Evercore Upgrades Halliburton and Helmerich & Payne Ratings on Oil Market Supply Shock

Investing.com - Evercore upgrades Halliburton and Helmerich & Payne ratings to Outperform, stating that recent shocks in the energy market are reshaping supply dynamics and improving the outlook for the U.S. land oilfield services industry.

The brokerage said the oil market is shifting focus from efficiency to supply security, as previous supply disruptions exposed vulnerabilities in the immediate supply system. The firm expects the impact of the current crisis to persist, with countries rebuilding inventories and prioritizing supply resilience.

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Evercore stated that this shift eliminates a key downside risk for energy stocks—that of oil prices falling to around $50 per barrel due to oversupply. Instead, the firm expects prices to remain elevated for a longer period to support inventory rebuilding after significant global stock declines.

The company also believes the energy system is structurally moving toward greater regionalization, with the Western Hemisphere becoming more self-sufficient, while Asia deepens ties with Gulf oil producers and accelerates the development of alternative energy sources.

Evercore forecasts a modest recovery in U.S. upstream activity. The firm expects about 35 rigs to be back in operation by 2026, with North American upstream capital expenditures projected to grow 3% year-over-year, reversing a previous forecast of a 3% decline.

This marks a new cycle for the U.S. land services industry after a period of activity decline, efficiency improvements by producers, and pricing pressures. Evercore states that as industry activity improves, the shift toward moderate growth could restore operational leverage by 2027.

Given Halliburton and Helmerich & Payne’s exposure in the U.S. land drilling sector, both companies are expected to benefit. The firm anticipates early signs of activity increase as soon as Q2 for Halliburton, while Helmerich & Payne can offset any delays in Saudi rig deployment by restarting U.S. rigs.

Evercore notes that after years of volatility, both companies’ order books should become more stable, with a clearer path to sustained activity growth.

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