The global surge in energy consumption is persistently escalating the demand for energy services. This burgeoning trend could foster sustainable growth within the industry. Therefore, it could be worth investing in quality energy services stocks Gibson Energy Inc. (GBNXF), Ranger Energy Services, Inc. (RNGR), and NCS Multistage Holdings, Inc. (NCSM) now.
Before delving deeper into the fundamentals of these stocks, let’s first briefly familiarize ourselves with the energy services sector.
Despite global economic uncertainties and geopolitical upheavals, the energy sector still exhibits solid fundamentals. The International Energy Agency’s (IEA) latest energy report revealed that global oil demand surged by 3.26 million barrels per day in the second quarter of 2023, reaching a record high of 103 mb/d.
This unprecedented demand growth is anticipated to continue through 2023, spurred by increased summer air travel that elevated high power generation oil usage and a revival in Chinese petrochemical activities.
Exploration and production companies incessantly seek new sources to meet such escalated demands. Services essential to these efforts, including drilling, completion, production, and well intervention, emerge as lucrative channels for leading energy firms.
Historically, upstream oil and gas projects have yielded approximately 15% to 20% returns. With promising long-term demand projections, oil and gas enterprises have amplified their efforts to discover new deposits, reinvesting a portion of the record profits from the surge in fossil fuel prices catalyzed by the Russia-Ukraine conflict.
Moreover, the impacts of tropical storm Hilary and OPEC+ and Russia’s production cuts could keep oil prices high. This market climate is conducive to oil exploration and production activities. Rystad Energy highlighted that expenditure on conventional oil and gas exploration is expanding and is anticipated to top $50 billion in 2023.
According to oil services firm Baker Hughes (BKR), there was a 6-unit increase in international offshore rigs in July 2023, while offshore rigs in operation also recorded a year-over-year increment of 31 units in the previous month.
Furthermore, the global oilfield services market is projected to reach $421.31 billion by 2030, growing at a CAGR of 5.6%. Also, SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has gained 8.1% over the past six months, substantiating investors’ interest.
Considering these conducive trends, we will now analyze the fundamental aspects of the featured stocks one by one, arranging them in ascending order of rank within the B-rated Energy – Services industry.
Stock #3: Gibson Energy Inc. (GBNXF)
Headquartered in Calgary, Canada, GBNXF, a liquids infrastructure company, gathers, stores, optimizes, processes, and markets liquids and refined products in North America. It operates through two segments: Infrastructure and Marketing.
On August 1, GBNXF announced the closing of the acquisition of 100% of the membership interests of South Texas Gateway Terminal LLC for $1.1 billion, through which GBNXF will acquire the South Texas Gateway Terminal (STGT).
STGT is a world-class liquids terminal and export facility in Ingleside, Texas, with extensive crude carrier capabilities and direct pipeline connections to the prolific Permian and Eagle Ford basins. The highly strategic acquisition would reinforce GBNXF’s position as a leading liquids-focused infrastructure business.
GBNXF has scheduled the quarterly dividend payment of $0.39 per common share to shareholders on October 16, 2023. Its annual dividend of $1.18 yields 8.06% on the current share price. The company’s dividend payouts have increased at 4.4% and 1.8% CAGRs over the past three and five years, respectively. Its four-year average yield is 6.14%.
GBNXF’s forward EV/Sales of 0.54x is 75.3% lower than the 2.18x industry average. Likewise, its forward Price/Sales multiple of 0.36 is 76.4% lower than the industry average of 1.50.
GBNXF’s trailing-12-month ROCE and ROTC of 47.53% and 11.16% are 122.8% and 7.3% higher than the industry averages of 21.34% and 10.40%, respectively. Its trailing-12-month asset turnover ratio of 2.75x is 350.5% higher than the industry average of 0.61x.
For the fiscal second quarter that ended June 30, 2023, GBNXF’s revenue stood at C$2.61 billion ($1.93 billion), while its gross profit rose 28.6% over the year-ago quarter to C$94.78 million ($69.96 million). The company’s net income increased 44.8% year-over-year to C$52.03 million ($38.40 million), while its earnings per share stood at C$0.37, representing an increase of 54.2% year-over-year.
As of June 30, 2023, the company’s total current assets stood at C$1.35 billion ($993.64 million), compared to C$821.52 million ($606.38 million) as of December 31, 2022.
For the fiscal third quarter ending September 2023, its revenue is expected to come at $1.69 billion, while for the year ending December 2023, revenue is expected to reach $6.64 billion. It has surpassed the consensus revenue in each of the trailing four quarters, which is impressive.
Over the past five days, the stock has gained marginally to close the last trading session at $14.61.
GBNXF’s POWR Ratings reflect a robust outlook. It has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Growth, Momentum, Stability, and Quality. Within the B-rated Energy – Services industry, it is ranked #6 out of 48 stocks.
Beyond what we have mentioned above, one can get the additional POWR Ratings for GBNXF for Value and Sentiment here.
Stock #2: NCS Multistage Holdings, Inc. (NCSM)
NCSM provides engineered products and support services for oil and natural gas well completions and field development strategies internationally. It offers fracturing systems, enhanced recovery products, repeat precision products, chemical, and radioactive tracer diagnostics services, and well construction products.
In terms of trailing-12-month EV/Sales, NCSM is trading at 0.37x, 82.8% lower than the industry average of 2.18x. Its trailing-12-month Price/Sales multiple of 0.26 is 82.9% lower than the industry average of 1.50x.
NCSM’s trailing-12-month asset turnover ratio of 1.17x is 40.6% higher than its five-year average of 0.83x. Its trailing-12-month EBITDA margin of 2.89% is 44.7% higher than the five-year average of 1.99%.
For the fiscal second quarter that ended June 30, 2023, NCSM’s total revenues stood at $25.39 million. The average U.S. land rig count stood at 699, whereas, in Canada and North American Land, it was 116 and 815, marginally higher than the prior-year quarter.
For the six months that ended June 30, 2023, its net cash used in operating activities stood at $1.04 million, down 80% year-over-year. At the end of the same period, its cash and cash equivalents came at $13.75 million.
The company expects sequential improvements in revenues for each of its Canadian, U.S., and international operations during the third quarter of 2023.
For the fiscal third quarter ending September 2023, analysts expect NCSM’s revenue and EPS to come at $51.10 million and $2.59, respectively.
The stock gained 1% over the past five days to close the last trading session at $17.45.
NCSM’s POWR Ratings reflect its robust prospects. It has an overall rating of B, translating to Buy in our proprietary rating system.
It also has an A grade for Momentum and a B for Value, Sentiment, and Quality. NCSM is ranked #5 within the same industry.
Click here for additional ratings for NCSM’s Growth and Stability.
Stock #1: Ranger Energy Services, Inc. (RNGR)
RNGR provides onshore high-specification well service rigs, wireline completion services, and complementary services to exploration and production companies in the United States. It operates through three segments: High Specification Rigs; Wireline Services; and Processing Solutions and Ancillary Services.
RNGR’s forward EV/Sales of 0.50x is 77.3% lower than the 2.18x industry average. Likewise, its forward Price/Sales multiple of 0.46 is 69.6% lower than the industry average of 1.50.
RNGR’s trailing-12-month asset turnover ratio of 1.74x is 184.6% higher than the industry average of 0.61x. Its trailing-12-month ROTA of 9.18% is 13.9% higher than the industry average of 8.06%.
During the second quarter, the company repurchased 508,700 shares of its Class A common stock at an average of $10.87 per share, representing 2% of shares outstanding. It intends to continue repurchasing shares in future quarters and will evaluate the best mechanism.
In addition, the company has scheduled the first quarterly dividend payment of $0.05 per share to the shareholders on September 8, 2023. Its $0.20 per share dividend rate would translate to a 1.64% yield on the current share price.
For the fiscal second quarter that ended June 30, 2023, RNGR’s total revenue increased 6.3% year-over-year to $163.20 million. Its operating income stood at $11.40 million, compared to an operating loss of $2.20 million in the prior year quarter. The company’s adjusted EBITDA stood at $21.90 million, up 21.7% from the year-ago quarter.
Its net income and income per common share stood at $6.10 million and $0.24, compared to a net loss and loss per common share of $0.40 million and $0.02, respectively, in the prior-year quarter. As of June 30, 2023, its long-term debt of $0.3 million compares with $18.4 million as of December 31, 2022. This marked the achievement of the company’s stated goal of net debt zero.
For the fiscal year ending December 2023, RNGR’s revenue and EPS are expected to increase 7.7% and 51.7% year-over-year to $655.35 million and $1.47, respectively.
Over the past year, the stock has gained 30.6% to close the last trading session at $12.22. The stock gained 14.9% over the past six months.
RNGR’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, translating to Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Growth. RNGR is ranked #4 within the same industry.
To see the other ratings of RNGR for Stability, Sentiment, and Quality, click here.
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GBNXF shares were unchanged in premarket trading Monday. Year-to-date, GBNXF has declined -13.87%, versus a 16.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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