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OFS Stocks: Update on Implied Volatility and Short Interest

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Part 2
OFS Stocks: Update on Implied Volatility and Short Interest PART 2 OF 3

Oilfield Services Stocks: Returns Impact Implied Volatility

OFS stocks with high implied volatilities

As of March 14, 2017, Seadrill (SDRL) fell 66.8% over the past year. It has the highest implied volatility of all the OFS (oilfield equipment and services) companies that make up the VanEck Vectors Oil Services ETF (OIH). In the past five trading days, Seadrill stock has risen 16.2%—the most among high implied volatility companies.

Oilfield Services Stocks: Returns Impact Implied Volatility

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During the same period, OIH fell 5.7%, while the S&P 500 Index (SPY) (QQQ) (SPX-INDEX) was flat. The Dow Jones Industrial Average (DIA) (DJIA-INDEX) fell 0.3% during the same period.

The above table shows the one-year and five-day returns of the stocks we identified as having high and low implied volatilities. Generally, high implied volatility stocks fell significantly or moved more drastically than low implied volatility stocks.

In the last five days, Seadrill (SDRL) was the only gainer among the OFS stocks with high implied volatilities. Carbo Ceramics (CRR) lost the most during this period.

On March 3, 2017, Carbo Ceramics (CRR) announced refinancing of $65 million in continuing bank loans with Wilks Brothers through debt placement. The company owns 9.5% stake in Carbo Ceramics.

The sharp fall in crude oil in the last few days caused OFS stocks to fall across the board. It caused low volatility and high-quality OFS companies like Halliburton (HAL) to fall sharply.

Weatherford International (WFT) fell the least in the past year among the high implied volatility OFS stocks. In the past four quarters, Weatherford International’s revenue fell 30.1%. Its operating loss was $148.0 million in 4Q16—compared to an operating loss of $388.0 million in 4Q15. Its operating profit margin is -12.5%—compared to the industry median of -3.7%.

Among high implied volatility OFS stocks, Seadrill fell the most in the past year. In the past four quarters, Seadrill’s revenue has fallen 30.4%, while its operating income fell 13.8%.

Returns of OFS stocks with low implied volatilities

Halliburton shares fell the most in the past five days among the low implied volatility OFS stocks. On January 23, 2017, it reported its 4Q16 earnings results with diluted earnings per share of $0.17.

In the next part of this series, we’ll look at the OFS stocks with the highest short interest-to-equity float ratios. Sharp moves and high short interest can cause high implied volatility in a stock.

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