HAL - Halliburton NexTier Tenaris top upbeat oilfield services view at J.P. Morgan

Oilfield services stocks ( OIH ) have strongly outperformed the broader stock market this year, and J.P. Morgan thinks the group will not just outperform the S&P 500 in 2023 but also other energy sub-sectors including the U.S. E&P sector.

JPM analysts led by Arun Jayaram said the bullish thesis is "underpinned by rising capital intensity in U.S. shale coupled with clear signs of Tier 1 inventory exhaustion, which will not only place upward pressure on the oil cost curve but lead to higher sustained spending in long-cycle international and offshore plays to meet demand growth."

Jayaram and his team anticipates continued net pricing tailwinds given coincident spending increases in North America and International markets as well as continued restrained oilfield services capacity expansion plans.

JPM's top picks are Overweight-rated Halliburton ( NYSE: HAL ), NexTier Oilfield Services ( NYSE: NEX ) and Tenaris ( NYSE: TS ), which should benefit from strong upstream spending growth in both International and North America markets and strong execution in the field.

The bank remains Underweight on Nabors ( NBR ) and Transocean ( RIG ) on weaker FCF/EV metrics relative to peers; ProPetro ( PUMP ) also is rated Underweight, given the magnitude of near-term capex associated with its fleet renewal program underway.

Halliburton ( HAL ) has made it "sufficiently clear that a clear-cut capital allocation policy is on the cards and is to be announced imminently," Michael Wiggins de Oliveira writes in an analysis published recently on Seeking Alpha .

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