2009-11-06 23:03:04 -
Zacks.com releases the latest Industry Outlook. Today, Zacks Equity Research discusses the Oil & Gas Industry, including CNOOC Ltd. (NYSE: CEO : 
), China Petroleum and Chemical Corporation, or Sinopec (NYSE: SNP : ), Cameron International (NYSE: CAM : ), Nabors (NYSE: NBR : ) and Patterson-UTI (Nasdaq: PTEN : ).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at www.zacks.com/stock/news/26953/Oil+%26amp%3B+Gas+Industry : .
The strengthening oil price environment should benefit producers, particularly those international players having attractive growth opportunities in their home markets. Two such standout names are China’s CNOOC Ltd. (NYSE: CEO : ) and China Petroleum and Chemical Corporation,
or Sinopec (NYSE: SNP :
), both of which remain well-placed to benefit from the country’s growing appetite for energy.
CNOOC enjoys a monopoly on exploration activities in China’s very prospective offshore region in addition to having a growing presence in the country’s natural gas and LNG infrastructure. On the other hand, Sinopec is the second largest crude oil and natural gas producer, and the largest refiner and marketer of refined petroleum products in China.
Sinopec’s leverage to the lucrative Chinese market and the recent $7.5 billion Addax acquisition is expected to help sustain its growth momentum.
Within the oilfield services group, we prefer to own companies such as Cameron International (NYSE: CAM :
) that derives about two-thirds of its revenue from outside North America, thereby playing an offsetting role to the relatively soft U.S. drilling scene. Cameron recently posted better-than-expected third quarter results and raised its 2009 forecast, as a revival in energy prices led to improved drilling activities.
WEAKNESSES
We continue to feel strongly that industry players in the servicing and drilling ends of the business with substantial natural gas-focused and North America-centric operations should be avoided. A major sub-sector that fits that description is the onshore drillers. While we currently don't have any Underperform rated stocks in this group, we remain skeptical of land drillers like Nabors (NYSE: NBR :
) and Patterson-UTI (Nasdaq: PTEN :
), given the extent of excess capacity in the sector that is expected to weigh on dayrates and margins well into next year.
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