You might have missed Monday's announcement of oilfield service company Halliburton's (NYSE: HAL) new contract south of the border. In a world of billion-dollar deals, this newly disclosed arrangement, at less than $700 million, probably wouldn't have raised an eyebrow anyway. Nonetheless, the contract is far from inconsequential.
Halliburton will work with Mexico's national oil company, Petroleos Mexicanos, or Pemex, to drill and complete 58 onshore wells in southern Mexico over a roughly three-year period. This new deal follows a similar one completed between the two companies in 2006. The wells will be drilled to a range of 11,000 to 21,000 feet, requiring Halliburton to conquer complex land formations before the wells are ready for production.
However, there are also other messages here for those who draw gloomy inferences from the recent pullback in shares of such oilfield services companies as Schlumberger (NYSE: SLB), Halliburton, Baker Hughes (NYSE: BHI), Weatherford (NYSE: WFT), and BJ Services (NYSE: BJS):
- The world's oil is more frequently being discovered in remote, geologically difficult places. As such, the big companies mentioned above should find their specialized skills in steadily increasing demand in the years and decades ahead.
- With a high percentage of total global reserves now in the hands of state oil companies, large, experienced service companies that can provide packaged assistance to countries with less technical sophistication will be especially well-positioned.
On those bases alone, I'm convinced that the oilfield services slide will be relatively brief. I'd strongly suggest that Fools watch the big services companies -- also including deepwater drillers Transocean (NYSE: RIG) and Diamond Offshore (NYSE: DO). Once the pullback seems mostly over, Fools might consider building or adding to positions in the group.
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