On Oct 13, Zacks Investment Research upgraded Baker Hughes Incorporated (BHI - Analyst Report) to a Zacks Rank #2 (Buy).
Why the Upgrade?
The Houston, TX-based company is one of the major oilfield service companies in the world. The firm provides an array of services to the global oil and gas industry. The company’s strong portfolio of products and services should help it post better-than-average results over the long term in North America and enable it to further expand in the international markets. As the world's third-largest oilfield services provider, the company also boasts a competitive set of technologies, which allow it to increase its activity in deepwater Gulf of Mexico (GoM).
Most importantly, oil price has recovered significantly from mid-February lows and has again touched $50 per barrel mark. The OPEC’s decision to curb oil production amid an already oversupplied market is expected help oil prices recover further. This apart, the Energy Minister of UAE has requested non-OPEC big oil producers – including Russia and shale producers in the U.S – to cut production. These developments should benefit upstream energy players through a surge in exploration and production activities. This will lead to more contracts for oilfield services firms to assist drilling companies in efficiently setting up oil and gas wells. Other major oilfield services players likely to gain from the success on the crude front include Schlumberger Limited (SLB - Analyst Report) and Weatherford International plc (WFT - Analyst Report) .
Moreover, with the termination of the impending merger with Halliburton Company (HAL - Analyst Report) , Baker Hughes has received a sum of $3.5 billion as break-up fee. This will strengthen its balance sheet and its liquidity as well as enable it to pursue a number of value-creating options.
It is to be noted that among the big four oilfield services players that include Schlumberger, Weatherford and Halliburton, only Baker Hughes carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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