Superior Energy Services (SPN) provides investors with exposure to North American land oilfield equipment and services, a segment expected to trend upward beginning in 2013. and which may provide a good opportunity after the earnings call for investors in the longer term, says Matt Beeby, Senior Equity Research Analyst of Oilfield Services at Williams Financial Group.
“I think investors need some exposure to North American land. I don’t believe it’s a great market for 2013, but I think it will be headed in the right direction. The trajectory is going to be upward in the year, I believe. Superior has about 70% of their business in North America onshore. They also have nice diversification from U.S. Gulf activity offshore, and then their international presence. Those two pieces are about 15% of their business each,” Beeby said.
Although Beeby doesn’t expect North America to fully recover this year, he says Superior Energy Services provides a longer-term portfolio-diversification opportunity for investors. He says that natural gas production in the U.S. is currently affected by low commodity prices, but he says that nevertheless a baseline of production is expected to be maintained in the continent.
“Part of that is low natural gas commodity prices, between $3 and $3.50. It got as low as $2 in midyear 2012, and without a better picture on industrial demand and economic-driven demand, it’s hard to see gas prices improve meaningfully from here. The result is a great migration of both E&P companies and service companies trying to get more exposure to oil, and I think that’s the right move. At some point it starts to make sense that the capabilities to keep up with the natural gas production that we need, the baseline production, will be part of the picture,” Beeby said.
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