Three Oilfield Services Outfits Earning Through the Downturn

Oilfield services companies have been the stock market's whipping boys during the industry downturn, and for good reason.

When oil prices are low, explorers and producers don't drill and thus don't need their products and services. Many of these providers also borrowed heavily to expand during the good times only to be pounded when oil prices went south starting in 2014.

With oil prices stuck below $50 per barrel and $110 billion worth of debt coming closer to maturing or expiring over the next five years, $21 billion in 2018, according to Moody's Investors Service, conditions are probably going to get worse before they get better.

Stalwarts such as Schlumberger (SLB) , Halliburton (HAL) and Baker Hughes (BHI) are expected to weather the storm, of course. But there are a few smaller oilfield services companies out there that continue to have solid margins and generate free cash flow. They include Tetra Technologies (TTI) , Natural Gas Services Group (NGS) and Patterson-UTI Energy (PTEN)

Jason Wangler, an analyst at Wunderlich Securities, said in a report Tuesday that he continues to favor Tetra over most other oilfield services companies. "We feel that TTI doesn't get enough credit for its positive traits given it is admittedly more complicated than some purer plays," he said.

The Woodlands, Texas-based company, which is led by CEO Stuart Brightman, does have multiple business segments. Its compression unit, which includes its separately traded CSI Compressco (CCLP) , remains its cash cow and will only get better as natural gas prices go higher, Wangler said. Others include its fluids segment, which has a nice onshore project in West Texas and is ramping up with other projects using its Neptune completion product that should help drive better sales and margins in the second half and through next year, Wangler said. Tetra also has an offshore unit that should add revenue with its current projects but could also be sold, a move that would add cash, simplify the company and smooth out its quarterly results, Wangler said.

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