Bernstein: Energy & Power — outrun the wolves with simpler heuristics
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Bernstein draws on historical metaphors of wolves—representing oil used as a political weapon—to frame the current macroeconomic environment, warning that a double whammy of concurrent inflation and recession demands decisive action. The firm believes the market is currently in the late stages of phase four in the Soros model. The ongoing Iran conflict could extend the current oilfield services (OFS) upcycle, originally projected to peak in the first half of 2027.
To stay ahead, the report outlines strategic heuristics for investors. These include leading with price increases, overweighting precious metals and energy, and favoring OFS companies with strong pricing power over engineering and construction firms. The OFS sector boasts record aggregated free cash flow of approximately $27 billion, and while its EV/revenue multiple of 1.94x sits above historical averages, consensus estimates remain undemanding.
Bernstein also highlights artificial intelligence as a structural catalyst for OFS, optimizing reservoir management and hydrocarbon recovery. Specific laggard stocks from 2025, including Vallourec, Saipem, and Tenaris, are starting to outperform and present compelling opportunities. The firm maintains Outperform ratings on 14 covered names, favoring companies like SLB, Viridien, and Adnoc Drilling, which combine pricing power with AI-driven operational leverage.