In a landscape defined by extended production cuts from major oil-producing nations, an upswing in global oil demand, and a surge in liquid fuels production, the result has been an elevation in both oil and pump gas prices.
Consequently, it would be prudent to keep a watchful eye on the notable energy stocks Archrock, Inc. (AROC), Halliburton Company (HAL), and Newpark Resources, Inc. (NR) as they continue to exhibit robust momentum. Let’s understand this in detail.
Recently, the Saudi Press Agency reported that Saudi Arabia has chosen to extend its voluntary reduction of crude oil production by 1 million barrels per day until year-end. Simultaneously, Russia, the world's second-largest oil exporter, has extended its voluntary 300,000 bpd reduction in oil exports until year-end to maintain market stability.
Moreover, in its most recent monthly report, the International Energy Agency (IEA) forecasts that global oil demand is set to increase by 2.2 million barrels per day (mb/d) in 2023, reaching 101.8 mb/d. This growth is primarily driven by a resurgence in Chinese consumption, along with heightened demand for jet fuel.
Given these developments, oil prices are poised to breach the $100 per barrel threshold. West Texas Intermediate crude oil has surged by nearly 30% since July, reaching a peak of $91.36 this week, and Brent crude oil has soared to a ten-month high of $94.95. Additionally, pump gas prices are climbing, with the national average now standing at $3.88.
In light of these encouraging trends, let's look at the fundamentals of the three best Energy - Services stocks, beginning with number 3.
Stock #3: Archrock, Inc. (AROC)
AROC sources, installs, operates, repairs, and maintains a proprietary fleet of natural gas compression equipment. This infrastructure facilitates the delivery of high-quality natural gas compression services to clientele within the oil and natural gas sector. The company's segments include Contract Operations and Aftermarket Services.
For the second quarter that ended June 30, 2023, AROC’s total revenue increased 14.7% year-over-year to $247.54 million. Its adjusted EBITDA rose 13.3% from the year-ago value to $112.78 million. Also, the company’s net income and net income per common share grew 47.2% and 45.5% from the prior year’s quarter to $24.65 million and $0.16, respectively.
Exceptional execution drove AROC's remarkable second-quarter performance. Strong first-half results, a compression market in undersupply, and robust early 2024 customer bookings have bolstered AROC's confidence in raising full-year 2023 expectations.
AROC now anticipates net income within $93.80 million to $113.80 million and adjusted EBITDA ranging from $430 million to $450 million. Additionally, in recognition of this pivotal performance, AROC bolstered returns in the fiscal second quarter, exceeding a 15% annual increase through additional dividend increments and share buybacks.
The consensus revenue estimate of $985.51 million for the fiscal year ending December 2023 reflects a 16.6% rise year-over-year. Likewise, the consensus EPS estimate of $0.65 for the current year indicates a 131% year-over-year improvement. Moreover, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
AROC’s shares have gained 71.3% over the past year to close the last trading session at $12.28. Moreover, the stock is trading above its 50-day and 200-day moving averages of $12.09 and $10.26, respectively.
AROC’s fundamentals are apparent in its POWR Ratings. The stock has an A grade for Growth and Momentum and a B for Sentiment. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AROC has ranked #18 in the 48-stock Energy - Services industry. In addition to the POWR Ratings I’ve just highlighted, you can see AROC’s ratings for Value, Stability, and Quality here.
Stock #2: Halliburton Company (HAL)
HAL furnishes comprehensive products and services. Its Completion and Production arm offers production enhancement and artificial lift services. The Drilling and Evaluation segment provides drilling fluids, additives, completion fluids, solids control, testing equipment, and waste management services.
On June 19, HAL and Nabors Industries (NBR) unveiled a partnership for leading well-construction automation solutions. This collaboration involves integrating HAL’s Well Construction 4.0, LOGIX® Autonomous Drilling Platform, with NBR’s SmartROS® universal rig controls and RigCLOUD® digital infrastructure platform.
This could result in increased market demand for HAL's offerings, leading to higher revenues and profitability as it enhances rig capabilities, reduces well construction costs, and minimizes operational risks for customers.
On May 30, HAL introduced Diskos 2.0 National Data Repository (NDR) for the Norwegian Petroleum Directorate. As the industry's first cloud-native NDR with advanced automation and AI capabilities, it enhances data analysis efficiency, reducing costs per byte.
This innovation is expected to position HAL to capture a larger market share, resulting in increased revenue and profitability.
For the second quarter that ended June 30, 2023, HAL’s total revenue increased 14.3% year-over-year to $5.80 billion. Its adjusted operating income rose 40.8% from the year-ago value to $1.01 billion.
In addition, adjusted net income attributable to the company came in at $691 million, up 56.3% year-over-year, while adjusted net income per share stood at $0.77, a 57.1% rise from the previous year’s quarter.
The company’s revenue for the fiscal year ending December 2023 is expected to increase 14.9% year-over-year to $23.31 billion. Similarly, analysts expect HAL’s EPS for the current year to come in at $3.05, up 41.9% from the previous year. Also, the company topped the consensus EPS estimates in all four trailing four quarters.
The stock has gained 46% over the past year, closing the last trading session at $41.43. Furthermore, it is trading above its 50-day and 200-day moving averages of $39.35 and $35.86, respectively.
HAL’s prospects are reflected in its POWR Ratings. It has an A grade for Momentum and a B for Growth. The stock is ranked #17 out of 48 stocks within the Energy – Services industry. Click here to access the additional HAL ratings (Value, Stability, Quality, and Sentiment).
Stock #1: Newpark Resources, Inc. (NR)
NR offers products, rentals, and services to the oil and natural gas exploration and production industry. Its Fluids Systems division provides drilling and completion fluids and technical services, while the Industrial Solutions segment offers composite matting system rentals for temporary worksite access and related construction services.
On June 20, NR disclosed its exploration of strategic alternatives for the long-term positioning of its Fluids Systems division. The company's Industrial Solutions arm is maintaining robust growth and high returns, intensifying its market presence within the multi-billion-dollar energy infrastructure and industrial sectors.
In the past year, NR has undertaken substantial measures to enhance and streamline its Fluids Systems business. Matthew Lanigan, NR’s President and CEO, said, "We believe the market fundamentals will support a double-digit annual growth rate for years to come, including from investment required to transition to lower carbon solutions."
For the second quarter that ended June 30, 2023, NR’s operating income came in at $5.88 million, compared to an operating loss of $6.22 million in the prior year’s period. Its adjusted EBITDA rose 49% from the year-ago value to $19.82 million.
In addition, the company’s adjusted net income and adjusted net income per common share grew 522.7% and 700% year-over-year to $6.78 million and $0.08, respectively.
Over the past year, the stock has surged 110.3%, closing the last trading session at $6.14. In addition, NR is trading above its respective 50-day and 200-day moving averages of $5.62 and $4.59.
NR’s outlook is apparent in its POWR Ratings. The stock has an A grade for Momentum and a B for Growth. It is ranked #16 out of 48 stocks within the same industry. Click here to access additional NR ratings for Value, Stability, Quality, and Sentiment.
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HAL shares were trading at $42.01 per share on Wednesday afternoon, up $0.58 (+1.40%). Year-to-date, HAL has gained 8.21%, versus a 17.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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