Wunderlich Securities recently released a report detailing their 2015 outlook for the onshore oilfield services industry. It might come as little surprise that analysts’ projections for the sector are grim.
Massive Spending Cuts
Analysts expect a huge reduction in CapEx by many oil companies in 2015, and some of the cuts have already been revealed. ConocoPhillips COP 1.76% is reducing planned 2015 spending by $2.5 billion. PDC Energy Inc PDCE 8.5% is cutting spending by 14 percent next year. Several other big names have also made official cuts to 2015 CapEx, including Continental Resources, Inc. CLR 5.46%, Emerald Oil Inc EOX 7.5% and Gastar Exploration Inc GST 5.6%.
Analysts believe that most producers will hunker down and rely on their most profitable operations to carry them through the storm, but there will be a lag between spending cuts and production dropoff.
Related Link: Wunderlich Cuts Crude Oil Price Targets, But Remain Bullish On These 5 Energy Stocks
The First Domino Has Fallen
The first casualty of the collapse in oil prices has been the number of oil and gas permits, which plummeted by 40 percent month-over-month in November. Analysts predict that the next domino to fall will be rig counts, which are predicted to take a heavy hit in the next three to six months. The report indicates that Wunderlich sees demand for only 1,400-1,500 of the 1,920 rigs currently in operation. Once rig count drops, only then can the final domino (production) possibly fall.
Rating Cuts
Analyst Jason Wangler explains that companies that have struggled recently are likely most vulnerable. “We are even more cautious on names that had finally just pulled themselves out of some tough situations.”
In light of the dreary outlook, Wunderlich has cut its ratings on…
Read the rest of this article (and all my other articles) for free on Benzinga by clicking here
Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
