BHGE and NOV’s Performances Compared to the Industry

Two oilfield service giants

Baker Hughes, a GE Company (BHGE), and National Oilwell Varco (NOV) are among the largest market cap US OFS (oilfield equipment and services) companies. In this series, we’ll compare Baker Hughes and National Oilwell Varco’s performances in the market and through financial metrics.

Returns from the market and industry

Since May 8, 2017, the VanEck Vectors Oil Services ETF (OIH) has decreased ~1% as of May 7, 2018. The West Texas Intermediate crude oil price has increased 52% during the same period. So, OIH has underperformed crude oil price’s recovery. Read What’s Happening in the Oil Market? to learn more. Oversupply in the OFS industry has kept margins under pressure. Since May 8, 2017, the Energy Select Sector SPDR ETF (XLE) has increased 9%. XLE represents the broader energy industry ETF. Since May 8, 2017, the SPDR S&P 500 ETF (SPY) has outperformed OIH and XLE in the past year. SPY has produced 11% one-year returns.

BHGE and NOV’s Performances Compared to the Industry

Analyzing one-year prices

National Oilwell Varco has outperformed the VanEck Vectors Oil Services ETF in the past year. Since May 8, 2017, National Oilwell Varco stock has increased ~13%. National Oilwell Varco provides services and products to the upstream energy industry.

Baker Hughes’s stock price has declined 14% since May 8, 2017. Baker Hughes provides integrated oilfield products, services, and digital solutions to energy producers. Baker Hughes accounts for 5.9% of OIH.

What impacted the returns?

The US rig count has increased ~18% in the past year. OFS companies’ revenues and profitability can improve when upstream companies’ exploration, drilling, and production increase. However, the improvement also depends on the OFS companies’ business models. Although US onshore energy companies have been busy with activities, offshore energy companies have fallen behind. Many offshore projects, which have been deferred since 2014 due to depressed crude oil prices, can finally be completed if crude oil price’s upward momentum continues. Restarting the projects would have a positive impact on OFS companies supplying products and services to the upstream companies.

In this series

In this series, we’ll compare Baker Hughes and National Oilwell Varco based on their revenues, earnings, and free cash flow. Next, we’ll compare the changes in these companies’ revenues in 1Q18.