BOSTON ( TheStreet) -- The continued growth of oil-shale drilling in North America and a big rebound in offshore drilling in the Gulf of Mexico has boosted the long-term investment prospects for the oil and gas industry's suppliers.
Standard & Poor's outlook for the oil and gas equipment and services industry for the next 12 months is "positive" as it notes that there are now 31 offshore deep-water drilling rigs operating in the Gulf of Mexico now, a 94% rebound in the two years since the BP (BP) offshore oil rig explosion and leak of April 2010 prompted a moratorium on new drilling. S&P expects the number of rigs operating there will exceed pre-disaster levels by year-end, which means significantly more demand for contractor services.
And that, coupled with the continued growth of oil-shale exploration throughout North America and internationally, adds to the industry's long-term prospects. "We generally expect onshore U.S. oil services to see robust demand into 2013, at least in liquids-rich basins," said the S&P report.And given the geopolitical uncertainties that grips the world's major oil-producing region of the Middle East, a singular negative event there could cause oil and gas prices to jump and kick start a major domestic oil boom and significantly strengthen demand for services and equipment. Supporting the bullish view of North America's oil and gas production potential, Norway's international oil giant Statoil ASA (STO) said in late June it aims to triple its North American oil and natural gas production by the end of the decade. It paid $4.4 billion for the U.S. exploration and production firm Brigham Exploration, a deal that provides it with oil-rich assets in North Dakota and Montana. And China's international oil conglomerate, CNOOC (CEO), is in the midst of attempting to close on Canada's Nexen (NXY), one of the biggest players in Canada's oil shale industry, in a $15 billion deal currently being held up by regulatory scrutiny. Sam Stovall, S&P Capital IQ's chief equity strategist, wrote Monday that since June 1, energy sector stocks have led a recovery with a 13.6% gain, well ahead of all other sectors and the S&P 500's 8.8% increase in the period. Within the energy sector, refiners' and marketers' stocks posted the biggest gains, but shares of equipment and services companies are also rallying, gaining almost 6% in the week ending Aug. 3. That's coincident with the strong second-quarter results coming from the largest companies in the sector. The biggest of all, Schlumberger (SLB - Get Report), reported a profit of $ 1.05 per share, up 4.8% from a year earlier on 16% revenue growth. Another industry leader, Baker Hughes (BHI - Get Report), reported a 30% jump in profit to $1 per share on a 12% increase in revenue. Here are nine oil-field and oil-and-gas equipment and services stocks with the best prospects, ranked in inverse order of the number of analysts' "buy" ratings: