MW: Oil-service segment shines on Goldman upgrades
Baker Hughes, Diamond Offshore rally; Peabody trims outlook
By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch) — Energy stocks traded flat to higher Friday, with the oil-services segment in the spotlight as Goldman Sachs upgraded shares of Diamond Offshore Drilling Inc. and Baker Hughes Inc.
In energy futures, crude oil moved back toward $89 a barrel, playing off U.S. employment data for December. See more in Crude Futures.
Among the sector benchmarks, the Philadelphia Oil Service Index (OSX 243.40, +3.40, +1.42%) moved up by 1.6% to 244, while the NYSE Arca Natural Gas Index (XNG 609.10, +2.05, +0.34%) rose 0.2% to 608. The NYSE Arca Oil Index (XOI 1,220, +3.16, +0.26%) fell less than 0.1% to 1,216.
Shares of Baker Hughes (BHI 56.91, +2.08, +3.79%) added more than 4%, slightly ahead of early gains for Diamond Offshore (DO 69.85, +2.56, +3.80%) .
Goldman upgraded Diamond Offshore to buy from sell and said oil-service shares with international exposure may see further gains, on top of their recent run higher. Baker Hughes got upgraded to buy from neutral.
Among other stocks in the spotlight, Hess Corp. (HES 79.01, -0.20, -0.25%) said it plans to spend $5.6 billion on capital projects during 2011, up 44% from 2010. The oil and gas producer plans to invest in the Bakken oil shale in North Dakota, as well as drilling production wells at the Valhall project in Norway and Shenzi in the Gulf of Mexico.
Its $900 million exploration budget will go toward conventional deepwater drilling in Egypt, Ghana, Indonesia and Brunei, as well as unconventional onshore drilling in the Eagle Ford Basin in Texas and the Paris Basin in France. Shares of Hess fell 0.2%.
In coal, Peabody Energy (BTU 61.89, +0.29, +0.47%) said its 2010 earnings before interest, taxes, depreciation and amortization will be affected by the company’s force majeure in Australia. Peabody’s shares have been under pressure in recent sessions, along with other coal producers in the region, as a result of extensive flooding in Queensland. See: U.S. coal may benefit from Australia flooding.
The rains and flooding caused Peabody to notch down the midpoint of its EBITDA target by about $75 million to “near the midpoint” of $1.7 billion to $1.9 billion. That outlook puts its performance in line with its forecast back in July, but falls short of its more recent view for EBITDA of $1.85 billion to $1.9 billion.
