Analyzing the Energy Services Landscape through Four Midcaps
Four OFS midcaps
In this series, we’ll compare four US oilfield services and equipment, or OFS, companies—Weatherford International (WFT), FMC Technologies (FTI), Transocean (RIG), and Core Laboratories (CLB). These four are among the top ten largest OFS companies. Their market capitalizations are larger than $2 billion but do not exceed $10 billion.
OFS companies assist exploration and production, or E&P, companies at various stages across the entire process of searching and producing oil and gas. This includes exploring wells and using equipment to lift and transport the energy produced from these wells.
Returns analysis
As noted in the chart above, Core Laboratories (CLB) has done better than its peers in the past year. It also beat the Market Vectors Oil Services ETF (OIH). OIH is an ETF tracking an index of 25 listed OFS companies.
CLB provides reservoir description, production enhancement, and reservoir management services to energy upstream companies. Since September 11, 2014, its stock has returned -28.7%. CLB is 2.9% of OIH. In the past year, OIH has returned -42.7%.
FMC Technologies is an equipment provider of subsea (offshore drilling) production, surface wellhead production (onshore drilling), high pressure fluid control equipment, and well measurement solutions. FTI returned a -42% in the past year—on par with OIH.
Weatherford International is a Switzerland-headquartered OFS company. WFT provides equipment and services to upstream energy companies. These are used in drilling, evaluation, completion, production, and intervention activities. In the past year, its stock has returned -57%.
Transocean, an offshore contract driller for oil and gas wells, has returned -56% in the past year.
Why did returns vary?
The slump in crude oil prices, which started in June last year, negatively affected the OFS sector. Those with US-centric businesses have suffered more due to their exposure to the American shale boom. American shale operations have been severely affected by the recent slump in energy prices.
You may also note that some of the OFS companies in the group have more diversified operations than others. As these companies’ share prices spiral down, some of the weaker OFS companies can also become vulnerable as M&A targets. For more on this topic, read Market Realist’s article titled “Schlumberger Proposes to Acquire Cameron International.”
In the next part of this series, we’ll look at the 2Q15 changes in these companies’ revenues.
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