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Which Oilfield Services Stocks Are Outperforming the Industry?

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Four OFS giants

Schlumberger (SLB), Halliburton (HAL), Baker Hughes, a GE company (BHGE), and National Oilwell Varco (NOV) are four large market cap US OFS (oilfield equipment and services) companies. In this series, we’ll compare their performances in the market and through financial metrics in the past year.

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What’s happening in the market and industry?

Since February 6, 2017, the VanEck Vectors Oil Services ETF (OIH) has decreased ~24% until February 5, 2018. The West Texas Intermediate crude oil price recovered 18% during the same period. So, OIH has grossly underperformed crude oil price’s recovery. The OFS industry remains under pressure. To learn more, read Energy Sector Review for the Week Ending March 2. Since February 6, 2017, the SPDR S&P 500 ETF (SPY) has increased 15%.

Analyzing the one-year prices

Halliburton has outperformed OIH in the past year. Since February 6, 2017, Halliburton stock has decreased ~14%. Halliburton provides services and products to the upstream industry.

By market capitalization, Schlumberger is the largest OFS company. Schlumberger’s stock price has declined 18% since February 6, 2017. Schlumberger provides technology, information solutions, and integrated project management to energy producers. Schlumberger accounts for 25% of OIH.

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Baker Hughes’s stock price has decreased ~33% in the past year—the steepest decline among the four OFS companies that we’re discussing. Baker Hughes provides drilling and evaluation as well as completion and production services to upstream producers. On July 3, 2017, the transaction combining GE’s (GE) oil and gas business with Baker Hughes was complete. Read Can the BHI–GE Partnership Benefit from Global Growth? to learn more.

National Oilwell Varco’s returns have been relatively resilient. National Oilwell Varco outperformed the industry ETF and fell 9% in the past year. Improved operating earnings from National Oilwell Varco’s Wellbore Technologies and Completion and Production Solutions segments in 2017 held the company’s returns above the industry ETF. National Oilwell Varco designs, manufactures, and sells equipment and components to energy producers.

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What impacted returns?

The US rig count has risen 30% in the past year. OFS companies’ revenues and profitability could improve when upstream companies’ drilling and production increase—depending on the OFS companies’ business model. Although the offshore drilling business remained challenging for most of the OFS companies, the sharp rise in US hydraulic fracturing drilling has started to ease the pricing pressure for OFS companies’ offerings. If crude oil prices remain strong, the higher upstream activity could have a positive impact on OFS companies’ revenues and profitability in 2018.

In this series

In this series, we’ll compare these four large market cap OFS companies based on revenues, earnings, and various industry indicators. Next, we’ll discuss the companies’ revenues in 2017.

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