9 Oil Stocks With Hot Prospects

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), 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), 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:

9. Gulfmark Offshore ( GLF)

Company profile: Gulfmark, with a market value of $950 million, provides offshore marine services to oil and gas companies with a boat fleet used to transport materials, supplies, equipment, and personnel to drilling rigs.

Investor takeaway: Its shares are down 13.5% this year, but have a three-year, average annual return of 5.5%. Analysts give its shares three "buy" ratings, four "buy/holds," and two "holds," according to a survey of analysts by S&P.

8. Tesco ( TESO)

Company profile: Tesco, with a market value of $466 million, is a manufacturer of oil-field equipment for the energy industry.

Investor takeaway: Its shares are down 4.6% % this year, but have a three-year, average annual return of 5.9%. Analysts give its shares three "buy" ratings, three "buy/holds," and two "holds," according to a survey of analysts by S&P. Analysts' consensus is for earnings of $1.36 per share this year, growing by 9% to $1.48 per share in 2013. S&P has it rated "strong buy," with a $21 price target, which is a 75% premium to its current price.

S&P says: "We see (the company) with little debt, having outstanding flexibility to pursue long-term plans, such as leveraging its proprietary tubular (pipe) business in the international offshore market or for expansion in the deep water Gulf of Mexico."

7. Hornbeck Offshore Services ( HOS)

Company profile: Hornbeck, with a market value of $1.4 billion, provides technologically advanced offshore supply vessels serving the offshore oil and gas industry, primarily in the U.S. Gulf of Mexico. It also has a large fleet of tug and tank barges, which transport petroleum in the Northeast.

Investor takeaway: Its shares are up 28% this year and have a three-year, average annual return of 22%. Analysts give its shares seven "buy" ratings, four "buy/holds," and three "holds," according to a survey of analysts by S&P. S&P has a "buy" rating on its shares, but with only a slight premium to its $40 price target.

6. FMC Technologies ( FTI)

Company profile: FMC Technologies, with a market value of $11 billion, is a global provider of high-technology products for the energy industry, including subsea and surface production and processing systems.

Investor takeaway: Its shares are down 10% this year, but have a three-year, average annual return of 29%. Analysts give its shares seven "buy" ratings, five "buy/holds," 13 "holds," and one "sell, according to a survey of analysts by S&P.

S&P has a "buy" rating with a $65 price target on it, a 19% premium to the current price.

5. Baker Hughes ( BHI)

Company profile: Baker Hughes, with a market value of $21 billion, is one of the world's largest oil-field products and services companies.

Dividend Yield: 1.28%

Investor takeaway: Its shares are down 2.5% this year, but have a three-year, average annual return of 4.9%. Analysts give its shares eight "buy" ratings, seven "buy/holds," 14 "holds," and one "sell," according to a survey of analysts by S&P. Analysts' consensus estimate is for earnings of $3.75 per share this year, growing by 15%, to $4.31 per share, next year. S&P has it rated "buy" with a $56 price target, a 19% premium to the current price.

4. Superior Energy Services ( SPN)

Company profile: Superior, with a market value of $3.3 billion, provides specialized oil-field services and equipment to oil and gas exploration companies both onshore and offshore. Its products include electronic torque and pressure-control equipment,

Investor takeaway: Its shares are down 25% this year, but have a three-year, average annual return of 6.6%. Analysts give its shares eight "buy" ratings, four "buy/holds," and one "hold," according to a survey of analysts by S&P. S&P has its shares rated "buy" with a $28 price target, which is a 32% premium to the current price. Analysts' consensus estimate is for earnings of $2.99 per share this year and $3.10 next year or 4% growth.

3. National Oilwell Varco ( NOV)

Company profile: National Oilwell Varco, with a market value of $32 billion, is one of the largest, most diversified equipment suppliers to the drilling industry as a provider of rigs, parts and repair services.

Dividend Yield: 0.64%

Investor takeaway: Its shares are up 11.5% this year, and have a three-year annualized return of 29%. Its 10-year annualized return is a huge, 25%. S&P has its shares rated "buy," with a $97 price target, which is a 29% premium to its current price. S&P's survey of analysts found 14 "buy" ratings, 9 "buy/holds," and two "holds." Analysts' consensus estimate is for earnings of $5.96 per share this year and growth of 14% to $6.82 per share next year.

2. Halliburton ( HAL)

Company profile: Halliburton, with a market value of $31 billion, provides a wide range of oil-field products and services to the global energy industry, ranging from housing and support at worker camps to sophisticated computerized research. Halliburton booked a $300 million liability charge in the first quarter for potential civil penalties for its role in the BP disaster in the Gulf of Mexico.

Dividend Yield: 1.07%

Investor takeaway: Its shares are down 1.5% this year, but have a three-year, average annual return of 16.8%. Analysts give its shares 16 "buy" ratings, nine "buy/holds," and five "holds," according to a survey of analysts by S&P. S&P has it rated "buy," with a $43 price target, which is a 27% premium to its current price.

1. Schlumberger ( SLB)

Company profile: Schlumberger, with a market value of $96 billion, provides equipment and services for oil and gas exploration and production companies worldwide.

Dividend Yield: 1.52%

Investor takeaway: Its shares are up 6.8% this year and have a three-year, average annual return of 12%. Over 10 years, its shares have a 15% annualized return. Analysts give its shares 19 "buy" ratings, 11 "buy/holds," and one "hold," according to a survey of analysts by S&P. S&P, which has it rated "strong buy" with an $85 price target, an 18% premium to the current price, says that "longer term, we see (the company) as a best-of-breed oilfield services company, well positioned to benefit from the trend toward higher oilfield technology content."

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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