The oil services sector fell on Monday as oil prices plunged on increasing doubts that energy demand will recover amid a battered economy and as rig counts continued to tumble.
Crude oil prices fell $4.26, or 9.5 percent, to $40.50 a barrel on the New York Mercantile Exchange.
Shares of Schlumberger Ltd., the world's largest oilfield services provider, fell $2.18, or 5.7 percent, to $35.90. Halliburton Co. shares dropped $1.48, or 9.1 percent, to $14.83.
Mark Brown, an analyst with Pritchard Capital Partners, said the rapidly declining rig count among oil service companies signals one of the worst downturns.
The Baker Hughes' U.S. rig count fell by 57 rigs last week to 1,243 rigs. This level is 39 percent below its peak of 2,031 24 weeks ago. This decline has outpaced that of even the 1983 cycle, which was down approximately 35 percent during the first 24 weeks, Brown said.
"Exploration and production companies were the first to estimate that the rig count will come down below 1,000 rigs before it bottoms, but services companies now appear to be crossing that psychological line as well," said Brown, noting that exploration and production companies generally hold more bearish views than drilling contractors.
Helmerich & Payne Inc. crossed that threshold on Friday when Chief Executive Hans Helmerich offered a forecast of 800 active rigs at the end of the year, said Brown.
Shares of Helmerich & Payne fell $3.06, or 12.9 percent, to $20.59 in Monday afternoon trading.
"Pessimism reigns supreme, but most of the downside appears to be priced in," Brown added. He reiterated "Buy" recommendations for Helmerich & Payne, Nabors Industries Ltd., Pioneer Drilling Co. and Patterson-UTI Energy Inc.
Shares of Nabors fell $1.16, or 12 percent, to $8.55. Pioneer Drilling shares lifted 4 cents, or 1 percent, to $3.88. Patterson-UTI shares hit a 52-week low in Monday trading and by mid-afternoon shed 80 cents, or 9.3 percent, to $7.79.
Brown advised investors to sell shares of Union Drilling Inc. and Bronco Drilling Co. Shares of Union Drilling fell 28 cents, or 8.2 percent, to $3.15. Bronco shares dropped 29 cents, or 7.1 percent, to $3.77.
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