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Oilfield Services Stocks: How Implied Volatilities Track Returns

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OFS stocks with high implied volatilities

As of May 1, 2017, Tidewater (TDW) has fallen 90% in the past year. It also has the highest implied volatility among the OFS (oilfield services and equipment) constituents of the VanEck Vectors Oil Services ETF (OIH).

The above table shows the one-year and one-week returns of the stocks we’ve identified as having high and low implied volatilities. Generally, high implied volatility stocks have moved more drastically than low implied volatility stocks, or have tended to fall more than low implied volatility stocks.

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Tidewater

In the past one week, Tidewater (TDW) stock has risen 10%, the only gainer among our high implied volatility stocks. The VanEck Vectors Oil Services ETF (OIH) fell 3.6%, while the broad market S&P 500 Index (VFINX) (SPY) (SPX-INDEX) rose 0.6% during the week. Energy accounts for 6.6% of the S&P 500 Index. On May 1, 2017, TDW stock closed at $0.88 per share. Tidewater has fallen the most among its high volatility peers in the past year.

On April 18, 2017, Tidewater received a “listing standard notice” from the NYSE (New York Stock Exchange). On April 5, 2017, Tidewater announced that it was in the process of restructuring its debts with creditors. However, the company didn’t ask for any extensions for its previous waivers, which expired on March 27, 2017. On April 5, 2017, the stock fell 13.4%.

In the past four quarters, TDW’s revenue has fallen 40.7%. Its adjusted operating income was -$39.7 million in 4Q16 as compared to -$0.10 million in 4Q15. Its operating profit margin is now -18.3%.

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Ensco

In the past week, Ensco (ESV) has fallen the most among the OFS stocks with high implied volatilities. On April 26, 2017, Ensco announced a loss of $0.09 per share for 1Q17. Wall Street had expected ESV to report a loss of $0.08 per share. On April 27, 2017, the stock fell 6.2%.

Weatherford International

Weatherford International (WFT) has fallen the least in the past year among our high implied volatility OFS stocks. On April 28, 2017, WFT announced non-GAAP negative earnings of $0.32 per share for 1Q17. On May 1, 2017, the stock fell 5.2%.

Returns of OFS stocks with low implied volatilities

Helmerich & Payne (HP) has fallen the most in the past one week among our OFS stocks with low implied volatility. HP released its 2Q17 earnings on April 27, 2017, reporting diluted earnings per share of -$0.45.

Baker Hughes (BHI) was the only gainer in the past one week and was the outperformer in the past one year among our OFS stocks with low implied volatility. BHI released its 1Q17 earnings on April 25, 2017, reporting negative GAAP earnings per share of $0.30.

Sharp movements and high short interest in a stock can cause high implied volatility in a stock.

In the next and final part of this series, we’ll look at the OFS stocks with the highest short-interest-to-equity-float ratios.

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