 |
| Dow | Nasdaq | About Us | Disclaimer |  |
RSS Feed |  |
Follow us on Twitter |
|
Featured Advisors |
Friday January 01, 2010
Weatherford (WFT): Elliott Gue's top stock for 2010
In his The Energy Strategist, he explains, "As with most oil services firms, Weatherford's North American business has been hit hard and the stock now trades at a deeply discounted valuation." "Weatherford is perhaps best known as an expert provider of services related to mature oilfields. "Traditionally, Weatherford has had a strong presence in North America, which has been a proving ground for all sorts of technologies that squeeze oil from older fields. 
"An example is underbalanced drilling, a technique that prevents damage to mature fields. Weatherford's genius in recent years has been to take homegrown North American technologies and sell them internationally. "The firm has gradually lessened its exposure to North America and forged into international markets where profit margins are higher and profitability cycles less severe. "It also wins points for expanding its business in Russia, a key market for both oil and natural gas production. Specifically, Weatherford purchased the oil services business of TNK-BP, BP's joint venture in Russia. "Weatherford’s stock has significantly underperformed the rest of the oil services industry since October, primarily due to concerns about Weatherford's Chicontepec contract in Mexico. "Chicontepec is a heavy oilfield that is the centerpiece of Petroleos Mexicanos’ (PEMEX) strategy to stabilize and grow oil production. "The problem PEMEX faces is that production from its largest field, the offshore Cantarell oilfield, has fallen off rapidly in recent years to the point that Mexico's oil exports have tumbled. "Accordingly, PEMEX has decided to reexamine its development plans for Chicontepec and has cut investment in the field 22%. Because Weatherford is a big player in Chicontepec, its stock has fallen. "Although PEMEX’s recent announcements caught the market by surprise and are bad news for companies with significant exposure to Mexico, the selloff that’s hit Weatherford's shares is overdone. "Mexican oil production is falling fast; the country will have no choice but to bump up spending on Chicontepec. "Finally, Weatherford is trading at less than 17 times 2010 earnings estimates. This compares favorably to Schlumberger’s stock, which trades at 22.5 times 2010 earnings estimates. Shares of Halliburton and Baker Hughes (NYSE: BHI) trade at 21 times 2010 earnings. "Weatherford's deeply discounted valuation more than prices in all the bad news surrounding Mexico and Chicontepec. Take advantage of the recent decline to buy Weatherford International under 26." |
News Flash
|
|
Energy sector expert