Goldman Sachs Upgrades XPRO to Buy, Maintains $19 Price Target
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Goldman Sachs Upgrades XPRO to Buy, Maintains $19 Price Target
Despite Middle East geopolitical uncertainty, near-term North American operations remain strong, and the long-term international business outlook is gradually improving.
- XPRO upgraded to Buy with a maintained $19 price target, implying approximately 24% upside potential.
- Although the timing of the reopening of the Strait of Hormuz remains uncertain, increased investment in international and offshore services is anticipated over the medium term.
- XPRO derives approximately 80% of its revenue internationally and about 70% from offshore activities, giving it significant thematic exposure.
- XPRO’s Drive25 initiative and the pending acquisition of Enhanced Drilling are expected to enhance profitability.
Report interpretation
Overview
This report analyzes the Americas energy services sector, with a particular focus on investment opportunities in Expro Group Holdings NV (XPRO). Despite geopolitical uncertainty in the Middle East, North American operations are performing well in the near term, and the long-term international business outlook is gradually improving. The report upgrades XPRO’s rating from 'Neutral' to 'Buy,' maintaining the price target at $19, implying approximately 24% upside potential. Additionally, the report discusses the outlook for several other companies, including Schlumberger (SLB), Halliburton (HAL), and Liberty Energy (LBRT).
Core views
The report considers XPRO undervalued, trading at an EV/EBITDA multiple of approximately 4x compared to the peer average of 8.5x. With roughly 80% of its revenue generated internationally and about 70% from offshore operations, XPRO is well-positioned to benefit from growth in international and offshore markets over the coming years. The report forecasts international rig counts to increase by 6% year-over-year in 2027 and 4% in 2028, while offshore rig counts are expected to grow by 5% in 2027 and 1% in 2028. XPRO’s Drive25 program and the upcoming acquisition of Enhanced Drilling are expected to further strengthen its profitability and drive market share gains. For SLB, the report maintains a 'Buy' rating, viewing the company as a leader in international oilfield services that will benefit from international market growth in the coming years. Meanwhile, the report maintains 'Neutral' ratings on Helmerich & Payne (H&P) and Liberty Energy (LBRT), acknowledging their exposure to the North American market but also noting certain challenges they face.
Analysis framework
The report employs a supply-demand framework to analyze international and offshore market demand under current macroeconomic conditions, integrating company financial data and strategic initiatives (such as the Drive25 program and M&A activity) to derive conclusions. It also uses both EV/EBITDA and free cash flow yield methodologies to assess XPRO’s price target, concluding that both approaches support the current target. The report notes that XPRO’s high exposure to international and offshore revenue gives it significant thematic relevance, especially as mature markets like U.S. shale offer limited growth, making incremental activity in international and offshore markets increasingly important.
Methodology notes
The report uses EV/EBITDA valuation combined with free cash flow yield to assess XPRO’s price target.
EV/EBITDA is a commonly used relative valuation method that compares enterprise value to earnings before interest, taxes, depreciation, and amortization to assess valuation levels. The report argues that XPRO is significantly undervalued relative to peers under current market conditions, indicating substantial upside potential.
The report analyzes supply-demand dynamics in international and offshore markets, expecting incremental activity to rise as Middle Eastern production restarts and expansion continues in Latin America and Africa.
The supply-demand framework is a key tool for assessing how changes on the supply and demand sides impact pricing and profitability in an industry. The report believes XPRO’s international and offshore businesses will benefit from this incremental activity over the next few years, driving revenue and EBITDA growth.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- XPROBenefits from growing international and offshore market demand
- Strengths
- High international and offshore revenue exposure, strong technological barriers
- Weaknesses
- Dependent on pace of international market growth and Middle East geopolitical developments
- Comparison
- Compared to other international oilfield service companies, XPRO trades at a lower valuation with significant upside potential
- Risks
- Slowdown in international and offshore activity, delays in technology development
- SLBBenefits from long-term international market growth
- Strengths
- Leader in international oilfield services with broad market share
- Weaknesses
- Dependent on pace of international market growth
- Comparison
- Compared to XPRO, SLB trades at a higher valuation but retains strong long-term growth potential
- Risks
- Commodity price volatility, slow adoption of digital technologies
- HALBalanced exposure between international and North American markets
- Strengths
- Pure-play North American operations and international growth potential
- Weaknesses
- Intense competition in North America, weaker pricing power
- Comparison
- Compared to XPRO, HAL performs better in North America but has slightly less international growth potential
- Risks
- Decline in North American activity, challenges from integration and M&A
Key data
- XPRO 2027 EBITDA Forecast$386 millionUp 3% from prior forecast
- XPRO Price Target$19Unchanged, implying approximately 24% upside potential
- XPRO International Rig Count Growth6% YoY growth in 2027Expected 4% YoY growth in 2028
- XPRO Offshore Rig Count Growth5% YoY growth in 2027Expected 1% YoY growth in 2028
Impact & implications
The report believes XPRO’s international and offshore businesses will benefit from rising international demand over the next few years, particularly as Middle Eastern production restarts and expansion continues in Latin America and Africa. XPRO’s Drive25 program and the imminent completion of the Enhanced Drilling acquisition are expected to further boost profitability, with EBITDA margins projected to reach approximately 25% by 2031. However, the report also highlights potential risks, including a slowdown in international and offshore activity and delays in technological development.
Risks
- A slowdown in international and offshore activity could negatively impact XPRO’s profitability.
- Slower-than-expected growth in the international oilfield services market could lead to XPRO’s earnings falling short of expectations.
- Delays in technological development could hinder XPRO’s product innovation and client activity growth.
What to watch
- Actual growth trends in international and offshore markets
- Progress of XPRO’s Drive25 program and technology integration
- Evolution of Middle East geopolitics and its impact on crude oil supply