Four oilfield service giants

Schlumberger (SLB), Halliburton (HAL), Baker Hughes (BHGE) (a GE Company), and National Oilwell Varco (NOV) are the four large market cap US OFS (oilfield services and equipment) companies we’ll be comparing in this series, both in terms of market performance and financial metrics.

These Large Oilfield Services Stocks Are Outperforming Industry

What’s happening in the market and industry?

Since November 7, 2016, the VanEck Vectors Oil Services ETF (OIH) has fallen ~8% as of November 6, 2017. But WTI (West Texas Intermediate) crude oil prices have recovered 28% during the same period, and so OIH has underperformed crude oil’s recovery, as the OFS industry remains under pressure.

Since November 7, 2016, the SPDR S&P 500 ETF (SPY) has risen 21%, while the Dow Jones Industrial Average (DJIA-INDEX) has risen 29%. (You can read the latest on crude oil prices in Market Realist’s Global Crude Oil Glut: Is It Shrinking?)

Analyzing one-year stock prices

Halliburton has outperformed the VanEck Vectors Oil Services ETF in the past year. Since November 7, 2016, its stock has fallen ~5%. Halliburton provides services and products to the upstream industry.

By market capitalization, Schlumberger is the largest OFS company. SLB’s stock price has declined 16% since November 7, 2016. SLB provides technology, information solutions, and integrated project management to energy producers and makes up 25% of OIH.

Baker Hughes’s stock price has fallen ~17% in the past year—the steepest decline in our select set of four OFS companies. BHGE provides drilling and evaluation and completion and production services to upstream producers. On July 3, 2017, a transaction combining GE’s (GE) oil and gas business with Baker Hughes was complete. (Read more about this deal this in Market Realist’s Can the BHI–GE Partnership Benefit from Global Growth?)

National Oilwell Varco’s returns have been relatively resilient, outperforming the industry ETF and rising 10% in the past year. Improved earnings from NOV’s Wellbore Technologies and Completion & Production Solutions segments in 3Q17 held its returns above the industry ETF. NOV designs, manufactures, and sells equipment and components to energy producers.

What affected returns?

The US rig count has risen 58% in the past year. OFS companies’ revenues and profitability can improve when the upstream companies’ drilling and production pick up, though these also depend on the business model of the OFS company.

Many offshore projects that have been deferred in the past two years as a result of depressed crude oil prices may finally see execution if crude oil’s upward momentum continues. This could positively affect OFS companies supplying products and services to offshore upstream companies. (For more, read Market Realist’s Oil near $60: How’s the Offshore Drilling Industry Faring?)

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