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The bull run in crude oil that began in early 2004, when prices were around $35 a barrel, leaves energy companies with more cash on hand and greater incentive to drill new wells.
But while oil prices have set records in each of the past four quarters, an index of oil-field-services stocks has been essentially treading water since fall.
The Oil Service Sector Index ($OSX.X) on the Philadelphia Stock Exchange crossed 300 for the first time Sept. 21, a few days after crude-oil futures topped $80 a barrel. That's about where the index was on the first day of May despite crude's steady march to almost $120 a barrel by April 28.
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Investors have favored services providers seen as best positioned to explore for hydrocarbons in faster-growing regions beyond North America and to drill in deeper waters or deeper below the seafloor.
Halliburton (HAL, news, msgs) is one such company. Its shares are up more than 12% since Sept. 21. The company appears on an MSN Money list of stocks with momentum that can be sustained. The list was created with StockScouter, an investment tool established in 2001 by MSN Money columnist Jon Markman and research firm Gradient Analytics to help investors quickly identify and assess a stock's likelihood of outperforming the broad market in the weeks ahead.
Every day, software deployed by Gradient Analytics uses quantitative methods to analyze the fundamental and technical conditions of more than 6,000 companies traded on U.S. stock exchanges.
Built into the system is the recognition that individual stocks' price movements tend to be driven by prevailing "market preferences" for companies of a certain market capitalization, in specific industries and classified as either value or growth plays.
StockScouter systematically recommends stocks characterized by the greatest number of market preferences. It kicks out daily top 10 and top 50 stock lists. Gradient Analytics also puts together a monthly benchmark portfolio of 50 stocks with potential to beat the market. The chart near the bottom of this page represents the May list.
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Patterson-UTI Energy provides drilling services to oil and gas companies operating in Texas, New Mexico, Pennsylvania and other states. Like other drillers, it has noted a pickup in North American business because of higher natural-gas prices. Natural-gas producers are swarming into Pennsylvania to chase what many are betting could be the next big thing: a thick wedge of gas-bearing rock called the Marcellus Shale, which Markman wrote about in a recent column.
A number of small-cap natural-gas companies also appear on this month's list, including Exco Resources (XCO, news, msgs), which operates in Colorado, Oklahoma, Texas and parts of Appalachia.
Citing the rise in natural-gas prices, Standard & Poor's analyst Michael Kay recently raised his 2008 and 2009 earnings estimates for Exco and boosted his 12-month price target on the stock by $2 a share to $27.
"With natural gas over 90% of (the company's) production, we expect earnings and cash flow to benefit from a 30% forecasted increase in prices and our projection of 20% production growth in '08," he wrote April 16. "After its completion of several acquisitions (last year), we believe Exco is better prepared to add reserves through the drill bit and to lower its finding and development costs."
Kay has a "buy" rating on the stock.
Services providers such as Halliburton make money by helping energy producers with everything from drilling wells to boosting recoverable resources from existing fields. A different kind of service is provided by Bristow (BRS, news, msgs), a Houston company that owns a fleet of more than 350 helicopters used to fly crews and light cargo to and from offshore production platforms and drilling rigs.
Demand for transportation to remote offshore rigs is rising, as are rates for helicopter rides. Bristow is active in many of the world's offshore operating regions, including the Gulf of Mexico, the North Sea, Nigeria, Alaska, Australia, Brazil and Russia.
Though energy exploration and development typically ebb and flow with commodity prices, Bristow executives believe the company is inoculated against any downturn in oil and gas prices. That's because most of its flights are made in the service of production operations; activity that's unlikely to be halted when prices fall below a certain level.
Bristow seeks growth by acquiring more aircraft and pushing into additional countries. It's also been cultivating relationships with national oil companies, including Petroleo Brasileiro (PBR, news, msgs) in Brazil and StatoilHydro (STO, news, msgs) in Norway, which control the majority of the globe's known oil and gas reserves.
| Company | Sector | April 30 close | Scouter score |
|---|---|---|---|
Oil and gas exploration | $21.17 | 10 | |
Oil and gas exploration | $42.45 | 10 | |
Oil and gas refining and marketing | $75.23 | 10 | |
Oil and gas exploration | $8.85 | 10 | |
Oil and gas exploration | $36.17 | 9 | |
Oil and gas | $14.83 | 9 | |
Electric utilities | $20.51 | 9 | |
Oil and gas exploration | $20.51 | 9 | |
Oil and gas exploration | $18.95 | 9 | |
Oil and gas | $121.42 | 8 | |
Electric utilities | $4.22 | 8 | |
Oil and gas pipelines | $23.75 | 9 | |
Oil and gas pipelines | $25.70 | 9 | |
Oil and gas | $40.57 | 8 | |
Oil and gas exploration | $44.83 | 8 | |
Oil and gas exploration | $15.62 | 8 | |
Rental and leasing services | $18.70 | 8 | |
Coal | $62.09 | 8 | |
Coal | $66.05 | 8 | |
Energy management services | $12.16 | 8 | |
Natural-gas utilities | $68.24 | 10 | |
Natural-gas utilities | $66.37 | 10 | |
Oil-field services | $45.91 | 10 | |
Oil and gas | $62.03 | 10 | |
Oil and gas | $84.00 | 10 | |
Oil and gas | $96.15 | 10 | |
Electric utilities | $33.79 | 10 | |
Oil-field services | $34.55 | 10 | |
Oil and gas | $57.73 | 10 | |
Oil and gas | $43.72 | 10 | |
Oil-field services | $100.55 | 10 | |
Oil and gas | $60.94 | 10 | |
Oil and gas | $66.56 | 10 | |
Oil and gas exploration | $63.73 | 10 | |
Oil and gas exploration | $53.75 | 10 | |
Oil and gas | $83.21 | 10 | |
Oil and gas exploration | $27.94 | 10 | |
Helicopter services | $52.75 | 10 | |
Oil and gas | $45.63 | 10 | |
Electric utilities | $55.78 | 10 | |
Oil and gas exploration | $13.70 | 10 | |
Oil and gas exploration | $41.04 | 10 | |
Oil and gas | $22.32 | 10 | |
Oil and gas refining and marketing | $58.54 | 10 | |
Oil and gas | $34.81 | 10 | |
Oil-field services | $27.01 | 10 | |
Oil and gas | $20.00 | 10 | |
Oil and gas | $36.34 | 10 | |
Oil-field services | $24.90 | 10 | |
Oil-field services | $50.06 | 10 |
How the list is created
StockScouter depends on advanced mathematics, software and an innovative mix of measurements and historical testing to forecast the short- and long-term outlook for all U.S. companies that have traded on the three major exchanges for at least the past six months.The analytical tools are applied to score stocks on fundamental, valuation, technical and ownership components. This score is combined with each company's StockScouter rating to come up with the list in the chart on this page.
Only stocks with a final closing price above $3 are eligible for the list.
Click here for more on how to put StockScouter to work for you.
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