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SAExploration Slips to Strong Sell on Low Commodity Prices

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On Oct 1, Zacks Investment Research downgraded oilfield service player, SAExploration Holdings Inc.SAEX , to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Being an oilfield services player, SAExploration Holdings' services to the oil and gas industry include acquisition and processing of seismic data. It is to be noted that acquisition of seismic data activities comprise planning and permitting, design, camp services, drilling, in-field processing, survey, recording and reclamation. It is to be noted that oilfield services are positively related to oil and gas prices as the higher the prices of the commodities, the more will be the exploration and production activities and hence the greater the demand for oilfield services. The reverse is true when the commodity prices are down.

Let's check the oil and gas pricing scenario. The price of crude has been witnessing a downfall for more than a year now owing to plentiful supply of the commodity. West Texas Intermediate (WTI) crude closed at $45.09 per barrel yesterday, less than half the price of the commodity in mid 2014, when crude was trading above $100 per barrel.

Moreover, natural gas prices are way off the heights reached some years back. From a peak of about $13.50 per MMBtu in 2008 to below $3 now after sinking to a 10-year low of under $2 in 2012, the plummeting value of natural gas represents a decline of around 80% over seven years. With production from the major shale plays remaining strong and the commodity's demand failing to keep pace with this supply surge, natural gas prices have been held back. Even the summer cooling demand has been of little help.

On top of that there is almost no hope of the commodity prices being recovered very soon. Hence, this might be a tough time for SAExploration Holdings.

These bearish factors prompted downward estimate revisions in recent times. In fact, over the last 60 days, the Zacks Consensus Estimate for full-year 2015 fell from earnings of 9 cents per share to 4 cents.

Stocks to Consider

Not all energy stocks are as badly placed as SAExploration. Some better-ranked players in the energy sector are Tesoro Corporation TSO , NuStar Energy LP NS and Matrix Service Company MTRX . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NUSTAR ENERGY (NS): Free Stock Analysis Report

TESORO CORP (TSO): Free Stock Analysis Report

MATRIX SERVICE (MTRX): Free Stock Analysis Report

SAEXPLORATN HLD (SAEX): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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