As energy prices are expected to remain high, the energy services industry is well-positioned to play a pivotal role in supporting and enhancing the efficiency of energy production and supply chains.
Hence, everyday traders could consider quality energy services stocks NexTier Oilfield Solutions Inc. (NEX), REX American Resources Corporation (REX), and Newpark Resources, Inc. (NR).
US oil production is on track to hit record levels, with projections indicating an average of 12.80 million barrels per day this year. This surpasses the previous 2019 record and exceeds the production levels of other countries, including Saudi Arabia.
Moreover, the just-released 2023 production forecast from the US Energy Information Administration (EIA) marks an upgrade of 200,000 barrels from its prior forecast. Also, next year, US oil output is projected to climb to another record of 13.10 million barrels per day.
Increasing US oil production is driving higher demand for oilfield services, benefiting energy service firms that provide drilling, maintenance, and equipment supply as oil producers expand operations.
Furthermore, the global offshore drilling market was valued at $33.22 billion last year and is projected to grow from $36.52 billion this year to $65.63 billion by 2030, expanding at a CAGR of 8.7%.
In addition, the current economic landscape, characterized by sustained high energy commodity prices, geopolitical tensions, and rising global energy demand, suggests a prolonged period of elevated energy prices.
This situation presents a favorable environment for the energy services industry, which is poised to benefit from increased demand for its services.
Let us take a look at the stocks mentioned above:
NexTier Oilfield Solutions Inc. (NEX)
NEX provides diverse oil completion and production services across various land oilfield basins across the United States. The company operates through two segments: Completion Services; and Well Construction and Intervention Services.
In terms of forward non-GAAP P/E, NEX is trading at 4.84x, which is 54% lower than the industry average of 10.53x. Its forward EV/Sales multiple of 0.75 is 66.4% lower than the industry average of 2.22.
On July 28, NEX and Patterson-UTI Energy, Inc. (PTEN) announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with the previously announced all-stock merger of equals transaction.
The expiration of the waiting period under the HSR Act satisfies one condition needed to close the merger, which remains on track to occur this year.
For the fiscal second quarter that ended June 30, 2022, NEX’s revenue increased 12.1% year-over-year to $945.09 million. The company’s adjusted net income rose 59.9% year-over-year to $157.54 million. Its adjusted net income per share grew 74.4% from the previous-year quarter to $0.68.
Analysts expect NEX’s revenue and EPS for the current fiscal year 2023 to increase 10.2% and 44.5% year-over-year to $3.58 billion and $2.28, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters, which is remarkable.
The stock has gained 37.6% over the past three months to close the last trading session at $11.05.
NEX’s POWR Ratings reflect this positive outlook. NEX has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It also has a B grade for Growth, Momentum, Value, and Quality. NEX is ranked #12 of 45 stocks in the Energy – Services industry.
Click here for additional ratings for NEX (Stability and Sentiment).
REX American Resources Corporation (REX)
REX produces and sells ethanol in the United States. The company also offers corn, distillers grains, non-food grade corn oil, gasoline, and natural gas. In addition, it provides dry distillers grains with soluble, which is used as a protein in animal feed.
REX’s forward EV/Sales of 0.60x is 73% lower than the 2.22x industry average. Its forward P/S multiple of 0.85 is 44.1% lower than the industry average of 1.52.
In the fiscal first quarter that ended April 30, 2023, REX’s net sales and revenue increased 9.5% year-over-year to $212.71 million. Its gross profit rose 26.2% year-over-year to $15.03 million.
Additionally, net income attributable to REX common shareholders increased 1% from its year-ago value to $5.24 million, while net income per share increased 3.4% year-over-year to $0.30.
Street expects REX’s EPS to rise 244.4% year-over-year to $0.62 in the fiscal third quarter ending October 2023. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Shares of REX have gained 15.8% year-to-date to close its last trading session at $36.90.
REX’s POWR Ratings reflect its sound fundamentals. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
REX has an A grade for Sentiment and a B for Value. It is ranked #11 in the same industry.
To see REX’s additional POWR Ratings for Growth, Momentum, and Stability, click here.
Newpark Resources, Inc. (NR)
NR provides products, rentals, and services primarily to the oil and natural gas exploration and production (E&P) industry. It operates through two segments, Fluids Systems and Industrial Solutions.
NR’s trailing-12-month EV/Sales multiple of 0.70 is 64.7% lower than the industry average of 1.98. Its 0.61 trailing-12-month P/S is 54.2% lower than the 1.32 industry average.
On June 20, NR announced that it was exploring strategic options for its Fluids Systems division. CEO Matthew Lanigan highlighted the division's improved profitability and readiness to benefit from the oil and gas upswing.
During the fiscal second quarter that ended June 30, 2023, NR reported $183.26 million in revenues. It reported an operating income of $5.88 million, compared to a loss of $6.22 million in the previous-year quarter.
Moreover, its adjusted net income and adjusted net income per share rose 522.7% and 700% year-over-year to $6.78 million and $0.08.
Over the past year, the stock has gained 85.4% to close the last trading session at $5.58. It has soared 43.4% over the past three months.
It is no surprise that NR is rated a B, which translates to a Buy in our proprietary rating system.
It has an A for Momentum and B for Growth and Sentiment. It is ranked #13 in the same industry.
Access additional NR ratings for Value, Stability, and Stability here.
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NEX shares were trading at $11.00 per share on Monday morning, down $0.05 (-0.45%). Year-to-date, NEX has gained 19.05%, versus a 15.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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