Koil Energy Solutions Inc. (KLNG)

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Market Spotlight: Oilfield Services
Monday February 11, 5:00 pm ET
By Stan Choe, AP Business Writer
http://biz.yahoo.com/ap/080211/market_spotlight_oilfield_services.html?.v=1

Some Analysts View the Sell-Off in Oilfield Services As Overdone

NEW YORK (AP) -- Shares of oilfield service providers have dropped more sharply than stocks overall this year amid worries that a slowing economy could diminish demand for oil.

The Philadelphia Oil Service sector index has fallen more than 15 percent since the start of the year, while the S&P 500 is off nearly 9 percent. Several big companies have cut projections for growth in international demand for pumping and other services, rattling investors.

But some analysts say the sell-off was overdone.

"Although slower international growth prospects have hammered stocks as each company has announced, we believe the larger point is demand continues to grow," said Citi Investment Research analyst Geoff Kieburtz.

"Valuations are historically low and signs of stabilization in (North America) are encouraging." Industry heavyweight Schlumberger Ltd., for example, trades near its lowest price-earnings ratio since 1999. The stock has benefited in recent quarters from strong demand due to high oil prices.

Limited offshore rig capacity has hampered international growth, he said, but new deliveries should boost it in 2009. His top picks include Halliburton, Weatherford International and National Oilwell Varco.

Credit Suisse analyst Ken Sill agrees a lack of rigs may hurt growth in 2008, but calls the long-term picture "outstanding."

Goldman Sachs analyst Charles Minervino, though, believes earnings estimates for 2008 are more likely to go down than up.

He thinks shares may have a modest bounce, but doesn't see major gains until at least 2009, unless oil prices unexpectedly move materially higher. His top picks are Weatherford and Schlumberger.