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4 Oil Services Stocks With Potential Upside of 75% or More

The key to investing has always been to buy when everybody is selling and to sell when everybody is buying. Seems simple enough, but as all investors know it is never that easy. A new research report from JPMorgan stresses that the energy downturn could last the rest of 2015 and well into 2016. The question is could now be the time to be buying?

The JPMorgan team are in lockstep with most of the firms we cover at 24/7 Wall St., as they think that the “lower for longer” mantra may end up being correct, and there could be more cutting of budgets and hard times. With that said, any positive signs the energy sector signals and the shorts and weak hands that are throwing in the towel at sector lows may have a judgement day.

We screened the list of oil services stocks rated Outperform at JPMorgan for those with the biggest upside potential, and we found four that are well-liked across much of Wall Street.

C&J Energy Services

This smaller cap company is well-liked across Wall Street desks. C&J Energy Services (NASDAQ: CJES) is an independent provider of premium hydraulic fracturing, coiled tubing, wireline, pumpdown and other complementary oilfield services with a focus on complex, technically demanding well completions. In addition to C&J’s suite of completion, stimulation and production enhancement services, the company manufactures, repairs and refurbishes equipment and provides parts and supplies for third-party companies in the energy services industry. Earlier this year it announced the purchase of Nabors Industries’ production services unit.

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The company fits nicely into positive sector opportunities for pressure pumping, and the company has been mentioned in takeover chatter from time to time. The stock has traded back to the January lows, after doubling from this area in two months in the spring.

The JPMorgan price target for the stock is $20, and the Thomson/First Call consensus target is $17.71. Shares closed Tuesday at $9.07. Trading to the JPMorgan target would be over a 100% gain.

Nabors Industries

This company provides drilling and rig services. Nabors Industries Ltd. (NYSE: NBR) offers rig instrumentation, optimization software and directional drilling services. It also provides completion, life-of-well maintenance and plugging and abandonment of a well. In addition, the company markets approximately 466 land drilling rigs for oil and gas land-based drilling operations in the United States, Canada and approximately 20 other countries worldwide; approximately 445 rigs for land well-servicing and workover services in the United States; 98 rigs for land well-servicing and workover services in Canada; 42 rigs for offshore drilling operations in the United States and internationally; and seven jackup units and components of trucks and fluid hauling vehicles.

Nabors posted earnings after the closing bell Tuesday. While the company slightly missed on the bottom line, the revenues came in above expectations and guidance was not as draconian as perhaps many analysts were expecting. Company management felt that the third quarter may even mark the bottom of the downturn.

Nabors investors are paid a 2.1% dividend. The JPMorgan price target is set at $21, and the consensus price objective is $17.30. Shares closed Tuesday at $11.48. Hitting the target would be a massive 80% gain.

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Superior Energy Services

Superior Energy Services Inc. (NYSE: SPN) serves the drilling, completion and production-related needs of oil and gas companies worldwide through its brand name drilling products and its integrated completion and well intervention services and tools, supported by an engineering staff who plan and design solutions for customers.

Some Wall Street analysts feel that Superior could be one of the biggest beneficiaries of potential divestitures coming from the Baker Hughes and Halliburton merger. The company is one of Wall Street’s favorite small to mid-cap stocks to play the U.S. land services recovery, and analysts think investors should see the impact of cost reductions as this year progresses, which some feel could help offset pricing pressure.

Superior investors are paid a 1.92% dividend. The JPMorgan price target $29, and the consensus target is $25.30. The stock closed Tuesday at $16.65. Hitting the target would be a monster 75% gain.

Weatherford International

Some Wall Street analysts feel that owning Weatherford is almost a derivative type play on the revenue fallout from the Halliburton and Baker Hughes deal. Weatherford International Ltd. (NYSE: WFT) has been cut almost 50% since the highs the stock printed last summer, and it was forced to cut 8,000 jobs back in early February, almost 15% of the company’s total workforce. The company still offers customers a wide range of global capabilities, including a proprietary system for pressure management in the mushrooming arena of subsea production. The changes in government oil policy in Mexico last year may provide some favorable tailwinds for the company, despite the huge downturn in oil pricing.

The JPMorgan price objective is $19, while the consensus target is posted at $14.75. The stock closed on Tuesday at $10.37. Hitting the target would be over an 80% gain.

The oil services trade is still a contrarian one to say the least. Oil seems to have hit bottom late last year, turned much higher and has totally rolled back over. The pain in the industry is not going away anytime soon, so sticking with the top companies with big upside potential makes good sense, and patient investors may see giant upside from current trading levels.

By Lee Jackson