How Did Markets React to Concerns about WFT and CJES?



WFT and CJES underperformed the industry index

We’ve discussed in this series how some of the oilfield services and equipment (or OFS) companies have been affected by huge debt burdens. But how did the market react to such debt-related concerns?

In the past one year, C&J Energy Services (CJES) stock has crashed. Its share price fell 94% during this period. During the same period, Weatherford International’s (WFT) share price dropped 51%. Both have underperformed the VanEck Vectors Oil Services ETF (OIH), an ETF tracking the index of 25 OFS companies. OIH has decreased only 19% in the past one year. Precision Drilling (PDS), WFT’s smaller market cap peer, has fallen 18% during the same period. The entire OFS industry has been negatively affected by the energy price crash that began in June 2014. Crude oil prices are down 19% compared to a year earlier. So, CJES and WFT have underperformed crude oil prices as well. In the past one year, the US rig count has fallen nearly 53%.

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Analysts’ targets for WFT and CJES

While the lowest target price for WFT is $4 in the next 12 months, the highest is $13. The median target price from sell-side analysts for WFT is $7.9. Weatherford International is currently trading near $6.6, implying a 20% upside to its median price target. WFT makes up 0.3% of the ProShares Ultra Oil & Gas (DIG).

The lowest target price for CJES is $0.5 in the next 12 months while the highest is $5. CJES received a $1.23 median target price from analysts. Relative to its current price of ~$0.95, this price implies a 30% upside. So, it seems that the market has already discounted WFT’s and CJES’s concerns, and Wall Street analysts expect some upside from their current levels.


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