Plummeting oil prices and uncertainty around the oil market in the midst of a price war between two big producing nations led Bank of America to downgrade nearly every stock in the sector that it didn't already rate Underperform, dropping the outlook on 14 stocks across the industry, from offshore drillers to equipment companies.
Bank of America analyst Chase Mulvehill said in a Tuesday note the Saudi-Russia price war will ripple through the industry, and that U.S. shale will be the biggest victim.
Mulvehill said U.S. Horizontal rig activity can be expected to collapse by nearly 35%, and expects U.S. onshore spending to drop considerably. Over the next couple years, shale could look pretty bleak.
"At some point, the global oil market will need US Shale to grow again," Mulvehill wrote in the note. "That’s probably not until 2022, though."
The only two sector stocks Mulvehill didn't downgrade were Baker Hughes Co (NYSE: BKR), which remains BOA's only buy-rated stock in the industry, and Liberty Oilfield Services Inc (NYSE: LBRT), on which it remains Neutral.
In all, BofA downgraded 14 stocks. They were:
- Halliburton Company (NYSE: HAL), from Buy to Neutral
- Schlumberger Limited (NYSE: SLB) from Buy to Neutral
- Helmerich & Payne, Inc. (NYSE: HP) from Neutral to Underperform
- Nabors Industries Ltd. (NYSE: NBR) from Neutral to Underperform
- Patterson-UTI Energy, Inc. (NASDAQ: PTEN) from Neutral to Underperform
- Transocean LTD (NYSE: RIG) from Neutral to Underperform
- Helix Energy Solutions Group Inc (NYSE: HLX) from Buy to Neutral
- Oceaneering International (NYSE: OII) from Buy to Neutral
- Apergy Corp (NYSE: APY) from Buy to Neutral
- Core Laboratories N.V. (NYSE: CLB) from Buy to Underperform
- Forum Energy Technologies Inc (NYSE: FET) from Neutral to Underperform
- Cactus Inc (NYSE: WHD) from Buy to Underperform
- Nextier Oilfield Solutions Inc (NYSE: NEX) from Buy to Neutral
- Propetro Holding Corp (NYSE: PUMP) from Neutral to Underperform