies that have been caught in the crossfire between Russia and Ukraine. In April, Halliburton announced that it had immediately suspended further business in Russia and is shutting down the remaining trades there. Previously, the company had stopped all shipments of specific sanctioned parts and products to Russia, although the company says it has no active joint ventures in the country.

Fortunately, HAL is not as exposed to the Russian market, and JPMorgan estimates that gets only 2% of its income from the country.

HAL has a strong buy average analyst recommendation with a price target of $31.84, good for a 15% increase.

Market Cap: $6.5B

YTD Returns: 16.3%

based in Texas november inc (NYSE: NOV) is a leading global provider of equipment and components used in oil and gas drilling and production operations, oilfield services and supply chain integration services for the upstream oil and gas industry. NOV was previously known as National Oilwell Varco.

Wall Street has been souring on NOV lately, thanks to valuation and supply chain concerns.

Bank of America has issued a double downgrade for NOV stock to underperform buy with a price target of $22 (31.2% up).

Russia will only create a tighter global supply chain which could delay the margin recovery story that was at the core of our bullish thesis. We are not 100% sure that Russia’s developments will not make sourcing of materials such as aluminium, copper, nickel and steel more problematic for a company that was already struggling with its supply chain and material cost inflation.” BofA’s Chase Mulvehill has written.

Meanwhile, Gruber has updated Nabors (NYSE: NBR) to hold as global exposure and improving drill rate ended its bearish free cash flow thesis.

Market capitalization: $837.2 million

YTD Returns: 61.6%

Precision Drilling Corporation (NYSE: PDS) is a Canadian-based company that is a provider of contract drilling, completion and production services primarily to oil and natural gas exploration and production companies in Canada, the United States and certain international locations.

BMO Capital Markets has provided updates to several Canadian oilfield services companies, including Precision Drilling Corporation, CES Energy Solutions Corp. (OTCPK: CESDEF), Pason Systems Inc. (OTCPK: PSYTF), Y Secure Energy Services Inc. (OTCPK: SECYF) as drilling activity increases.

“We believe the sector is on the verge of a multi-year run in activity levels, while prices continue to trend higher.” John Gibson, an analyst at BMO Capital Markets, has written in a note to clients titled “Glory days ahead, but expect volatility to continue.”

Gibson says that Precision, CES and Pason each exhibit high market share in North America, leverage to grow activity levels and strong free cash flow generation capabilities.

By Alex Kimani for Oilprice.com

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