Broker snap: Petrofac among Citi's top picks in oil services sector

10th Jul 2013 09:54

Citigroup has named FTSE 100-listed Petrofac as one of its favoured names in the European oil services sector following its recent underperformance so far in 2013."European Oil Services have been a significant 1H underperformer relative to the market. This poor performance has occurred against a backdrop of earnings downgrades, heightened execution uncertainty, and concerns around forward industry spend," the broker said on Wednesday morning."In contrast, revenues grew for all names bar Saipem and already record backlogs have expanded a further 6.0% year-on-year, setting the stage for further top-line growth."Citi said that it sees increased risks around exploration spend across the sector, but planned offshore and Middle East developments "look economically protected"."Consequent tightening across the offshore supply chain over the coming 12 months should offer a better pricing environment than that currently reflected with 2Q results."Citi's top picks include Petrofac, French firm Technip, Norway's Seadrill and Saipem in Italy.The broker said that the sector is trading at its lowest price-to-earnings multiple relative the market since 2009. Petrofac's share price in particular has fallen by over 20% so far this year.Petrofac was trading 0.62% higher at 1,292p by 10:40 on Wednesday.BC