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Investec mulls oil services results season; likes mid caps

Investec mulls oil services results season; likes mid caps

It is results season for the UK's oil service sector, notes broker Investec, which is expecting to see "relatively positive" statements.

But this is likely to be overshadowed by factors, including wider uncertainty in the oil price, unconventional reservoir activity in the US and the timing of large contracts, says analyst Keith Morris.

The big caps such as AMEC, Petrofac and Wood Group are unlikely to throw up many surprises, he says, adding they are likely to repeat the tone of previous trading updates.

"Mid caps offer the most attractive ratings with Kentz (LON:KENZ) and Hunting (LON:HTG) being our preferred engineering and drilling services picks respectively, with Cape (LON:CIU) as a special situation recovery play," he said.

The broker rates Kentz a 'buy' with a 600 pence a share price target, saying it stands out as the most undervalued.

Hunting, 'buy' with a target price of 950 pence, offers the most direct leverage to the US unconventional market, where there has been recent evidence suggesting recovery in activity, if not margins, by the end of 2012, he says.

Cape has a new chief executive likely to drive the business forward after revealing structural issues, says Morris, rating it a 'buy' with a price target of 300 pence.

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