E&Ps are increasing capex for higher-quality equipment to drill in ultradeepwater, shales and other hard-to-reach oil reservoirs, directly benefiting oil services companies providing services for oil producers, says Andrea Sharkey, Research Analyst at Gabelli & Company, Inc.
“The exploration and production companies have been increasing their capex budgets, which should directly benefit service companies,” Sharkey said. “I expect E&Ps spending to grow 15% this year, led by growth in the North American shale regions, and then I think in 2012 we’ll start to see stronger E&P spending in the international arena.”
Sharkey points to Cameron International Corporation (CAM) as a services company expected to benefit from the capex increase over the next 12 to 18 months. CAM has a 50% share of the blowout-preventer market and is increasing its frac offerings for shale development.
“[Cameron has] high-quality wellheads, frac trees and frac manifolds that have been seeing a lot more demand, and so I think they’ll benefit from that,” Sharkey said. “And then they’ll also benefit in their valve and measurement products from increased demand as pipeline and midstream infrastructure is built out to support the development of shale regions as well.”
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