Recovering Chinese Economy Sparks Record High Demand for Oil

China’s economy is recovering, according to media reports, and with it comes a significant increase in its demand for oil. According to Platts, China’s oil demand reached record highs in December, suggesting that demand for 2013 will also spike.

Citing data from China’s National Bureau of Statistics, the Platts report noted that China’s economy rebounded by 7.8

Photo courtesy of heatingoil.com

Photo courtesy of heatingoil.com

percent in the fourth quarter of 2012 after bottoming out in the third quarter. Along with that recovery, China’s oil demand rose 7.7 percent year on year in December, or an average of 10.58 million barrels per day, the highest on record. Oil demand “was boosted by record refinery throughput.”For the entire year 2012, oil demand in China averaged 9.68 million barrels per day, a 3.4 percent increase over 2011. If the government continues its stimulus measures and the economy continues to improve, “growth this year could surpass” these figures, the Platt report noted.

This report prompted another look at small cap oil services and oil industry stocks.  Here are four we started following back on Aug. 1, 2012 and two others we have added to the list:

Houston-based Flotek Industries (NYSE: FTK, http://www.flotekind.com/), a company that develops and supplies a portfolio of drilling and production related products and services to the energy and mining industries worldwide, closed back on Aug 1 at $9.71 with a market cap of $480 million. When we checked a little over a month later on Sept. 11 it closed at $12 and its market cap was $596 million. On Jan. 24, FTK closed at $13.44, down 8 cents for the day. Its 52-week trading range is now $8.46-$14.73.

Norwalk, CT-based Bolt Technology Corp. (Nasdaq: BOLT, http://www.bolt-technology.com/) operates in the offshore drilling segment. It manufactures and sells marine seismic data acquisition equipment and underwater robotic vehicles. In January 2011 Bolt purchased SeaBotix Inc. BOLT closed Aug. 1 at $14.45 and Sept. 11 at $14.90, with a market cap of $126 million. BOLT closed Jan. 24 at $15.43, up 3 cents for the day. Its 52-week trading range is now $11.65-$16.09.

Houston-based Tesco Corporation (Nasdaq: TESO, http://www.tescocorp.com/) operates in four divisions serving drilling contractors and the oil and natural gas industry: Top Drives, Tubular Services, Casing Drilling and Reseach and Engineering. In October 2011 Tesco purchased Premiere Casing Services-Egypt SAE. Back on Aug. 1, TESO closed at $11.31. By Sept. 11 it had dropped to $10.39. On Jan. 24, TESO closed at $11.86, down 16 cents for the day. Its 52-week trading range is now $8.70-$16.88.

The Woodlands, TX-based Newpark Resources Inc. (NYSE: NR, http://www.newpark.com/) provides products mainly to the oil and gas exploration industry. It operates in three segments: Fluid Systems and Engineering, Mats and Integrated Services, and Environmental Services. In April 2011 it acquired the drilling fluids and engineering services business from Rheochem PLC. Back on Aug. 1 it closed at $6.68 and by Sept. 11 it was up to $7.67. On Jan. 24 it closed at $8.35, up 2 cents for the day. Its market cap is now $725 million and it 52-week trading range is now $5.19-$9.82.

The Woodlands, TX-based TETRA Technologies (NYSE: TTI, http://www.tetratec.com/) has five different business segments including oil and gas exploration, a products and services segment serving the oil and gas industry, and production testing. Since March 2012 TTI has made three acquisitions. TTI closed Jan. 24 at $8.55, up 3 cents for the day. Its market cap is now $668 million. Its 52-week trading range is $5.35-$10.66.

Houston-based Cal Dive International (NYSE: DVR, http://www.caldive.com/) is a marine contractor specializing in platform installation and salvage services, pipe inlay and burial for a diverse customer base in the oil and natural gas industry. DVR owns a fleet of 29 vessels and barges. It closed Jan. 24 at $1.74, up 5 cents for the day. Its market cap is now $169 million and its 52-week trading range is $1-$4.

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Boom in Oil Rig Makeovers Could Benefit Small Cap Oilfield Stocks

As recently as Aug. 2 we covered small cap oilfield services stocks, fueled by a story in The Economist which characterized them as “the unsung workhorses of the oil industry.” But we’re back with them this week after catching a Wall Street Journal headline Sept. 11 “Rig-Fleet Makeovers Fuel a Boom” (http://online.wsj.com/article/SB10000872396390443589304577637231118149766.html?KEYWORDS=daniel+gilbert+national+oil-well+varco subscription needed).

The idea in August was that these small, agile oilfield services stocks were the ones doing the vast majority of

Oil platform workers photo courtesy of oilrigjobsinfo.com

exploration and extraction in the oil industry. Small caps came up with the technique called “directional drilling” that transformed the industry by allowing one rig to cover a lot more territory.

The Wall Street Journal story highlighted the idea that new safety rules, the rise of fracking and demand for “new drilling rigs and safety devices that can withstand harsh environments” have created work for companies that “make the equipment used in the booming businesses of deep-sea drilling and onshore hydraulic fracturing.” The added safety measures were prompted by the Deepwater Horizon spill in 2010.

Furthermore, according to the WSJ, this boom should have legs because “many rigs–both offshore and on land–are more than 30 years old and ill-suited for drilling in deep waters and shale formations, both technically challenging environments that are among the hottest places globally to explore for oil.”

In our search for small caps in this area, we kept coming back to the four companies we covered randomly a month ago. Let’s see how they have fared.

Houston-based Flotek Industries (NYSE: FTK, http://www.flotekind.com/) develops and supplies a portfolio of drilling and production related products and services to the energy and mining industries worldwide. FTK operates in three segments: Chemicals, Drilling and Artificial Lift. FTK closed Aug.1 at $9.71, down 6 cents for the day. It’s market cap was about $480 million. FTK closed Sept. 11 at $12, up three cents for the day and its market cap is now $596 million. Its 52-week trading range is still $3.89-$14.73.

Norwalk, CT-based Bolt Technology Corp. (Nasdaq: BOLT, http://www.bolt-technology.com/) operates in the offshore drilling segment. It manufactures and sells marine seismic data acquisition equipment and underwater robotic vehicles. In January 2011 Bolt purchase SeaBotix Inc. According to a Seeking Alpha story in early June, Bolt’s one year projected earnings per share growth rate is 43.28 percent. BOLT closed Aug. 1 at $14.45, down 10 cents for that day. It closed Sept. 11 at $14.90, no change for the day. Its market cap is about $126 million and Its 52-week trading range is still $9.56-$16.09. 

Houston-based Tesco Corporation (Nasdaq: TESO, http://www.tescocorp.com/) operates in four divisions serving drilling contractors and the oil and natural gas industry: Top Drives, Tubular Services, Casing Drilling and Reseach and Engineering. In October 2011 Tesco purchased Premiere Casing Services-Egypt SAE. It closed Aug. 1 at $11.31, down 28 cents for the day. TESO closed Sept. 11 at $10.39, up 16 cents for the day. Its 52-week trading range is now $9.73-$17.54.

The Woodlands, TX-based Newpark Resources Inc. (NYSE: NR, http://www.newpark.com/) provides products mainly to the oil and gas exploration industry. It operates in three segments: Fluid Systems and Engineering, Mats and Integrated Services, and Environmental Services. In April 2011 it acquired the drilling fluids and engineering services business from Rheochem PLC. Its 52-week trading range is $5.19 and $10.62. It closed Aug. 1 at $6.68, down 15 cents for the day. On Sept. 11 it closed at $7.67, up 10 cents for the day.

Small Cap Stocks Among ‘Unsung Workhorses of the Oil Industry’

Chevron, Exxon Mobile and British Petroleum get all the headlines, but the companies that deliver oilfield services are the “unsung workhorses of the oil industry” and do the vast majority of the exploration and extraction of oil and gas, according to a recent story in The Economist (http://www.economist.com/node/21559358).

These are the people who came up with a technique called “directional drilling,” which transformed the industry by allowing drilling rigs to drill vertically, then shift sharply and continue drilling horizontally for up to seven miles, the story notes. This technology “vastly increases the area one rig can cover.”

While not as big as the huge oil company names, many of the companies in the oilfield services industry are also large caps, including Schlumberger, Cameron, FMC, National Oilwell Varco, Halliburton, Baker Hughes and Weatherford International.

But there are also many small cap firms in this sector. Here are four selected randomly:

Houston-based Flotek Industries (NYSE: FTK, http://www.flotekind.com/) develops and supplies a portfolio of drilling and production related products and services to the energy and mining industries worldwide. FTK operates in three segments: Chemicals, Drilling and Artificial Lift. While some of the big names–Baker Hughes and Schlumberger–have posted good results for the second quarter of 2012, FTK reports its results after market Aug. 8 and will host a conference call to discuss the quarter at 7:30 a.m. Thursday, Aug. 9. FTK closed Aug.1 at $9.71, down 6 cents for the day. It’s market cap is about $480 million and 52-week trading range was $3.89-$14.73.

Norwalk, CT-based Bolt Technology Corp. (Nasdaq: BOLT, http://www.bolt-technology.com/) operates in the offshore drilling segment. It manufactures and sells marine seismic data acquisition equipment and underwater robotic vehicles. In January 2011 Bolt purchase SeaBotix Inc. According to a Seeking Alpha story in early June, Bolt’s one year projected earnings per share growth rate is 43.28 percent. Its market cap is about $122 million and 52-week trading range is $9.56-$16.09. It closed Aug. 1 at $14.45, down 10 cents for the day.

Houston-based Tesco Corporation (Nasdaq: TESO, http://www.tescocorp.com/) operates in four divisions serving drilling contractors and the oil and natural gas industry: Top Drives, Tubular Services, Casing Drilling and Reseach and Engineering. In October 2011 Tesco purchased Premiere Casing Services-Egypt SAE. Its market cap is about $437 million and 52-week trading range is $10.01-$21.10. It closed Aug. 1 at $11.31, down 28 cents for the day.

The Woodlands, TX-based Newpark Resources Inc. (NYSE: NR, http://www.newpark.com/) provides products mainly to the oil and gas exploration industry. It operates in three segments: Fluid Systems and Engineering, Mats and Integrated Services, and Environmental Services. In April 2011 it acquired the drilling fluids and engineering services business from Rheochem PLC. Its market cap is about $602 million and 52-week trading range is $5.19 and $10.62. It closed Aug. 1 at $6.68, down 15 cents for the day.

As Halliburton Goes, So Goes the Oilfield Sector

What’s good for Halliburton is good for the entire oilfield services sector. That’s the investor sentiment behind this week’s news that Halliburton’s fourth quarter earnings had more than doubled. In fact, the news about Halliburton, the second largest oilfield services company in the U.S., did more than boost oilfield services stocks, it lifted U.S. equities overall on January 24, according to the Financial Times. Alcoa, the world’s largest aluminum producer; Cliffs Natural Resources, the iron ore and coal mining company; and the S&P materials index, all ticked upwards following the Halliburton announcement.

That lift didn’t seem to last long. Smallcap stocks in the oilfield services sector generally dropped back down on January 25. But the Halliburton dose of optimism was no doubt welcome nonetheless. Here’s a short capsule look at a few randomly chosen smallcaps in the sector. We’ll check back on this sector in the coming months.

Texas-based Lufkin Industries (Nasdaq:LUFK, http://www.lufkin.com/), a company that sells, manufactures and repairs oil field pumping units, enjoyed an initial bump from the Halliburton news, but dropped nearly 1.5 percent to $60.62 the next day (Jan. 25). Only two years ag this was a $90 stock.

Midland, TX-based Basic Energy Services Inc. (NYSE:BAS, http://www.basicenergyservices.com/), which provides a range of oil and gas drilling and producing companies in the U.S., also ticked down to $16.32 January 25 after getting an initial bump from the Halliburton news. BAS, with a market cap of $673 million, is trading near its 52-week high of $17.84. Earlier this month, TheStreet.com Ratings stock model upgraded BAS from sell to hold.

Houston-based Cal Dive International (NYSE:DVR, http://www.caldive.com/), a contractor of offshore platform, diving and underwater pipelay services with a market cap of $567 million, got a small bump from the Halliburton news, but is languishing around $6 a share. Investopedia picked DVR in early January as one of six stocks (and one of the few small companies) that will profit from ongoing Gulf infrastructure upgrades. It’s currently trading near its 52-week high of $7.97 which it hit last April, just before the BP disaster.

Huntington, WV-based Energy Services of America (AMEX:ESA, http://www.energyservicesofamerica.com/) is a $50 million market cap company that provides contracting services including construction, replacement and repair of natural gas pipelines and construction of intrastate and interstate pipelines, among other services. The Halliburton news may have provided a short lift to their stock price, but nothing that lasted a day of trading. The stock has enjoyed a nice roll since early November, moving from $3.43 to about $4 a share but its average daily volume is only a little more than 16,000 shares a day.

The Woodlands, TX-based Newpark Resources (NYSE:NR, http://www.newpark.com/), a $508 million market cap company that provides fluids management, waste disposal and well site products and services to the oil and gas exploration and production industry.did get a small boost to $5.67 on the Halliburton news and managed to keep most of that through January 25. The stock trades strongly, averaging nearly 1.8 million shares a day, and was as high as $9.50 last September. For more insight into its year-end 2010 results and outlook for 2011, tune into the senior management on its results conference call February 18.