The oilfield services market is expanding due to strong global demand and increased investments in international markets, particularly in the Middle East and Asia. This growth is driven by rising drilling activity and deepwater projects, with international operations further boosting profits for major service firms and fueling market expansion.
Considering the ongoing reliance on oil and gas, companies that offer oilfield services are poised for growth. Therefore, investing in fundamentally strong oilfield services stocks like Baker Hughes Company (BKR), NOV Inc. (NOV), and MRC Global Inc. (MRC) could be a wise move.
Amid potential challenges like fluctuating demand and economic uncertainties, advancements in technology, growth in offshore and unconventional oilfield exploration, and a focus on energy efficiency offer significant investment opportunities in the oilfield services sector. The global oilfield services market is projected to grow at an annual rate of 3.3% from 2024 to 2031, reaching $168.77 billion.
Despite volatility, oilfield drilling remains essential for global energy needs, economic growth, technological advancement, and energy security, making it a promising market.
This is evident as OPEC projects a surge in global oil demand in the latter half of 2024, expecting a 2.30 million bpd increase, driven by seasonal factors like increased driving, the Northern Hemisphere harvest, and winter preparations. Given these trends, oilfield services offer a promising investment opportunity. With this in mind, let’s explore the fundamentals of the three featured oilfield services stocks.
Baker Hughes Company (BKR)
BKR provides a portfolio of technologies and services to energy and industrial value chains worldwide. The company operates through the Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET) segments.
On June 10, 2024, BKR announced a major multi-year contract with Petrobras to provide workover and plug and abandonment services in offshore Brazil, starting in 2025. The project will leverage BKR’s integrated solutions and expand their facilities in Macaé.
In terms of forward non-GAAP PEG, BKR’s 0.43x is 72.3% lower than the 1.54x industry average. Its 1.39x forward EV/Sales is 31% lower than the 2.02x industry average. Also, its 1.26x forward Price/Sales is 11.9% lower than the 1.42x industry average.
For the fiscal second quarter that ended June 30, 2024, BKR’s revenue increased 13% year-over-year to $7.14 billion. The company’s adjusted net income attributable to BKR and adjusted EPS grew 43.8% and 46.2% from the prior year’s period to $568 million and $0.57, respectively. Furthermore, its adjusted EBITDA rose 24.6% from the year-ago value to $1.13 billion.
For the quarter ending September 30, 2024, BKR’s EPS is expected to increase 45.7% year-over-year to $0.61. Its revenue for the same quarter is expected to increase 9.2% year-over-year to $7.25 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 18.7% to close the last trading session at $35.43.
BKR’s POWR Ratings reflect this positive outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Energy - Oil & Gas industry, it is ranked #20 out of 78 stocks. It has a B grade for Sentiment. To see the other ratings of BKR for Growth, Value, Momentum, Stability, and Quality, click here.
NOV Inc. (NOV)
NOV designs, constructs, manufactures, and sells systems, components, and products for oil and gas drilling and production, as well as for industrial and renewable energy sectors internationally. It operates through two segments: Energy Equipment and Energy Products and Services.
In terms of forward EV/Sales, NOV’s 0.97x is 51.9% lower than the 2.02x industry average. Its 0.79x forward Price/Sales is 44.6% lower than the 1.42x industry average. Likewise, its 1.08x forward Price/Book is 34.1% lower than the 1.63x industry average.
NOV’s total revenues for the second quarter that ended June 30, 2024, came in at $2.22 billion, up 2.8% over the prior-year quarter. Its operating profit increased 93.2% year-over-year to $313 million. The company’s net income attributable to the company rose 89.9% over the prior-year quarter to $226 million. In addition, net income per common stood at $0.57, up 90% year-over-year.
Street expects NOV's EPS for the quarter ending September 30, 2024, to increase 30.1% year-over-year to $0.35, and its revenue for the same quarter is expected to increase 2.2% year-over-year to $2.23 billion. NOV surpassed the Street revenue estimates in each of the trailing four quarters. Over the past six months, the stock has gained 6.5% to close the last trading session at $18.01.
NOV’s POWR Ratings reflect its solid prospects. It is ranked #21 out of 51 stocks in the Energy - Services industry. It has a B grade for Value. Click here to see the other ratings of NOV for Growth, Momentum, Stability, Sentiment, and Quality.
MRC Global Inc. (MRC)
MRC and its subsidiaries distribute pipes, valves, fittings, and other infrastructure products and services internationally. They offer ball, butterfly, gate, globe, check, diaphragm, needle, and plug valves among other products.
On June 13, 2024, MRC announced an agreement to be the primary provider of pipe, valves, and fittings for ExxonMobil’s North America operations. This agreement covers maintenance, repair, operations, and project work across ExxonMobil's upstream and downstream facilities.
In terms of forward non-GAAP P/E, MRC’s 14.96x is 23.8% lower than the 19.62x industry average. Its 0.55x forward EV/Sales is 70% lower than the 1.85x industry average. In addition, its 11.34x forward EV/EBIT is 30.9% lower than the 16.42x industry average.
During the first quarter that ended on March 31, 2024, MRC reported sales of $832 million, with an adjusted gross profit of $184 million. Similarly, its adjusted net income attributable to common stockholders was $27 million, or $0.31 per share.
Analysts expect MRC’s revenue for the quarter ending December 31, 2024, to increase marginally year-over-year to $771.54 million. Its EPS for the quarter ending March 31, 2025, is expected to grow 22.5% year-over-year to $0.25. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 43.1% to close the last trading session at $13.09.
It’s no surprise that MRC has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It has an A grade for Value. Within the Energy - Services industry, it is ranked #2. To access MRC’s additional grades for Growth, Momentum, Stability, Sentiment, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BKR shares were trading at $35.41 per share on Tuesday afternoon, down $0.02 (-0.06%). Year-to-date, BKR has gained 5.69%, versus a 18.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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