In Battered Oil Services Sector, Smallest Look Weakest

Elsewhere Transocean Ltd, once the service sector's biggest company by market value, has said it will scrap seven move vessels bringing the total in recent months to 11, and may cut more. Its stock is on 7 times forward earnings, having dropped 66 percent over the past 12 months.

By contrast, Schlumberger and Halliburton are valued at 20 and 16 times.

Still, the sector remains acutely sensitive to oil prices and analysts warn its problems will take some time to play out.

"In 2009, E&P spending dropped 15 to 20 percent and it is likely that we will see something of the same over 2015 to 2016," said Sondre Stormyr, a Danske Bank analyst. But while assets were temporarily idled in 2009, he expects to see more permanent supply reductions this time, particularly for segments with a lot of outdated supply such as drilling.

AT THE SHARP END

Companies likely to feel most pain tend to fall into three segments: onshore shale well services in North America, drillers and seismic survey firms.

All are at the sharp end of E&P and Erik Reiso, a partner at consultancy Rystad Energy, argues the shorter investment cycle and rapid turnover of wells in U.S. shale mean companies servicing that sector will see a drop in demand more quickly.


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WHAT DO YOU THINK?


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Doug Stetzer  |  January 23, 2015
While headlines of the "big guys" slashing headcount are making the news, there are untold amounts of little guys who will be slimming down from 20 people to 5 or will literally be closing up shop altogether. All these numbers add up to real pain in the workforce.


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