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Analyzing the 1-Year Returns for SLB, HAL, BHI, and CAM

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Four OFS companies

In this series, we’ll compare four of the largest US OFS (oilfield services and equipment) companies by market capitalization. The companies are Schlumberger (SLB), Halliburton (HAL), Baker Hughes (BHI), and Cameron International (CAM).

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Analyzing the one-year returns 

Cameron International has done better than most of its peers in the stock market in the past year. The company provides flow equipment products, systems, and services to the upstream energy sector across the world. Since February last year, its stock has returned 40%. On August 26, 2015, Schlumberger and Cameron International entered into a merger agreement. Cameron International will merge with Schlumberger. Cameron International’s share price rose 41% following the merger announcement. This partly explains Cameron International’s spectacular returns.

Schlumberger is the largest OFS company by market capitalization. It provides technology, integrated project management, and information solutions to energy producers. Schlumberger returned -13% year-to-date. Schlumberger accounts for 24.1% of the VanEck Vectors Oil Services ETF (OIH). In the past year, OIH has returned -29%. OIH is an ETF that tracks an index of 25 listed OFS companies.

Halliburton provides services and products to upstream producers. Its services include locating hydrocarbons, drilling and formation evaluation, and well construction and completion. Since February 2015, its stock has returned -23.5%. Baker Hughes provides drilling and evaluation as well as completion and production services to upstream producers. It has returned -31%. In November 2014, Baker Hughes and Halliburton entered into an agreement. Halliburton will acquire Baker Hughes. The transaction is still subject to regulatory approvals.

Why did the returns vary?

The slump in the US rig count started in October 2014. It had a negative impact on the OFS sector. The fall in upstream companies’ drilling budget impacted these OFS companies’ revenue and profitability to various degrees depending on the business model diversity of the OFS companies. According to a Rystad Energy report, well services and drilling contractors were the hardest hit within the OFS industry in fiscal 2015.

Next, we’ll compare the changes in these companies’ revenue in fiscal 4Q15.

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