Analyst Sees Q1 Winnowing Losers From Oilfield Services Sector

The domestic oil services industry will get divided into "winners and losers" as first-quarter results trickle in, an analyst said Monday.

Morgan Stanley's Ole Slorer said share of the market for pressure pumping to stimulate well production has slipped away from Baker Hughes Incorporated (NYSE: BHI), Nabors Industries Ltd. (NYSE: NBR) and Trican Well Service Ltd. (TSE:TCW).

Larger companies like Halliburton Company (NYSE: HAL) and Schlumberger Limited (NYSE: SLB) have gained share by using their ability to subsidize low-margin bids with other more profitable services, Slorer said.

A few well-managed small-cap companies "should also do relatively well," Slorer said, counting among them RPC, Inc. (NYSE: RES), C&J Energy Services Ltd (NYSE: CJES) and Calfrac Well Services Ltd. (TSE: CFW).

In contrast with the market for pressure pumping, results of a shake-out in the market for land-based oil rigs, may be less apparent following the first quarter, according to Slorer.

Term contracts have so-far largely dictated which rigs have remained in service, Slorer said.

But the analyst predicted that drillers will collect significant contract termination payments in the first half, followed by a slowdown in the rate of rig count cuts in the second half of 2015.