Analyst says some oil services cos. are good buys

An analyst on Wednesday said investors should buy up stocks of some oil services companies, as share prices are deeply discounted and a long-term recovery is expected.

Pritchard Capital Partners initiated coverage of six land drilling contractors, naming Helmerich & Payne Inc. as its favorite in the sector.

Crude oil has shed over 70 percent its value since its July peak of $147.27, while natural gas prices are off 58 percent from their summer peak of $13.577 per million British thermal units. leading investors to wonder if commodity prices _ and shares of land drillers, which also have taken a beating this year _ have reached their bottom.

"We believe this is the ideal time for a long-term investor to buy into the sector despite the stiff headwinds of a bearish six-month outlook and negative immediate-term catalysts," said Pritchard analyst Mark Brown in a note to clients.

Brown said land drilling stocks, having fallen about 70 percent to 80 percent since their June highs, are priced well below their value.

The analyst said that over the major down cycles of the past few decades, land drilling stocks generally bottomed out one to six months before rig counts hit a trough. Brown expects at least 750 and possibly 1,000 rigs will be laid down during this cycle, representing a decline of 37 percent to 50 percent from their peak rig count.

Brown assigned a "Buy" rating to Helmerich & Payne, citing its earnings resilience and its high-end rigs, which are less likely to be idled in a downturn. Shares of Helmerich & Payne rose 56 cents, or 2.6 percent, to $22.39 in midday trading.

Brown also assigned "Buy" ratings to Nabors Industries Ltd. and Pioneer Drilling Company Inc. Brown assigned a "Neutral" rating to Patterson-UTI Energy Inc. and "Sell" ratings to Bronco Drilling Company Inc. and Union Drilling Inc.

Nabors shares added 39 cents, or 3.4 percent, to $11.94. Pioneer Drilling shares edged up a penny to $5.31, while Patterson-UTI shares climbed 28 cents, or 2.5 percent, to $11.53. Bronco shares were unchanged at $6.26, and Union Drilling shares added 22 cents, or 4.4 percent, to $5.21.