One of my all-time favorite quotes is one that I picked up from a finance professor at Georgetown University -- "Math works." Here's the equation on BJ Services (NYSE:BJS) -- higher energy prices mean more desire to produce, more desire to produce means more demand for pressure pumping, and less capacity expansion in pressure pumping means even higher prices.

Revenue for the company's first quarter climbed 30% on that combination of higher pricing and volume demand. Better yet, that revenue growth led to better expense leverage, and operating income grew 76% from the year-ago level.

In the company's largest segment, pressure pumping in the U.S. and Mexico, revenue climbed over 32% as a high-teens increase in rig counts joined up with a low-teens increase in prices. Margins also expanded nicely, and operating income from this business rose 63%. On the international side, revenue growth wasn't quite as strong (up over 28%), but the margin improvement was even better, and operating income grew almost 85%. Breaking this down further, Canada continues to see very strong drilling activity, while there was some sequential softness in Asia and Russia.

The basic gig here in the pressure pumping services market goes a little something like this. You see North American rig counts increasing by high-teens percentages (up 18% in the U.S. in the fourth quarter), but capacity in the industry has thus far been expanding at a low- to mid-teens rate. With this market being very sensitive to available capacity, that has pushed pricing up notably.

But of course, this won't go on forever. BJ Services and rivals Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB) have thus far been pretty disciplined about adding new capacity, but even BJ management acknowledges it will be "catching up" on its cap-ex spending this year. Likewise, the high prices are encouraging start-ups -- particularly in Canada. Sooner or later, supply and demand will come back into balance, and that will most likely be followed by demand falling below capacity. And then we have the whole downside of the cycle to witness.

There are probably at least two good years of drilling/pumping services growth left, but I'm not sure how much that really matters right now. Stocks of service companies like BJ Services and Baker Hughes (NYSE:BHI), as well as drillers like Transocean (NYSE:RIG), are trading like proxies for the oil and gas market. So in a situation roughly akin to what we've seen with semiconductor equipment stocks, prices have probably outstripped long-term value, but a hot market could continue to propel them further.

For more oil-related Foolishness:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).