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As a country's currency weakens, commodities become more expensive. The United States dollar has seen better times. There is talk of QE3 which could create further pressure. It looks like this theme will be continued in the short term, which could create even higher commodity prices. Investors will invest in these commodities through companies that produce things like gold, steel or oil. Oil may see even more pressure, as social unrest in the Middle East could rear its ugly head for months and even years.

Investors should remember there are several ways to invest in higher commodity prices. For example, if oil is the focus, there are other avenues to pursue if the commodity itself begins to trade sideways. Some oil service stocks have begun to run and have the growth to substantiate valuation. The companies that interest me are those that provide completion services for unconventional U.S. land wells.

RPC Inc. (NYSE:RES) provides oilfield services in the United States. It operates in two segments - technical services and support services. 2010 was a rebound year. Revenues almost doubled from the year prior. 2010 also had positive earnings. RPC could have a better year than analysts expect. This is based on areas like the Bakken, where companies are waiting significant periods of time for some services. Pressure pumping is not only in demand; companies are beginning to sign contracts instead of waiting. It won't be long before dayrates increase significantly. 48% of 2010 revenues was generated by pressure pumping. Pressure pumping is a stimulation service that involves fracturing to stimulate production in new wells. RPC is currently spending most of its capital expenditures on this part of the business. This company believes that the large inventory of shale resource will create an increased demand.

RPC's business is:

  • Pressure Pumping - 48%
  • Rental Tools - 8%
  • Down hole Tools - 12%
  • Coiled Tubing - 11%
  • Snubbing-Hydraulic Work - over 5%
  • Nitrogen - 5%
  • Pipe Inspection, Storage and Management - 2%
  • Well Control - 1%

RPC believes that contracts are becoming common place for its services. This is also due to increased demand, but more importantly to the very large inventories of work.

  • P/E Ratio - 23.99
  • Forward P/E - 13.48
  • 2011 EPS Growth - 79%
  • PEG Ratio (1 year) - .303
  • EPS Growth Per Annum (5 years) - 19%
  • PEG Ratio (5 year) - .68

Complete Production Services (NYSE:CPX) offers completion and production services to oil and gas companies. This stock is up $1.94 since I wrote Complete Production Services: A Full Resource Play Provider. Completion is a one stop shop for getting oil out of the ground. Its revenues at the end of 2010 are:

  • Pressure Pumping - 30%
  • Fluid Handling - 19%
  • Well Servicing - 12%
  • Coiled Tubing - 10%
  • Wireline - 7%
  • Other - 22%

As with RPC, pressure pumping continues to be the most important variable for this group. 90% of Complete's horsepower is 5 or less years old. Since the second quarter of 2010, the pressure pumping fleet is working 18 hours a day, 7 days a week. Complete has significant market share in coiled tubing and well servicing. Complete's valuations are:

  • P/E Ratio - 28.71
  • Forward P/E Ratio - 10.96
  • 2011 EPS Growth - 132.4%
  • PEG Ratio (1 Year) - .217
  • EPS Growth Per Annum (5 Years) - 20%
  • PEG Ratio (5 Year) - .60

Key Energy Services (NYSE:KEG) operates as a well servicing contractor. This company also offers production services. Key is a leader in well service. Its 2010 revenue split is:

  • Rig Service - 58%
  • Fluid Management Services (FMS) - 24%
  • Intervention Services (coiled tubing) - 9%
  • Fishing and Rental Services (FRS) - 9%

A further breakdown of Key's services at the end of 2010:

  • Total Service Locations - 272
  • Rig Service Locations - 75
  • Rig Service Rigs - 787
  • FMS Service Locations - 57
  • Fluid Trucks - 1000+
  • Storage Tanks - 3400+
  • Disposal Wells - 65
  • Coiled Tubing Service Locations - 9
  • Coiled Tubing Units - 43
  • FRS Service Locations - 21

From 2004 to 2010, Key has a CAGR of 30%. This number should go higher on an increased number of horizontal wells. Horizontals require 3 to 5 times the service of vertical wells. They also require more work to drill and complete. For four straight quarters, Key has beat earnings estimates handily. Key has very good fundamentals:

  • P/E Ratio - 27.43
  • Forward P/E Ratio - 15.55
  • 2011 EPS Growth - 1340%
  • PEG Ratio (1 year) - .020
  • EPS Growth Per Annum (5 year) - 12%
  • PEG Ratio (5 year) - 2.03

Superior Energy Services (NYSE:SPN) is an oil service company focused on subsea wells. This company has three segments of business:

  • Drilling Products and Services - $474.7 million
  • Subsea and Well Enhancement - $1112.7 million
  • Marine Segment - $94.2 million

Diversification through geography protects this company from significant downside in revenue:

  • Gulf of Mexico - 40%
  • Domestic Land - 32%
  • International - 28%

The domestic land market is seeing huge demand for coiled tubing and premium drill pipe. Year over year from the first quarter of 2010 to 2011, drill pipe rental has increased from 164,000 feet to 700,000 feet. Since 2003, international revenue has a CAGR of 35%. The subsea market is estimated to see a 59% increase in light well completions by 2015. Superior is well placed in a fragmented market with opportunities for growth.

  • P/E Ratio - 38.58
  • Forward P/E - 14.35
  • 2011 EPS Growth - 29.9%
  • PEG Ratio (1 year) - 1.29
  • EPS Growth Per Annum (5 year) - ( - 4%)
  • PEG Ratio (5 year) - ( - 4.83)

Basic Energy Services (NYSE:BAS) is one of my favorites in this space. 2010 revenues are:

  • Completion and Remedial Services - $261 million or 36% of revenue
  • Fluid Services - $241 million or 33% of revenue
  • Well Services - $205 million or 28% of revenue
  • Contract Drilling - $21 million or 3% of revenue

Basic's pressure pumping segment has 142,000 total hydraulic horsepower. Basic has access to over 600,000 active oil and gas wells in its service region. Basic has its largest footprint in the Permian. The Permian has a $25/bbl break even price and this is stimulating increased drilling. 100 rigs are being added here in 2011, followed by the Williston Basin and South Texas.

Basic has seen large revenue improvements in cementing, acid and pumping. Fracking has remained steady. Fluid services has seen revenue improvements per truck trend:

  • 4th Quarter 2009 - $64,000
  • 4th Quarter 2010 - $85,000

Basic is estimating a 5% increase in fluid service trucks this year. Well service truck revenue per rig hour:

  • 1st Quarter of 2010 - $308,000
  • 4th Quarter of 2010 - $331,000

Basic's business is improving. 50% of Basic's rigs are from 2000 or newer. As with others on this list, much of this improvement is in completion and remedial services. This is followed by fluid services. Well servicing and drilling revenues are progressing at a slower rate. 2011 capital spending has 51% going towards expansion. 79% is being spent on fluid services, completion and remedial services.

  • Forward P/E Ratio - 26.71
  • 2011 EPS Growth - 152.6%
  • EPS Growth Per Annum (5 year) - 9%
  • PEG Ratio (5 year) - 4.5

Halliburton (NYSE:HAL) beat analyst estimates last quarter. Halliburton commented on the strength of the United States land business. The United States land rig count increased 4%. This was outpaced by revenue and operating income growth of 10%. The United States revenue was the highest in company history. There are two themes to watch. These are improved pricing and long term contracts. Both are occurring in United States land markets. Completion and production revenue increased 12% from the third quarter. Year over year, North American completion and production revenue increased from $3.589 billion to $6.183 billion.

  • P/E Ratio - 22.86
  • Forward P/E - 13.19
  • 2011 EPS Growth - 40.8%
  • PEG Ratio (1 year) - .560
  • EPS Growth Per Annum (5 years) - 19.53%
  • PEG Ratio (5 year) - .81

Schlumberger (NYSE:SLB) stated that oil demand in 2010 was the largest increase in 30 years. 2010 oil service revenue increased 35% year over year from 2009. North American oil services revenue increased 27%. Schlumberger also saw pretax operating margin increase by 224 bps to 22.1%. This was created by robust North American activity. North American revenue was up 27% sequentially and 84% year over year. Pretax operating income was up 75% sequentially and 21 fold year over year. Sequentially, United States land increased 24% in revenue. Improvements were seen with additional service capacity and utilization.

  • P/E Ratio - 25.7
  • Forward P/E Ratio - 17.31
  • 2011 EPS Growth - 35%
  • PEG Ratio (1 year) - .734
  • EPS Growth Per Annum (5 years) - 22.33%
  • PEG Ratio (5 year) - 1.02

Baker Hughes (NYSE:BHI) issued its rig count on March 18 which revealed a 5 rig increase. This was the third increase in as many weeks. This rig count is 96% higher then the 2009 low. Baker's numbers are like Halliburton's and Schlumberger's. In 2010, Baker's North American revenues were double 2009 numbers. In 2010, profit before tax was over 500% higher then 2009.

  • P/E Ratio - 34.5
  • Forward P/E Ratio - 14.84
  • 2011 EPS Growth - 69.8%
  • PEG Ratio (1 year) - .494
  • EPS Growth Per Annum (5 years) - 25.86%
  • PEG Ratio (5 year) - .73

Weatherford International (NYSE:WFT) also reported very good North American numbers at its 4th quarter of 2010 results. A 14% increase in revenue from the previous quarter, and 70% year over year. Margins improved by 180 basis points to 20.1%.

  • P/E Ratio - 15.57
  • Forward P/E Ratio - 12.57
  • 2011 EPS Growth - 92.9%
  • PEG Ratio (1 year) - .168
  • EPS Growth Per Annum (5 years) - 16%
  • PEG Ratio (5 Year) - 1.21

Oil service companies are increasing revenues quickly. Although revenue increases are being seen across all segments, it seems that the United States is growing faster. Niche systems such as pressure pumping are beginning to see price increases. I would suggest to anyone in this sector to ride the trend - as long as these stocks stay above the 50 day moving average.

Disclaimer: This article is a list of companies with in the oil service sector. It is a group that has a large footprint in U.S. shale oil. This is not a recommendation to buy, but I am looking to get back into RES and BAS on a pullback.

Source: Oil Service Companies Continue to Move Higher: 9 Stocks to Ride This Trend