6 Stocks That Will Profit From Expensive Oil

Oil prices are off their highs from this past spring and, as a result, some oil-field services stocks have taken a licking. As far as I'm concerned, that just makes them more affordable. Fool energy editor Dan Dzombak wrote yesterday that high oil prices probably aren't as far off as we think. With that in mind, it's time to get to know some of the players in the oilfield service industry.

We're here to help
Oil service companies are the experts in the field that make things easier on companies like ExxonMobil and Shell. Their expertise can cover everything from manufacturing equipment to developing new technologies that make it easier and more efficient to pull the black gold from the ground. No major or independent oil company operates without the help of one of these guys.

Who's who?
Some of the names on this list are probably more familiar than others. Halliburton (NYSE: HAL  ) makes big money, but also finds itself in the news for all the wrong reasons, like the oil spill in the Gulf.

Company

TTM Revenue

Business

Superior Energy Services
(NYSE: SPN  )

$1.82

Small player that just purchased another small player, Complete Production Services (NYSE: CPX  ) , for $2.7 billion.

Halliburton

$21.04

Serves upstream oil and gas industry, focusing on drilling and evaluation and completion of production services.

Schlumberger
(NYSE: SLB  )

$34.25

Top dog in the industry; combines oil-field services with the largest seismic imaging company.

Baker Hughes
(NYSE: BHI  )

$17.77

Provides E&P services, but also supports pipeline and refining operations. Has published industrywide rig counts for the last 60 years.

National Oilwell Varco
(NYSE: NOV  )

$12.84

Worldwide manufacturer of equipment for oil and gas drillers.

Weatherford International
(NYSE: WFT  )

$11.36

Oil-field services for independent oil and gas companies, currently focused on Eastern Hemisphere expansion.

Source: Yahoo! Finance, company reports. Dollar figures in billions.

Schlumberger is most often recognized as the leader in the oil-field service industry, but there is plenty of room for midsized companies like Baker Hughes and the little guys, like Superior. Superior acquired Complete largely for its North American fracking expertise.

Investment upside
This industry bounced back relatively quickly from the last recession, so while I've read that at least one analyst is predicting a slide, if it happens, it should not be as prolonged and catastrophic in this industry compared to others.

The other thing that will certainly help these companies fight off recessionary fears is that they don’t just assist oil drillers; they’re in the gas business too. Gas drilling is huge across the globe right now, but particularly in the United States. Exploratory drilling in the Utica Shale has really begun to pop -- half of all drilling permits issued for the region have come in the last three months.

Foolish bottom line
The immediate relevancy of this industry really depends on an investor's thoughts on the price of energy. The theory is that if the price of oil goes up, then the oil majors are likely to spend more on oil-field service work. If the price of oil drops, then they won't. Some might argue that this is flawed logic, considering that the price of natural gas is so low, yet oil-field service companies can barely keep up with demand.

Which means, Fools, that we all have to make our own decisions. The best bet for anyone on the fence is to add these companies to My Watchlist to stay current on industry updates and analysis.

If you are looking for more ideas, The Motley Fool has created a new special oil report titled "3 Stocks for $100 Oil," which you can download today, absolutely free. In this report, Fool analysts cover three outstanding oil companies, including the stock Fool analyst David Lee Smith calls the "energy king." To get instant access to the names of the three oil stocks, click here -- it's free.

Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. If you have the energy, check out what she's keeping an eye on by following her on Twitter @TMFDuffy.

The Motley Fool owns shares of National Oilwell Varco. Motley Fool newsletter services have recommended buying shares of National Oilwell Varco. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 14, 2011, at 3:36 PM, Eerkes wrote:

    I hate to be this guy, but I count six. Sorry about being the overcritical guy on his couch who can't not point out mistakes. Suggestions for number seven would be RIG or ATW.

  • Report this Comment On October 14, 2011, at 4:26 PM, XMFAimeeD wrote:

    @Eerkes

    Nonsense, you're absolutely right. I had included CPX in my original count and failed to revisit my title when I finished.

    don't knock the couch,

    Aimee

  • Report this Comment On October 14, 2011, at 6:08 PM, jerryz11 wrote:

    I still like Buffett's play on higher oil prices better: buy railroads. Railroads enjoy cost advantages to trucking, which will only increase as oil prices go up. Railroads have immense moat, they are virtually impossible to replicate. Moreover, the railroad bet does not depend on higher oil prices, unlike the oil and oil services plays; it's just icing on the cake.

  • Report this Comment On October 16, 2011, at 10:15 PM, HWY216 wrote:

    Aimee,

    Thanks for your article. I like the sector. Long HAL & SLB. This country needs to wake up and do the Pickens Plan! Then class 8 trucking will run on much less expensive and abundant nat gas.

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