Wunderlich Securities provided an update on its outlook for the North American oil and gas industry. The report included the most updated rig count statistics released last week.

Falling Rig Count Accelerates

After falling by less than 100 in December, the number of active rig counts dropped by nearly 300 in the month of January.

Wunderlich analysts caution investors from believing the worst is over. They see the big drop in January coming as a result of companies getting an early start on their 2015 budget cuts.

February Could Be Worse

Analysts believe even more rigs could be shut down in February and predict that the total active rig count could fall from its current level of 1,543 to around 1,200. If that prediction comes true, it will be the lowest number of active rigs in North America since 2009.

Wunderlich analysts believe more than 300 additional rigs will be shut down in February, representing a 700-plus reduction from the peak number of more than 1,900 active rigs back in September of 2014.

Another Leg Down

Analysts, thus, believe many oilfield services (OFS) companies will still endure another leg down after a rough second half of 2014.

“With so much equipment being delivered in 2015 in an already oversupplied market, E&Ps focused on cost reductions, and dogfights for every dollar, we think this is a recipe for a big leg down in the OFS names going forward,” they wrote.

Top Names

Even though Wunderlich’s outlook for 2015 is gloomy, they do see a few bright spots in the space.

The report lists Seventy Seven Energy Inc SSE 21.51%, Natural Gas Services Group Inc NGS 3.15%, Tetra Technologies Inc TTI 0.2% and Superior Drilling Products Inc SDPI 9.09% as top picks.

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