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About the Industry
The Zacks Oil and Gas - Field Services industry comprises companies that primarily engage in providing support services to exploration and production players. These companies help in manufacturing, repairing and maintaining wells, drilling equipment, leasing of drilling rigs, seismic testing and transport and directional solutions, among others. Additionally, the firms assist upstream energy players in locating oil and natural gas, as well as drilling and evaluating hydrocarbon wells. Hence, oilfield services businesses are positively correlated to expenditures from upstream firms. Furthermore, with countries worldwide investing heavily in liquefied natural gas (LNG) terminals, a few oilfield service companies are extending their reach beyond hydrocarbon fields and capitalizing on contracts for manufacturing equipment used in LNG facilities to decrease carbon emissions.
3 Trends Defining the Oilfield Services Industrys Future
Exposure to Volatile Oil & Gas Prices: The demand for oilfield services is predominantly tied to exploration and production activities, as the companies assist the upstream players in effectively setting up oil and gas wells. Given the reliance of oil explorers and producers on a volatile and uncertain commodity pricing landscape, which is currently being affected by the ongoing US-China trade tensions, the business of oilfield service companies like SLB and Halliburton is susceptible to uncertainty.
Lower Upstream Spending: Although the commodity pricing scenario remains favorable for exploration and production operations, with breakeven prices much lower for existing wells in the shale plays, there has been a slowdown in drilling activities, which may continue as upstream players are prioritizing stockholder returns rather than boosting output. The reduction in drilling activity indicates lower demand for oilfield services, as companies like SLB and Halliburton, which primarily assist upstream operators in setting up oil and gas wells, are adversely impacted by this shift.
Impacts of Failing Energy Transition Goals on Cashflows: The prosperity of companies within the industry hinges greatly on their adeptness in navigating the evolving energy transition landscape. This encompasses the ability of oilfield service providers to efficiently tackle the decarbonization of oil and gas operations while expanding the adoption of inventive, low-carbon and carbon-neutral technologies. Consequently, failing to meet energy transition objectives will affect cash flow.
Zacks Industry Rank Indicates Bearish Outlook
The Zacks Oil and Gas – Field Services is a 22-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #220, which places it in the bottom 11% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates gloomy near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may consider, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags S&P 500 & Sector
The Zacks Oil and Gas – Field Services industry has lagged the Zacks S&P 500 composite and the broader Zacks Oil – Energy sector over the past year.
The industry has plummeted 11.9% over this period against the S&P 500’s rise of 12.9% and the broader sector’s 3% improvement.
One-Year Price Performance
Industry's Current Valuation
Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses.
Based on the trailing 12-month EV/EBITDA, the industry is currently trading at 5.95X compared with the S&P 500’s 17.59X and the sector’s 4.79X.
Over the past five years, the industry has traded as high as 12.87X and as low as 1.19X, with a median of 8.11X.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
3 Oilfield Services Stocks Trying to Survive Industry Challenges
Oceaneering International
Oceaneering is a well-known provider of services and robotic solutions to the offshore energy players. In the first quarter of 2025, OII witnessed a strong flow of new business while securing around $1.2 billion worth of new orders. Oceaneering currently carries a Zacks Rank #2 (Buy).
Price and Consensus: OII
Helix Energy Solutions
While providing specialty services to the offshore energy industry, Helix Energy ended the first quarter of 2025 with a backlog of about $1.4 billion. Thus, HLX secures stable cash flows for the months ahead. Helix Energy, carrying a Zacks Rank #3 (Hold), is also known for its proactive cost management and strong capital expenditure discipline.
Price and Consensus: HLX
TechnipFMC
TechnipFMC has a very strong pipeline of potential work, with more than $26 billion worth of subsea projects expected in the coming years. This secures future cash flows for Zacks #2 Ranked FTI. You can see the complete list of today’s Zacks #1 Rank(Strong Buy) stocks here.
Price and Consensus: FTI
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This article originally published on Zacks Investment Research (zacks.com).
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