Top five OFS companies
ION Geophysical (IO) saw the highest rise in stock prices in the OFS industry. YTD (year-to-date), its stock price has risen ~116% until November 20. ION Geophysical provides geoscience products, services, and solutions to the uptream energy industry. Its operating segments are E&P Technology & Services, E&P Operations Optimization, and Ocean Bottom Services.
Newpark Resources (NR), which operates through its Fluids Systems and Mats and Integrated Services segments, ranks second in terms of YTD stock market returns in the OFS industry. Its stock price has risen 16.7% YTD until November 20. RPC (RES), which offers pressure pumping and hydraulic fracturing services and related equipment, had 16.5% returns YTD.
Although McDermott International (MDR) and CARBO Ceramics (CRR) are on the top five list of outperformers in the OFS industry, their returns were actually negative. McDermott International has fallen 2.8%, while CARBO Ceramics has fallen 3.4% as of November 20. The VanEck Vectors Oil Services ETF (OIH) had returns of -28% YTD. It shows the sheer weakness in the industry.
Why did the returns vary?
West Texas Intermediate crude oil prices have recovered 4%, while the US rig count has risen 39% YTD. OFS companies’ revenues and profitability can improve when upstream companies’ drilling and production pick up. However, it also depends on the OFS companies’ business model. Increased upstream activity usually has a positive impact on OFS companies supplying products and services to offshore upstream companies.
However, the OFS industry’s services and equipment are still in oversupply, which has kept their earnings under pressure. So, most returns haven’t kept up with crude prices and the broad market’s returns. To learn more about the top OFS companies, read Oilfield Services after 3Q17: SLB, HAL, BHGE, and NOV.
Next, we’ll compare ION Geophysical’s YTD returns with market indicators and analyze its fundamental metrics.