BofA: Oceaneering International Represents 'Safer' Exposure To Oilfield Services

Oceaneering International OII seems poised to perform well in 2020, given the better outlook for deepwater oil and gas relative to shale and improving free cash flows, according to Bank of America.

The Analyst

BofA’s Mike Sabella initiated coverage of Oceaneering International with a Buy rating and a price target of $17.

The Thesis

Oceaneering International has been among the better performing oilfield services stocks so far this year, having appreciated 16% versus a 14% decline for the overall oil service sector, Sabella said in the initiation note.

The company’s high exposure to offshore demand would likely generate “good growth into 2020,” the analyst wrote. He added that demand may remain solid for a couple years, given a strong list of fixed investment decisions (FIDs) in 2019 and “possibly again in 2020.”

This would benefit Oceaneering International’s entire energy business, which contributes around 80% of revenue, Sabella noted.

“While we still think investors should be wary of too much leverage, we think OII offers a “safer” way to add a levered name,” the analyst further wrote. He expects the company to begin generating free cash flow in 2020, while there are no debt maturities until 2024.

Price Action

Shares of Oceaneering International were flat at the time of publication Tuesday.