Oilfield Services Weekly Notes: Lower Oil Rig Count, Baker Hughes-Halliburton Merger Updates
The oilfield services sector had another mixed week. While North American drillers continued to idle rigs at a rapid pace, taking the oil rig count below three-year lows, oil prices declined marginally with WTI crude trading at about $52 per barrel as of Thursday. The PHLX Oil Service Sector index closed up around 3% through the week. Here is a quick roundup of the news from the oilfield services sector.
See Our Complete Analysis For Halliburton| Schlumberger |Baker Hughes
U.S. Oil Rig Count Continues To Decline
- Up 7% This Year, Will Halliburton’s Gains Continue Following Q1 Results?
- What To Expect From Halliburton’s Q3 After Stock Up 10% This Year?
- What To Expect From Halliburton’s Stock?
- Can Halliburton Stock Return To Its Pre-Inflation Shock Highs?
- Halliburton Stock Likely To See Higher Levels Post Q1 Results
- What to Watch For In Halliburton’s Stock Post Q4?
Drilling activity continues to trend lower on the back of a challenging crude oil pricing environment. Most oil and gas companies have scaled back on their capital budgets for this year in order to conserve cash as they see their revenues decline. According to Baker Hughes (NYSE:BHI), the U.S. oil rig count declined by 84 units to 1,056 rigs for the week ended February 13. The oil rig count is down by about 29% year-to-date, marking the lowest levels since August 2011. Oilfield services companies such as Halliburton and Baker Hughes will see weaker revenues over the next few quarters, as spending cuts take effect and customers push for better pricing and terms on contract negotiations and renewals.
Transocean Slashes Dividend Amid Turmoil In Offshore Markets
Transocean (NYSE:RIG), the largest offshore driller, slashed its annual dividend to $0.60 per share from the earlier payout of $3 per share. The move – which was inevitable given the challenging conditions in the offshore drilling markets – should help the company better manage its liquidity and will also support the company’s objective of retaining its investment grade credit rating (related: Why Transocean Slashed Its Dividend). Trefis has a $25 price estimate for Transocean, which is significantly ahead of the current market price. We are forecasting revenues of around $9.2 billion for 2014, with an EPS estimate of $4.45. Transocean’s stock declined by around 8% through Thursday.
Halliburton And Baker Hughes Plan Special Meetings For Merger Vote
Halliburton and Baker Hughes intend to hold special meetings on March 27 for shareholders to vote on their pending $34.6 billion merger agreement. The deal, which was announced last November, is expected to close sometime in the second half of 2015 subject to the approval of shareholders and regulators (related: Why Halliburton Is Buying Baker Hughes). We have a $48 price estimate for Halliburton, which is about 10% ahead of the current market price. We are modeling revenues of about $28 billion for 2015. Our EPS estimate for 2015 stands at $2.51 per share, which compares to a consensus of around $2.24 according to Reuters. Halliburton’s stock remained relatively flat at around $44 through the week.
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