Sector movers: Analysts warm to Oil&Gas sector

Shares in select Oil&Gas and oil service sector names led gains on Monday as analysts weighed in with positive views.

In a research note e-mailed to clients first thing in the morning a team at Morgan Stanley headed by Martjin Rats wrote that: “A strong [Oil&Gas] industry response to the fall in oil prices is underway, and tentative signs of a rebalancing market are emerging. Equities will discount this much in advance. With valuations at historical lows, we upgrade Oil Services and Exploration and Production industry views, and reiterate our upbeat stance on the majors.”

Tullow Oil was singled out by the broker as its most-preferred company among large-capitalisation oil firms.

Acting as a backdrop, the recent sharp reduction in the US oil rig count has led some some observers to begin to speculate on an eventual bottom in oil prices.

On 13 February Westhouse Securities wrote: “the US oil rig count has fallen 30% from the peak in October 2014, operators have announced major capex cuts (Apache is cutting its rig count by a massive 70%) and more observers are cottoning on to the fact that the vast majority of the investment in the US shale industry has been funded by debt.

“This is now starting to lead some to question the sustainability of the shale boom and even to suggest that a recovery may not be swift should oil prices recover.”

Numis gives Hunting a leg up

Over on the FTSE 250, stock in oil services firm Hunting saw very volatile trading conditions on Monday, but managed to end the session as one of the best performers on the FTSE 250.

Early in the day management had warned investors that: “The company does not believe that [analysts’] estimates should be relied upon as an accurate indicator of 2015 financial performance.”

“Equally […] given the changes in its markets, Hunting does not believe that it is appropriate at this stage to provide financial guidance for 2015.”

That quickly sent the stock lower.

However, a subsequent upgrade out of Numis analyst Kathryn Leonard, later in the day, to 'buy' from 'reduce', buoyed the shares. Leonard also upped her price target, to 554p from 487p previously.