Energy Commodities: Investing in Oil Fields - dummies

Energy Commodities: Investing in Oil Fields

By Amine Bouchentouf

A large part of the exploration and production activity for oil commodities takes place on dry land. While most industry insiders agree that most onshore oil wells have been discovered, but you can still benefit by investing in companies that are involved in the exploitation and production of onshore oil fields.

You may consider investing in a couple companies in this segment of the drilling market:

  • Nabors Industries (NYSE: NBR): Nabors is one of the largest land-drilling contractors in the world. It has a division that can perform heavy-duty and horizontal drilling activities.

  • Patterson-UTI Energy Inc. (NASDAQ: PTEN): Patterson-UTI is an onshore oil field drilling contractor that has extensive operations in North America. It operates in a number of segments, including drilling new wells and servicing and maintaining existing oil wells. It’s part of the S&P 400 MidCap stocks.

Another area you should take a close look at is companies that focus on oil field maintenance and services. The oil field services sector is dominated by technology-oriented and labor-intensive companies that seek to maximize an oil field’s output by using sophisticated technological techniques. The major integrated oil companies or national oil companies generally hire oil field services companies for general oil field and oil well maintenance and extraction solutions.

The services company may get involved in actually extracting crude from the oil well, providing data and statistics on current and past usage and on potential future output, using technologically oriented techniques to extract hard-to-recover oil, and performing other specific and general oil field–management services.

Perhaps the most well-known oil field services company is Halliburton (NYSE: HAL). A lot of people are familiar with the name because it’s a high-profile Defense Department contractor that Vice President Dick Cheney once headed. Because of the nature of its political contracts, Halliburton is often a lightning rod for criticism.

You should go beyond some of this criticism. Although some of its work is political in nature (government contracts), that work represents only a fraction of its operational activities.

More important, Halliburton is certainly not representative of the other companies in the field. Many of the other players in this space focus exclusively on oil field maintenance and services, and aren’t involved in work of a political nature.

These companies make up your hit list, if you’re looking to invest in the oil field services space:

  • Baker Hughes, Inc. (NYSE: BHI): Baker Hughes operates both in the United States and internationally, with operations stretching from the Persian Gulf to West Africa. The company provides technologically oriented solutions to its customers to maximize oil field output efficiency. Baker Hughes isn’t the biggest company in the group, but it’s certainly a nimble competitor.

  • Halliburton Co. (NYSE: HAL): This company, based in Houston, Texas, makes a lot of headlines (sometimes not very positive ones) because of the political nature of its work with the U.S. government and military.

    Besides its governmental contracts, the company is a leader in oil and gas field maintenance. It helps customers extract as much energy from existing wells as possible, while maintaining low costs. This makes Halliburton a knowledgeable company in the petroleum services sector.

  • Schlumberger Ltd. (NYSE: SLB): Schlumberger is one of the most technologically savvy services companies out there and can provide solutions regarding all aspects of oil field–management services, from exploration and extraction to maintenance and abandonment. It provides evaluations to help customers identify the short-term and long-term viability of an oil field and specializes in maximizing oil field output through technologically advanced solutions.

For more information on the oil field services sector and all the companies involved in it, check out Yahoo! Finance.