Citi upgrades oil firms as Permian recovery gains momentum

Investing.com -- The U.S. oilfield services (OFS) sector is entering the first-quarter earnings season with mixed signals, as a gradual recovery in domestic shale activity contrasts with ongoing geopolitical uncertainty in the Middle East, according to a new research report by Citi.

Citi upgraded Atlas Energy Solutions and ProPetro to “Buy,” citing strong leverage to Permian activity and emerging opportunities in power generation.

Citi analysts highlighted improving conditions in the Permian Basin, where rising completion activity and stabilizing pricing for hydraulic fracturing (frac), sand, and logistics services are expected to lift earnings. The firm noted that pricing, while still below long-term averages, is rebounding from recent lows.

AESI’s target price was raised to $18, supported by expected growth in its sand logistics and power businesses.

PUMP’s target was increased to $16, driven by improving frac demand and expansion into power services.

Both companies are expected to benefit from a long-term “power theme,” as rising electricity demand—particularly in Texas—creates opportunities for oilfield firms to diversify into energy infrastructure.

Citi said that private operators may add 30–50 drilling rigs by the end of 2026, depending on oil price trends, signaling cautious but steady growth in U.S. shale production.

Firms such as Halliburton, Patterson-UTI, and Liberty Energy are expected to gain from stronger U.S. activity and pricing.

The trajectory of the OFS sector will largely depend on how the Middle East conflict evolves. Companies with international exposure may face operational disruptions, while U.S.-focused players could benefit from a shift toward domestic production.