S&P 500   5,068.86 (-0.18%)
DOW   38,882.02 (-0.23%)
QQQ   434.90 (-0.62%)
AAPL   180.29 (-1.28%)
MSFT   406.06 (-0.35%)
META   485.88 (-0.24%)
GOOGL   135.83 (-2.20%)
AMZN   173.57 (+0.02%)
TSLA   202.97 (+1.62%)
NVDA   782.31 (-0.60%)
NIO   5.49 (-5.02%)
AMD   175.30 (-1.52%)
BABA   75.19 (-3.21%)
T   17.00 (+1.01%)
F   12.26 (+2.17%)
MU   89.38 (-2.69%)
CGC   3.47 (-1.70%)
GE   155.07 (+0.70%)
DIS   110.66 (+1.13%)
AMC   4.93 (+2.49%)
PFE   27.09 (+0.74%)
PYPL   60.59 (+0.71%)
XOM   104.03 (+0.00%)
S&P 500   5,068.86 (-0.18%)
DOW   38,882.02 (-0.23%)
QQQ   434.90 (-0.62%)
AAPL   180.29 (-1.28%)
MSFT   406.06 (-0.35%)
META   485.88 (-0.24%)
GOOGL   135.83 (-2.20%)
AMZN   173.57 (+0.02%)
TSLA   202.97 (+1.62%)
NVDA   782.31 (-0.60%)
NIO   5.49 (-5.02%)
AMD   175.30 (-1.52%)
BABA   75.19 (-3.21%)
T   17.00 (+1.01%)
F   12.26 (+2.17%)
MU   89.38 (-2.69%)
CGC   3.47 (-1.70%)
GE   155.07 (+0.70%)
DIS   110.66 (+1.13%)
AMC   4.93 (+2.49%)
PFE   27.09 (+0.74%)
PYPL   60.59 (+0.71%)
XOM   104.03 (+0.00%)
S&P 500   5,068.86 (-0.18%)
DOW   38,882.02 (-0.23%)
QQQ   434.90 (-0.62%)
AAPL   180.29 (-1.28%)
MSFT   406.06 (-0.35%)
META   485.88 (-0.24%)
GOOGL   135.83 (-2.20%)
AMZN   173.57 (+0.02%)
TSLA   202.97 (+1.62%)
NVDA   782.31 (-0.60%)
NIO   5.49 (-5.02%)
AMD   175.30 (-1.52%)
BABA   75.19 (-3.21%)
T   17.00 (+1.01%)
F   12.26 (+2.17%)
MU   89.38 (-2.69%)
CGC   3.47 (-1.70%)
GE   155.07 (+0.70%)
DIS   110.66 (+1.13%)
AMC   4.93 (+2.49%)
PFE   27.09 (+0.74%)
PYPL   60.59 (+0.71%)
XOM   104.03 (+0.00%)
S&P 500   5,068.86 (-0.18%)
DOW   38,882.02 (-0.23%)
QQQ   434.90 (-0.62%)
AAPL   180.29 (-1.28%)
MSFT   406.06 (-0.35%)
META   485.88 (-0.24%)
GOOGL   135.83 (-2.20%)
AMZN   173.57 (+0.02%)
TSLA   202.97 (+1.62%)
NVDA   782.31 (-0.60%)
NIO   5.49 (-5.02%)
AMD   175.30 (-1.52%)
BABA   75.19 (-3.21%)
T   17.00 (+1.01%)
F   12.26 (+2.17%)
MU   89.38 (-2.69%)
CGC   3.47 (-1.70%)
GE   155.07 (+0.70%)
DIS   110.66 (+1.13%)
AMC   4.93 (+2.49%)
PFE   27.09 (+0.74%)
PYPL   60.59 (+0.71%)
XOM   104.03 (+0.00%)

Oilfield Services Growing Faster Than Wider Energy Sector

oil services stocks

Key Points

  • The oil industry is undergoing rapid transformation due to changes in regulation, customer behavior, technology acquisitions and other factors,
  • The recent merger of Patterson UTI and NexTier Oilfield Solutions exemplifies the shifting industry landscape.
  • Oilfield services firms are reducing debt loads and increasing share buybacks to fortify their financial positions.
  • Schlumberger, Halliburton, and Baker Hughes have all increased dividends and implemented share buyback programs.
  • Within oilfield services, Weatherford International currently boasts a solid combination of fundamental and technical characteristics. 
  • 5 stocks we like better than Baker Hughes

It’s sometimes said that markets can turn on a dime. That seemed to have happened with the energy sector, which was the huge 2022 winner, but the Energy Select Sector SPDR Fund NYSEARCA: XLE is down 7.56% so far in 2023, lagging behind all other sectors. 

Within the broader energy sector, oilfield services and machinery and equipment makers are explorers and producers in the past month. 

There are a few things going on: Oil prices are down due to factors including a higher dollar and mixed signals about economic growth. In addition, according to the U.S. Energy Information Administration, biofuels are displacing petroleum-based distillate fuel oil consumption on the West Coast. The EIA said consumption of distillate fuel oil dropped to its lowest levels since 2003. 

Renewables Replacing Petroleum Diesel

According to the EIA, “The primary cause for the decline is the replacing of petroleum diesel with biofuels, namely renewable diesel, which has gained a larger market share of the region’s diesel pool as clean-fuel programs incentivize biofuels.”

The group also said that crude oil, gasoline and heating oil prices have all declined year-over-year as of June 14. 

Meanwhile, oilfield services company Baker Hughes Co. NYSE: BKR, which releases data on industry-wide U.S. and Canadian rig counts every Friday, says the U.S. rig count is down by 53 since a year ago and down by 8 in just the past week. 

The oil industry is rapidly transforming due to factors including changes in regulation, customer behavior, technology acquisitions, market share protection, and financial restructurings. Oilfield services have grown into an industry that combines advanced technologies and digital modeling with old-fashioned dirty work in the field. 

Shifting Industry Landscape 

As the recent merger of Patterson UTI Energy Inc. NASDAQ: PTEN and NexTier Oilfield Solutions Inc. NYSE: NEX illustrates, the industry landscape is shifting. 


But the importance of oilfield services is growing as the drillers and explorers themselves are consolidating. For example, Chevron Corp. NYSE: CVX recently said it would acquire PDC Energy Inc. NASDAQ: PDCE to add to its oil-and-gas reserves. 

The deal comes as producers are slashing budgets, instead opting to boost shareholder payouts through dividends and share repurchases. Earlier this year, Chevron increased its quarterly dividend to $1.51 per share and announced a $75 billion share buyback program. MarketBeat’s Chevron dividend data show a 37-year history of dividend increases. 

Reducing Debt, Buying Back Shares

At the same time, oil services firms have been fortifying their financial positions by reducing debt loads and increasing share buybacks. Baker Hughes, Schlumberger NYSE: SLB and Halliburton Co. NYSE: HAL all increased their dividends within the past two years, and all have robust share buyback programs. 

While that’s great for shareholders, it has the effect of leaving less cash on hand to invest in new technologies. But for the moment, oilfield services companies have to toe the line between delivering what their clients want right now and developing solutions that may be needed in the future and which could drive revenue. 

Schlumberger, Halliburton and Baker Hughes, all S&P 500 components, are consolidating below previous highs from late 2022 or early 2023. 

Weatherford: Triple-Digit EPS Growth

Switzerland-based Weatherford International plc NYSE: WFRD, which focuses on drilling technologies to maximize output, in addition to well construction and completion, is the leading stock within the oilfield services industry. The stock has advanced 19.15% year-to-date, although a recent cup-with-handle breakout broke down. Nonetheless, analysts expect the company’s earnings to grow by 439% this year, to $4.63 per share, driven by increased business internationally. 

In a highly fragmented industry that’s seeing the early signs of consolidation amidst an ever-changing landscape, how should investors handle these stocks?

Watch For Strong Earnings & Good Chart Action

It’s best not to try guessing what companies might be acquisition targets; instead, focus on a sound combination of revenue and earnings growth combined with price performance. Currently, Halliburton, Schlumberger, Baker Hughes, Weatherford and Patterson-UTI are all expected to grow earnings at double-or triple-digit rates this year, and all their charts are holding up fairly well. 

Of that group, Weatherford currently boasts the best combination of fundamental and technical strength, but before making any purchase, be sure a stock you’re eyeing is a good fit in terms of sector exposure and risk levels, given what else you’re currently holding.

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Should you invest $1,000 in Baker Hughes right now?

Before you consider Baker Hughes, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Baker Hughes wasn't on the list.

While Baker Hughes currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Baker Hughes (BKR)
4.9408 of 5 stars
$29.41-1.0%2.86%15.40Moderate Buy$40.44
Chevron (CVX)
4.8841 of 5 stars
$152.02-0.1%4.29%13.38Moderate Buy$181.53
Energy Select Sector SPDR Fund (XLE)N/A$85.46-0.5%3.77%6.92N/AN/A
Halliburton (HAL)
4.9747 of 5 stars
$34.75-0.6%1.84%11.86Buy$48.63
NexTier Oilfield Solutions (NEX)
0.0796 of 5 stars
$10.69+0.8%N/A4.00Reduce$11.47
PDC Energy (PDCE)
1.6012 of 5 stars
$73.85flat2.17%3.15Hold$80.75
Schlumberger (SLB)
4.9945 of 5 stars
$48.17-0.6%2.08%16.50Buy$70.67
Weatherford International (WFRD)
3.9019 of 5 stars
$103.57-0.5%N/A18.33Buy$114.86
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

  • stalterkate@gmail.com

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Experience

Kate Stalter has been a contributing writer for MarketBeat since 2021.

Additional Experience

Series 65-licensed investment advisor, financial advisor, Blue Marlin Advisors; investment columnist for Forbes, U.S. News & World Report

Areas of Expertise

Asset allocation, technical and fundamental analysis, retirement strategies, income generation, risk management, sector and industry analysis

Education

Bachelor of Arts, Saint Mary’s College, Notre Dame, Indiana; Master of Business Adminstration, Kellogg School of Management at Northwestern University

Past Experience

Founder, financial advisor for Better Money Decisions; editor, stock trading instructor for Investor’s Business Daily; columnist, podcast host, video host for MoneyShow.com; contributor for Morningstar magazine


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