RBC Capital Markets says fundamentals within the energy sector appear strong as oil markets remain in a tightening cycle and notes an increase in North America and global oil rig counts
In Q2, the U.S. rig count increased 13% sequentially, while the drilled-uncompleted well count decreased by 3% through May- RBC
Says higher U.S. drilling and completions activity, as evidenced by the 13% sequential improvement in industry rig counts, will help in annual margin expansion in Q2
Brokerage raises forecast for North American land rig counts for 2022/23 to range of 879-980 from previous estimate of 849-945
Higher service pricing, as contract books for rigs and frac crews re-price toward prevailing spot rates, to reflect in the Q2 results-RBC
Says it expects increased Exploration and Production (E&P) budgets in the second half of the year which could present a catalyst for the sector
Brokerage’s top picks include Schlumberger Helmerich & Payne, Precision Drilling and Secure Energy Services.