Global energy consumption is growing rapidly, fueled by a growing population worldwide, urbanization, and industrialization. Oil and gas remain crucial components of the global energy mix, necessitating solid investment in energy services to ensure a stable supply.
Against this backdrop, it could be wise to invest in fundamentally strong energy service stocks ChampionX Corporation (CHX), Halliburton Company (HAL), and TechnipFMC plc (FTI) with significant growth potential.
Despite heightened uncertainty around geopolitical developments and economic projections, OPEC remains optimistic about world oil demand as economies expand. The group expects global oil demand to grow by 2.2 million b/d in 2024 and 1.8% million b/d next year. The steady surge in energy consumption worldwide propels the demand for energy services.
According to a Mordor Intelligence report, the oilfield services market is projected to reach $158.48 billion by 2029, expanding at a CAGR of 5.8% from 2024 to 2029. The growing development of oil & gas reserves and the adoption of advanced technologies, tools, and equipment will likely drive the market’s growth.
Innovations in drilling technologies include hydraulic fracturing, horizontal drilling, and enhanced oil recovery (EOR) techniques, which have significantly revolutionized the oil and gas industry.
Further, the energy as a service market is expected to be valued at $94.16 billion in 2024. The market is expected to reach $169.52 billion by 2029, exhibiting growth at a CAGR of 12.5% during the forecast period. The increasing adoption of distributed energy generation in commercial and industrial sectors and government initiatives are expected to drive market growth.
Considering the encouraging economic trends, let’s delve into the fundamentals of the top three Energy - Services stocks, beginning with the third choice.
Stock #3: ChampionX Corporation (CHX)
CHX provides chemistry solutions, artificial lift systems, and engineered equipment and technologies to oil and gas companies. It operates through four segments: Production Chemical Technologies; Production & Automation Technologies; Drilling Technologies; and Reservoir Chemical Technologies.
On May 16, CHX’s Board of Directors declared a regular quarterly dividend of $0.095 per share on the company’s common stock, par value of $0.01 per share, to be paid on July 26, 2024, to shareholders of record on July 5, 2024. CHX pays an annual dividend of $0.38, which translates to a yield of 1.22% at the current share price. Its four-year average dividend yield is 0.49%.
On March 22, CHX announced its plan to acquire RMSpumptools Limited, a business unit of the energy division of UK-based James Fisher and Sons plc. Under the terms of the agreement, the net purchase price is about £86 million (approximately $110 million) inclusive of net working capital adjustments.
The acquisition might enhance CHX’s Production and Automation Technologies portfolio, providing added value to its customers worldwide.
During the first quarter that ended March 31, 2024, CHX reported revenue of $922.14 million, and its gross profit was $299.20 million, up 5.6% from the prior year’s quarter. Adjusted net income and EPS attributable to ChampionX came in at $96.43 million and $0.50, indicating 17.5% and 21.9% year-over-year growth, respectively.
Furthermore, the company’s adjusted EBITDA increased 3.7% from the year-ago value to $191.71 million. Its free cash flow grew 107.6% year-over-year to $143.99 million.
Analysts expect CHX’s revenue and EPS for the third quarter (ending September 2024) to grow 5.8% and 28.9% year-over-year to $994.20 million and $0.53, respectively. Also, the company topped the consensus EPS estimates in three of the four trailing quarters.
Shares of CHX have surged 5.6% over the past six months and 14% over the past year to close the last trading session at $31.11.
CHX’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CHX has a B grade for Quality, Growth, and Momentum. It is ranked #11 out of 510 stocks in the Energy - Services industry.
In addition to the POWR Ratings we’ve stated above, we also have CHX ratings for Value, Sentiment, and Stability. Get all CHX ratings here.
Stock #2: Halliburton Company (HAL)
HAL offers products and services to the energy industry globally. The company operates through two segments: Completion and Production; and Drilling and Evaluation. It offers production enhancement services that include stimulation and sand control services.
On May 21, HAL and Wintershall Dea, a German gas and oil producer, entered a license agreement under which Wintershall Dea will use HAL’s new Unified Ensemble Modeling (UEM) solution, which is an innovative approach that integrates static and dynamic data in real-time to represent subsurface conditions across multiple scales.
This marks the industry’s first use of commercial technology to provide real-time updates to a reservoir model during active drilling.
On April 24, HAL was awarded a deep-water integrated multi-well construction contract by Rhino Resources Ltd., a private company engaged in both onshore and offshore energy exploration in Africa. The strategic collaboration marks a milestone for the companies to harness the full potential of Namibia’s oil and gas sector.
For the first quarter that ended March 31, 2024, HAL’s total revenue increased 2.2% year-over-year to $5.80 billion. Its total operating income grew marginally from the year-ago value to $987 million. Adjusted net income attributable to the company was $679 million and $0.76 per share, up 4.3% and 5.5% from the prior year’s quarter, respectively.
In addition, the company’s cash and equivalents and total assets were $1.89 billion and $24.65 billion as of March 31, 2024, respectively.
Street expects HAL’s revenue for the second quarter (ending June 2024) to increase 2.7% year-over-year to $5.96 billion, while its EPS is expected to grow 4.2% year-over-year to $0.80, respectively. Furthermore, the company surpassed the consensus EPS estimates in all of the trailing four quarters.
HAL’s stock has gained 11.5% over the past year to close the last trading session at $34.74.
HAL’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Momentum. HAL is ranked #7 among 51 stocks in the Energy - Services industry.
Click here to access HAL’s ratings for Quality, Growth, Value, Stability, and Sentiment.
Stock #1: TechnipFMC plc (FTI)
FTI engages in energy projects, technologies, and systems and services businesses internationally. It operates in two segments: Subsea and Surface Technologies. The company engages in the design, engineering, procurement, manufacturing, fabrication, installation, and life of field services for subsea systems, subsea field infrastructure, and subsea pipe systems.
On May 14, FTI was awarded a significant integrated Engineering, Procurement, Construction, and Installation (iEPCI™) contract by Woodside Energy in Australia. Under the deal, FTI will design, manufacture, and install the subsea production system, flexible pipe, and umbilicals for the Xena Infill well to support ongoing production from the Pluto LNG Project.
On April 16, FTI was awarded a large contract in Guyana’s Stabroek Block by Exxon Mobil Corporation (XOM) affiliate ExxonMobil Guyana Limited to supply subsea production systems for the Whiptail project under which FTI will provide project management, engineering, and manufacturing to deliver 48 subsea trees and associated tooling.
FTI’s revenue increased 18.9% year-over-year to $2.04 billion during the first quarter that ended March 31, 2024. Its operating profit rose 134.4% year-over-year to $155.60 million. Its adjusted net income and EPS came in at $97.60 million and $0.22 for the quarter, respectively. Its adjusted EBITDA grew 60.4% from the year-ago value to $252.60 million.
Street expects FTI’s EPS for the second quarter (ending June 2024) to increase 205.2% year-over-year to $0.31, and its revenue for the ongoing quarter is expected to grow 12.8% year-over-year to $2.22 billion. Also, the company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
FTI’s stock has gained 19.7% over the past six months and 69.4% over the past year to close the last trading session at $24.50.
FTI’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Momentum and Growth. It also has a B grade for Sentiment. Within the same industry, FTI is ranked #3 among 51 stocks.
Click here to access additional ratings of FTI for Stability, Value, and Quality.
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HAL shares were trading at $33.90 per share on Tuesday morning, down $0.84 (-2.42%). Year-to-date, HAL has declined -5.77%, versus a 11.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 Top Energy Service Stocks for Resilient Investments StockNews.com
