Oil and Gas Service Companies Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of oil and gas companies were up big today as the price of oil rises and service companies have followed suit on hope that this will bring more business to the industry. Key Energy Services (NYSE: KEG  ) , Nabors Industries (NYSE: NBR  ) , and RPC (NYSE: RES  ) are among the companies that have climbed 10% or more today.

So what: What a difference a week makes. A week ago, oil was trading at a low for the year, and there was fear that Europe would self-destruct under the weight of its own debt. But after France and Germany pledged to help recapitalize banks and a bailout fund moved forward, the market has gotten its confidence back and oil has climbed by an impressive 2.9% today.

More confidence in Europe, combined with a slightly lower level of output from OPEC and a falling dollar, pushes the price of oil higher and is dragging everyone in the oil industry with it. Service providers Basic Energy Services (NYSE: BAS  ) , Complete Production Services (NYSE: CPX  ) , ION Geophysical (NYSE: IO  ) , and Patterson-UTI Energy (Nasdaq: PTEN  ) followed other service providers to double-digit gains today.

Now what: These service providers don't directly benefit from higher oil prices, but if oil were to continue falling, drilling would dry up -- and so would their businesses. In this Fool's opinion, the low price of oil couldn't last long unless the global economy virtually collapsed along with Europe -- something governments were unlikely to let happen.

Service providers will still need to see oil climb further for drilling in shale plays as well as deepwater drilling to continue growing, but today's move is a step in the right direction.

Interested in more info on oil and gas service companies? Add them to your watchlist.

Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On October 10, 2011, at 9:55 PM, TruffelPig wrote:

    I think it had more to do with the fact that another oil service company was acquired today and some of those small ones are candidates to be acquired next. Many people thing RPC Inc. could go this year (Ticker RES). Another piece of news was that certain companies are drilling like there is no tomorrow. AXAS rose 20% on that news today. (I think it is the Bakken and Eagle syndrome.)

    Disclaimer: Long RES, BAS

    Oil: Long TOT

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