What happened

Just when investors thought it was safe to get back in the water and invest in oil services stocks, this past month proved to be a tough one, as shares of Superior Energy Services (NYSE:SPN), Weatherford International (NYSE:WFT), Franks International (NYSE:FI), Key Energy Services (NYSE:KEG), and Bristow Group (NYSE:BRS) all suffered double-digit drops in May.

So what

These five businesses are pretty diverse even though they are all in the oil services business. Superior and Weatherford are two of the world's five largest diversified oil services firms. Franks International mostly specializes in tubular running services with a large concentration in offshore operations. Key Energy Services is a North America-centric provider of production enhancement and late-stage well servicing. Finally, Bristow Group is a helicopter service business that works almost exclusively with the oil and gas industry.

Oil worker connecting drill pipe

Image source: Getty Images.

The two things that these companies all had in common this past month were the movements of the oil markets and recent earnings results that haven't been too impressive. 

Looking at the current state of the oil market, it's not a time that is conducive to profits for oil services companies. Internationally, demand for services is weak, as $50 oil is too low for many producers overseas to justify spending. Some aspects of the international market such as onshore drilling are either flat or modestly picking back up again, but offshore is still very much on the decline. For oil services in general, that isn't great because offshore is a more service-intense business, but it is especially troublesome for Franks International and Bristow Group, as so much of their business is offshore-centered. 

On the North American side of things, it's a little more complicated. Drilling activity is growing at a staggering pace, but that isn't necessarily translating to high returns for oil services. Companies such as Weatherford and Superior are spending lots of money to reactivate idle equipment and crews at the expense of profits. At the same time, though, there is still a lot of available equipment out there that gives producers a leg up in negotiating price. As a result, oil services companies aren't making much money on this market.

Weatherford is trying to combat this issue through a recent joint venture with Schlumberger. They will combine their North American drilling assets into a single entity that will give the two better pricing power and will integrate several disparate services into a complete service package. 

The other news this past month that impacted most of these companies was less-than-stellar earnings. Superior and Weatherford both had reported before the month started, but neither press release inspired much confidence. For the rest, they experienced significant drops when each reported their earnings: Franks International on May 2, Key Energy Services on May 11, and Bristow Group on May 24.  

SPN Chart

SPN data by YCharts.

Now what

The oil services business is incredibly competitive right now as each company fights for the little capital spending producers have doled out. This situation will likely persist for some time until all that idle equipment gets put back to work. North America will probably be the first market to turn for the better, which will most likely help Key Energy Services more than the rest of the bunch here, and those offshore-centric companies will probably be waiting for quite some time before a turnaround.

It also doesn't help that -- with the possible exception of Weatherford International -- none of these companies have the size or economies of scale to fend off competition from the big fish in this business: Schlumberger, Halliburton, and Baker Hughes. If you are looking to make an investment based on a rebound in the oil and gas industry, none of the companies here really stand out as great options.

Tyler Crowe has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.