Amid the chatter of U.S. election results, we had a busy week meeting with BakerHughes to discuss the GE tie-up and attending Nabors’ Analyst Day (see p. 5 forour thoughts on WFT). We’re back in Houston for our inaugural EnergyTechnology Tour, visiting SLB, HAL, BHI, WFT, NOV and FTI, and meetingwith E&Ps like APC, CVX, EOG, and EPE. Last week marked a historic (andsurprising) win for new President-elect Donald Trump, spurring discussionsregarding the potential impact to oil. We concur with our High Yield colleaguesthat Trump’s broad policy goals aren’t likely to have appreciable impact on supplydynamics near-term (since the majority of federal lands are located offshore),though reduced regulatory burden should be a boon for midstream infrastructure.

Hawkish Fed implications put increased USD pressure on oil prices, though theongoing reflationary trade in fixed income markets has more mixed read-throughfor OFS stocks, in our view. As we highlighted in our latest E&P Budget Watch,robust production growth forecasts (some multiyear) on relatively measured capexincreases portend a test of our “circular logic” thesis for the group, indicatingwhether the U.S. can serve as a swing producer and cap the oil price andsubsequent activity upside. We stay cautious on the group and prefer to positiondefensively for a narrower, W-shaped recovery. On a relative basis, our toppicks in large caps: SLB and HAL; in small caps CLB, MRC and TTI.