Robust Growth for Oilfield Services, but No Bargains
Halliburton looks especially overvalued.
Overall, fourth-quarter results from the integrated oilfield services companies-- Baker Hughes (BHGE), Halliburton (HAL), Schlumberger (SLB), and Weatherford International (WFT)--were in line with ongoing trends, with few surprises for investors. Across the board, the companies experienced robust revenue growth in the high single digits. Likewise, there was continued strengthening in margins, with the primary exception of Weatherford, which remains mired in a seemingly endless restructuring campaign.
The strengthening financial results are largely due to the improvement in U.S. shale operations, where activity steadily increased throughout 2017. The impact on the bottom line has occurred primarily through the benefit of operating leverage. True pricing increases have generally been scarce, even with the integrated service companies reporting tight demand for many of their products and services in the U.S. shale market. Thus far, our view has fully borne out that services pricing increases will be no obstacle to low-cost U.S. shale (and hence lower long-term oil prices).
Preston Caldwell does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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