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TheStreet Open House

5 Oil and Gas Equipment Stocks to Watch

Stocks in this article: IOGGSDWSNOYOGGOK

NEW YORK ( TheStreet) -- ION Geophysical (IO), Global Geophysical Services (GGS), Dawson Geophysical (DWSN), OYO Geospace (OYOG) and Geokinetics (GOK) are five high-growth stocks within the scientific and technical instruments space that doubled in the last one year and have potential upside of 10%-42%. Being analysts' favorites, most of these stocks have no sell ratings.

Geoscientists use seismic data for exploring and developing oil and gas resources and to map potential/recognized hydrocarbon-bearing formations and geologic structures that are contiguous. A seismic survey is crucial for oil and gas exploration. The survey involves arranging several thousands of channels of acquisition equipment in a grid. In tandem, a fleet of vibrator trucks or a dynamite crew returns vibrations on the surface that pass into the formation or the acquisition equipment. The acquisition equipment intercepts and records these vibrations. On analysis, the acquired data provides 3-D images of the subsurface profile and indicates prospective reserves of oil or gas.

Demand for seismic equipment companies' services directly correlates to oil and gas explorers' capital spending, which, in turn, depends on oil and natural gas prices. With the onset of the global economic crisis in the final quarter of 2008, oil prices plunged from record highs reached earlier as the global economic slowdown impacted consumption. As a result, capital spending reduced by 18% during 2009 from 2008 levels, according to a global data report titled Oil & Gas Capital Expenditure Outlook 2011.

Going forward, capital expenditure in the oil and gas industry is expected to witness strong growth in 2011, at 15%. Improved seismic and drilling technologies and depleting reserves in shallow waters are the key drivers of drilling activities, according to the report.

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