Diversification is Driving the Oil & Gas Services Industry

With year-to-date gains of 7.75 percent, the oil and gas services industry is the best-performing segment of the energy sector, as well as one of the top performing of all segments so far in 2014.

Investors looking for a simple explanation for this phenomenon, however, are likely to be frustrated. In the span of two decades, the services industry has metastasized from companies providing a variety of drilling services, as well as those who build and install drilling machinery, to comprise a truly staggering number of different businesses.

The reasons for the industry’s expansion are ultimately as numerous as the needs resulting from the push into unconventional reserves, whether these are found onshore or off. Consider the following six services stocks, all of which are up over 20 percent so far in 2014. Not only are they the segment’s best small-cap performers so far this year, they each serve very specific and different aspects of the oil and gas lifecycle:

Basic Energy Services, Inc. (BAS)

Market Cap/Price: $1.17 billion/$27.48

Year-to-Date Gain: 74.14 percent

Business: BAS operates in four different segments: 1)completion & remedial (pumping) services, 2)fluid services, including the transportation and disposal of fracking water and liquids, 3)well services, including the maintenance and operation of oil and gas wells, and 4)contract drilling, comprised primarily of doing the actual drilling/fracturing that begets the well in the first place.

Emerge Energy Services LP (EMES)

Market Cap/Price: $1.68 billion/$71.16

Year-to-Date Gains: 64.19 percent

Business: Emerge operates in two segments. Its sand segment manufactures and sells various grades of sand that are a vital component of the liquid mixtures that are so important to the process of hydraulic fracturing, while its fuel segment engages primarily in the mixture and sale of fracking compounds.

ION Geophysical Corporation (IO)

Market Cap/Price: $689.35 million/$4.21

Year-to-Date Gains: 27.58 percent

Business: ION Geophysical generates revenue from the provision of services relating to the seismic imaging technology that allows companies to search for and drill into oil and gas reservoirs onshore and off.

C&J Energy Services, Inc. (CJES)

Market Cap/Price: $1.60 billion/$28.87

Year-to-Date Gains: 24.98 percent

Business: C&J in a fracking outfit that operates in three segments: 1)Stimulation and well-intervention services, 2)wireline services, relating to the method of horizontal drilling, and 3)equipment manufacturing.

Key Energy Services Inc. (KEG)

Market Cap/Price: $1.50 billion/$9.80

Year-to-Date Gains: 24.05 percent

Business: Key Energy brings in revenues from a comprehensive offering of front-to-end well-services, as well as fluid management, for companies both in the US and throughout the world.

Willbros Group Inc. (WG)

Market Cap/Price: $578.49 million/$11.60

Year-to-Date Gains: 23.14 percent

Business: Willbros is a comprehensive pipeline services/infrastructure company and as such connects all three of the oil & gas industry streams, and also contracts out to petrochemicals producers and power industries.