Investing.com — Oil resource stocks could enter a promising phase in 2025, if George Soros’ “boom and bust sequence model” plays out as expected, according to Bernstein analysts. The sector is believed to be at the beginning of stage 4, which has historically been associated with strong equity returns driven by a gap between improving fundamentals and investor skepticism.
“Based on this model, we will watch the shares of European OFS – and maybe, but less, the shares of North America – right now at the beginning of phase 4,” Bernstein analysts led by Guillaume Delaby note.
The fourth category, they explain, “is often more attractive to income, as it is the result of a disconnect between: 1) the rapidly developing economic reality; and 2) investor expectations that are still very low.”
“Therefore, we can expect a strong performance (especially in Europe) of OFS shares in 1Q25 and possibly 2H25,” the analysts added.
Bernstein expects that oil and gas exploration and production (E&P) spending will increase by about 5% by 2024, to about $600 billion. Offshore operations saw strong growth, rising 8% to $250 billion, while offshore investment increased 1% to $350 billion.
By 2025, oil and gas costs are expected to increase modestly by 1-2%, reaching approximately $610 billion. Offshore spending is forecast to grow by 3-4%, reaching $260 billion, while onshore spending is expected to remain low.
“Subsea remains the most attractive segment,” analysts highlight, citing “long-term visible demand, a duopolistic/oligopolistic structure, a lack of available vessels, and a visible margin improvement.”
They also point to potential windfalls in power and LNG projects in late 2025 or early 2026, and higher capex in the Middle East in the 2026-2027 period. However, they cautioned that the outlook for North America remains unclear.
In terms of investment recommendations, Bernstein highlights Saipem (TRUE :), ADNOC Drilling (ADX:), ADNOC Logistics & Services (L&S) (ADX:), and SBM Offshore NV (AS:) as its top picks, joined by Technip Energies BV (EPA:), which they consider “the only real growth stock in the industry.”
Saipem is expected to start the year with a backlog of 35 billion euros, with its fleet fully booked for 2026 and half of the 2027 capacity already secured.
In the Middle East, Adnoc Drilling is in line to win a $1.7 billion contract to drill 144 unconventional wells before 2026.
Adnoc L&S, on the other hand, is expected to double the revenue of its shipping segment by integrating Navig8 and expand its Integrated Logistics segment with significant capex initiatives.
Finally, SBM Offshore can earn money after changing its business model to a lower-cost, more operational and maintenance-oriented one, Bernstein explained.
