Over the years, the company has been working on integrating its drilling services to fully optimize drilling performance while lowering costs. The company began by placing its drilling engineering applications under one roof, including fluids, bits, and directional drilling.
Over time, the firm has integrated its services into a single solution, which means that a customer could obtain substantially greater well performance and reduced levels of nonproductive time by standardizing on Halliburton Company (NYSE:HAL) rather than mixing services from multiple service providers. With the help of its integrated services, the company has been able to grow its revenues at a CAGR of 25.93% over a three-year period. Though intense competition forced the company to cut its margins, resulting in a drop of 4.50% in operating margin to 14.6% in 2012, and a 2.19% drop in net margin, to 9.24%.
Baker Hughes
Baker Hughes Incorporated (NYSE:BHI) operates in the oilfield services industry. It provides products and services for drilling, completion, and production of oil and gas wells, fluids and chemicals, and reservoir technology.
Over the years, the company organized itself by product lines, which led to missed opportunities internationally, as national oil companies wanted a more holistic sales approach that focused on a suite of services.This is the reason the company’s revenue growth compared to its peer group is lower, at a CAGR of 21.74%. Operating and net margins were also lower than its peers, which are10.3 percent and 6.14 percent in 2012 respectively, also hurt by strong competition from its peer group.
Conclusion
According to the World’s Oil report, 2013 will be another good year with sustained E&P activity, despite a slight drop in WTI and Brent oil prices.
World Oil predicts that the Henry Hub price for natural gas will average $3.45/Mcf in 2013 and drilling has remained strong in the US and worldwide. Given these factors and others, World Oil’s forecast indicates that US drilling will rise 5.2% during 2013, to 47,053 wells, US footage drilled will rise 6.5 %, to more than 385 million feet of hole, and Gulf of Mexico drilling will recover toward a level not seen since before the Deepwater Horizon spill in 2010.
The restriction on supply by OPEC, political instability in North Africa and an embargo on Iran shifting the demand for oil and gas towards the U.S., will also translate into higher demand for oil and gas equipment and services companies. Currently, oil prices are on a rising trend, which provides strong growth potential for the company in coming years.
Among the above-mentioned companies, National-Oilwell Varco, Inc. (NYSE:NOV) would be the best choice, as it has a strong financial position to compete with its peers in local as well as international markets. Keeping these factors in view, I propose a bullish stance for this stock.
Hussain Asghar has no position in any stocks mentioned. The Motley Fool recommends Halliburton and National Oilwell Varco. The Motley Fool owns shares of National Oilwell Varco. Hussain is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Drilling Remains Strong in the USA originally appeared on Fool.com is written by Hussain Asghar.
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