2Q Preview: Macro/geopolitical uncertainty driving the OFS bus

Research evidence excerpt

2Q Preview: Macro/geopolitical uncertainty driving the OFS bus

Risks to our price objective are global economic weakness, weaker O&G prices, reduced

upstream capital spending, inability to integrate GTLS, changes to fiscal & royalty

regimes in countries where BKR operates or may operate, geopolitical upheavals,

oversupply, technical and operational issues. The company-specific risk is that increasing

competition in international markets may permanently result in lower margins, returns

and ultimately valuation premium.

Cactus Inc. (WHD)

Our PO of $57.00 is derived from our discounted cash flow valuation, which we believe

is a better method to value WHD than EV/EBITDA in these market conditions. We

forecast earnings & cash flow through 2030, which we believe is the limit of market

recognition, and then assume a terminal growth rate of -1% due to potential disruptions

from the energy transition, while using a 8.9% WACC. The PO increase reflects higher

2027/28 estimates & benefit from the recently closed SPC JV..

Downside risks to our PO are: 1) weaker O&G prices, 2) increased E&P capital discipline,

3) continued pressure on margins from tariff, 4) regulatory risk, as greater restrictions

on drilling or fracturing operations would hurt WHD's operations, 5) new entrants &

market share loss, and 6) global economic weakness.

Upside risks are: 1) O&G price increases ramping E&P capex higher, 2) faster than

expected market share gains & non-completions market penetration in Spoolables, 3)

faster than expected International expansion in Pressure Control / SPC-JV, and 4) faster

than expected recovery in Pressure Control margins on successful tariff mitigation

efforts.

Chart Industries (GTLS)

We have removed the investment opinion on the company's stock. Investors should no