Oil services and equipment sector in 'early stages' of up cycle

The US oil services and equipment sector is in the "early stages of what should be a powerful up cycle," according to Lehman Bros. Inc. analyst James Crandell.

By OGJ editors

HOUSTON, Aug. 13 -- The US oil services and equipment sector is in the "early stages of what should be a powerful up cycle," according to Lehman Bros. Inc. analyst James Crandell. The conjecture, Crandell noted, is based on the current and expected strength of oil and gas prices as well as oil and gas companies' expanded exploration and production spending plans.

"Domestic natural gas drilling is just beginning to turn higher, following a short, sharp downturn, reflecting a recovery in prices and the expectation that supply, demand, and inventories will return to balance," Crandell said in a research note. Crandell added that he expects to see this recovery in gas drilling to run through 2004.

Outside North America, meanwhile, the analyst sees "moderate" spending growth over the next 2 years. "The combination of growing domestic and international drilling activity should lead to better capacity utilization and pricing improvement and case a strong expansion of earnings through at least 2004," Crandell stated.

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