Today's matchup is a battle among oilfield service providers: Weatherford
With the threat of increased regulation due to the Gulf oil spill and the swings in commodities prices, a host of oil- and gas-related companies have come into full focus. Here are a few that have been on my radar.
- There may be opportunity in the oil majors who have gotten collateral damage to their stock prices due to BP's problems. ExxonMobil
(NYSE: XOM) looks like a good move to me at current prices. - Master limited partnerships (MLPs) Kinder Morgan Energy
(NYSE: KMP) and Enterprise Products Partners(NYSE: EPD) keep charging for the use of their pipelines and continue to pay out heavy dividends to their owners: 6.4% and 6.1%, respectively. As toll takers, they are fairly immune to the price of oil and gas prices, but they are sensitive to volume changes. That's the big question out there. - The natural gas players have been hammered due to unfavorable gas prices. I highlighted Linn Energy
(Nasdaq: LINE) and two other natural gas plays in a recent piece. Click here to see which natural gas company fared better than Linn.
But as I wrote earlier, today's matchup features oilfield services companies Weatherford, National Oilwell Varco, and Helix. Helix is the smallest and gets the bulk of its sales in the U.S., making it the most sensitive to future U.S. regulation policy. Making lemonade out of lemons, it has been contracted out to BP to help with spill clean-up. On the other end, National Oilwell Varco is quite large (it's a member of the S&P 100) and is diversified across the world. Weatherford is a Swiss company that is a little smaller than National Oilwell Varco but also diversified geographically in that it only gets a quarter of its sales from the U.S.
Using five short-of-scientific-but-carefully-chosen criteria, let's determine which of these plays is the best buy.
Round 1: Balance sheet
National Oilwell Varco wins this one easily. It actually has net cash -- in other words, it has more cash than debt. Weatherford uses debt for a little over a third of its capital and Helix is at around half. Rank: (1) National Oilwell Varco, (2) Weatherford, (3) Helix.
Round 2: Operations
Sorry, Weatherford and Helix fans. Another easy win for National Oilwell Varco as it's the only one that produces earnings. Rank: (1) National Oilwell Varco, (2) Weatherford, (3) Helix.
Round 3: Price
Since two of the three companies don't have earnings (and hence no earnings multiples), let's look at their price-to-book ratios as the price decider. Helix takes this one with a P/B of just 0.84. National Oilwell Varco follows at 1.17, and Weatherford is close behind at 1.27. Rank: (1) Helix, (2) National Oilwell Varco, (3) Weatherford.
Round 4: X-factor
Weatherford recently completed its purchase of Russia's third-largest oil company, TNK-BP. How's that for an X-factor? As for National Oilwell Varco, my fellow Fool Toby Shute says it's in a great position to benefit from the shale race (read more by clicking here). Meanwhile, Helix's CEO, Owen Krantz, bought more than 100,000 shares of Helix recently, sending the shares up more than 10% since then. Rank: (1) Weatherford, (2) National Oilwell Varco, (3) Helix.
Round 5: CAPS rating
Our CAPS community loves all three of these stocks. Weatherford and Helix are rated 4 stars (out of 5) and National Oilwell Varco is rated a perfect 5 stars. Rank: (1) National Oilwell Varco, (Tied for 2nd) Helix and Weatherford.
The summary rankings
|
Category |
Weatherford |
National Oilwell Varco |
Helix |
|---|---|---|---|
|
Balance sheet |
2 |
1 |
3 |
|
Operations |
2 |
1 |
3 |
|
Price |
3 |
2 |
1 |
|
X-factor |
1 |
2 |
3 |
|
CAPS rating |
2 |
1 |
2 |
|
Average finish |
2.0 |
1.4 |
2.4 |
There you have it. National Oilwell Varco dominated by the numbers. Weatherford takes the silver. And Helix gets some parting gifts. But what do you think? Do you agree with Helix's CEO that shares are trading far too low? Declare your winner in the poll below and then share your thoughts in the comments section below the poll.
