Analyzing the 1-Year Prices for 4 Mega Oilfield Services Companies

Four oilfield service giants

In this series, we’ll compare four of the most prominent US oilfield services and equipment (or OFS) companies—Schlumberger (SLB), Halliburton (HAL), Baker Hughes (BHI), and National Oilwell Varco (NOV). Each of these companies has a market capitalization in excess of $5.0 billion.

Analyzing the 1-Year Prices for 4 Mega Oilfield Services Companies

What’s happening in the market and industry?

In the past year, the VanEck Vectors Oil Services ETF (OIH) has decreased ~8%. OIH tracks an index of 25 listed OFS companies. Although the West Texas Intermediate (or WTI) crude oil price is still higher than its level a year ago, it has dropped 9% since its one-year high recorded in February 2017. This partially explains the decline in OIH’s price.

The SPDR S&P 500 ETF (SPY) has increased 13% in the past year. You can read the latest on crude oil prices in Market Realist’s Is It Time for OPEC to Rebalance the Crude Oil Market? The Dow Jones Industrial Average (DJIA-INDEX) has increased 16% in the past year.

Analyzing one-year prices

Halliburton (HAL) has outperformed the industry ETF in the past year. Since May 2, 2016, its stock has increased ~8%. Leaving the merger termination with Baker Hughes (BHI) behind, improving earnings from Halliburton’s North America operations kept its returns ahead of the industry. Halliburton provides services and products to upstream producers.

Schlumberger (SLB) is the largest OFS company by market capitalization. SLB stock has fallen 10% in the past year. SLB provides technology, integrated project management, and information solutions to energy producers. SLB makes up 20.9% of OIH.

Baker Hughes (BHI) stock has increased ~26% in the past year—the largest increase in our set of OFS companies under discussion. BHI provides drilling and evaluation services, as well as completion and production services, to upstream producers.

On October 31, 2016, Baker Hughes and GE (GE) entered a partnership agreement. You can read the latest on this deal in Can the BHI–GE Partnership Benefit from Global Growth?

National Oilwell Varco, which designs, manufactures, and sells equipment and components to the upstream industry, has performed in line with the industry ETF, decreasing 3% in the past year.

Why did returns vary?

The US rig count has more than doubled in the past year. Upstream companies’ drilling budgets are also showing signs of recovery. OFS companies’ revenues and profitability can improve when the upstream companies’ drilling and production pick up again. However, this would also depend on the business model diversity of the OFS companies.

Many offshore projects have been deferred during the past two years as a result of depressed crude oil prices. This has negatively affected OFS companies supplying products and services to the offshore upstream companies. In this context, please read Market Realist’s What to Expect from Transocean’s 1Q17 Results.

Series highlight

In this series, we’ll compare these four large-cap OFS companies based on fundamental drivers, as well as their industry indicators. We will start our discussion by comparing the changes in these companies’ revenues in 1Q17.