Piper Sandler cautious on Oilfield Services, sees FTI as top pick

On Friday, Piper Sandler’s analysis of the Oilfield Services (OFS) sector reflected a cautious stance amid a challenging macroeconomic environment. Analyst Derek Podhaizer highlighted a defensive approach, identifying TechnipFMC (NYSE:FTI), Tenaris (NYSE:TS), and Baker Hughes (NYSE:NASDAQ:BKR) as stocks expected to outperform within the sector. This outlook aligns with the firm’s oil price shock playbook, which has been used to navigate recent volatility in oil markets. According to InvestingPro data, Tenaris stands out with a GREAT Financial Health score and remarkably low debt levels, with a debt-to-equity ratio of just 0.03.

The analyst’s comments come after significant declines in West Texas Intermediate (WTI) crude and the Oil Services ETF (OIH), which have dropped 15% and 17% respectively since April 2, 2025. FTI emerged as the relative outperformer, having fallen just 4%, with TS and BKR also performing better than some of their peers. Despite market volatility, Tenaris has shown resilience with an 8.5% return over the past year and currently appears undervalued according to InvestingPro Fair Value analysis. The company maintains a healthy 6.6% dividend yield with impressive 40% dividend growth in the last twelve months. The downturn in oil prices, attributed partly to OPEC+ production increases and other factors, has led to downward earnings revisions across the industry.

The Piper Sandler team maintains a bearish outlook for the oil market, with WTI prices expected to hover around $55 per barrel for the next year. This forecast is supported by anticipated quarterly inventory builds from the third quarter of 2025 to the second quarter of 2026. The U.S. oil rig count, which has decreased by 5% since April 4, 2025, is also being closely monitored for signs of a supply response that could bolster oil prices.

In terms of company guidance, Podhaizer expressed that Weatherford International (NASDAQ:WFRD) provides the most believable outlook, having reduced its 2025 EBITDA estimate by nearly 20%. Baker Hughes’ conservative view on Oilfield Services Equipment (OFSE) and Integrated Energy Transition (IET) targets were also deemed attainable, while Halliburton’s (NYSE:HAL) margin improvement goals were seen as more challenging. The impact of tariffs on Schlumberger’s (NYSE:SLB) second-half 2025 performance remained uncertain.

Power generation has been a recurring theme in discussions, with Solaris Energy Inc. (SEI) stock rising 28% over the past week. The sector’s long-term potential is debated, but investor interest has been piqued by factors such as CEO stock purchases, new contracts, and additional buy ratings from other sell-side firms.

Piper Sandler’s current approach to the OFS sector is to maintain vigilance and a defensive position, with a focus on specific companies that are expected to navigate the current headwinds more effectively. The firm will continue to monitor industry indicators to determine when a more constructive stance on the sector could be warranted. For investors seeking deeper insights, InvestingPro offers comprehensive analysis of over 1,400 US stocks, including detailed Pro Research Reports that transform complex financial data into actionable intelligence, with extensive metrics, peer comparisons, and expert analysis.

In other recent news, Tenaris S.A. has been the subject of attention from multiple analyst firms, highlighting significant developments. Piper Sandler reiterated its Overweight rating for Tenaris, maintaining a $50 price target, emphasizing the company’s potential benefits from sustained 25% steel tariffs and anticipated improvements in Oil Country Tubular Goods pricing. This is expected to enhance Tenaris’s EBITDA margins, with management projecting a 25% margin by the second half of 2025. Additionally, TD Cowen analysts maintained their Buy rating on Tenaris, with a price target of $44, noting the company’s strong competitive position and cash generation capabilities. They expressed confidence that Tenaris would continue returning cash to shareholders, supported by strategic developments and U.S. steel tariffs. The price target was previously increased to EUR44.00 from EUR21.00, reflecting a more optimistic outlook on Tenaris’s financial prospects. Both analyst firms recognize Tenaris’s unique market position, with Piper Sandler anticipating robust buybacks and TD Cowen highlighting a competitive advantage. These recent developments underscore the company’s strategic initiatives and potential for investor returns.

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