As an industry, the oil field services sector is doing very well. Its P/E ratio for the trailing twelve months is 36 and its price/book ratio is 6.0. With a few exceptions, including Weatherford International Ltd. (NYSE: WFT), which is down about -10% this year. Competitors Halliburton Co. (NYSE: HAL) and Baker Hughes Inc. (NYSE: BHI) are up about 40% in the same period and Schlumberger Ltd. (NYSE: SLB) is up more than 10%. Weatherfod is making up some ground today, though, following a strong second-quarter earnings report.
The company beat EPS expectations of $0.15, posting earnings of $0.17, excluding items. Revenue came in at a record $3.05 billion. Strong demand in the US and overseas gets the credit. Weatherford’s share price has trailed its rivals mainly because Schlumberger, Halliburton, and Baker Hughes all made big acquisitions last year that have begun to pay off for them in revenues and profits.
Weatherford is also a portfolio company in several major oil field services ETFs, including Oil Services HLDRS (NYSE: OIH), SPDR S&P Oil & Gas Equipment & Services (NYSE: XES), PowerShares Dynamic Oil & Gas Services (NYSE: PXJ), and iShares Dow Jones US Oil Equipment Index (NYSE: IEZ).
The Oil Services HLDRS (NYSE: OIH) holds more than 45% of assets in Schlumberger, Halliburton, and Baker Hughes. Weatherford accounts for about 4.7% of total assets of $2.9 billion. OIH has posted a daily high today of $163.63, before pulling back to below $162. The 52-week trading range is $96.10-$167.37.
The SPDR S&P Oil & Gas Equipment & Services (NYSE: XES) is an equally-weighted fund that holds about 2% of its total assets of about $519 million in Weatherford shares. Shares came within pennies of posting a new 52-week high this morning, but are now trading at $43.97, slightly down from yesterday’s close at $44.03. The 52-week range is $25.38-$44.63. The fund gets a 3-star rating from Morningstar.
The PowerShares Dynamic Oil & Gas Services (NYSE: PXJ) holds about 4.7% of its $254 million of total assets in Weatherford shares. Shares rose as high as $26.55 this morning before pulling back to $23.65. The 52-week range is $14.73-$26.84. The fund gets a 2-star rating from Morningstar.
The iShares Dow Jones US Oil Equipment Index (NYSE: IEZ) holds about 4.2% of its $707 million in total assets in Weatherford shares. The fund posted a new 52-week intra-day high this morning before pulling back to stand currently at $68.67. The new 52-week range is $37.77-$69.39. The fund gets a 3-star rating from Morningstar.
Because Weatherford does not play a large role in any of these funds its impact is limited. As a whole, though, the oil field services sector is currently flourishing. Demand for rigs and equipment to drill for shale gas in the US is primarily responsible.
In the future, keep an eye on announcements from Petrobras for new contracts as well as contracts of northern and western Africa and in Iraq. The sector is could be ready for a nice upturn, with the ETFs hanging on for the ride.
Paul Ausick
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