Sector Spotlight: Oil Equipment Services & Distribution

Are there any opportunities lurking in the Oil Equipment Services & Distribution for investors?

Article updated: 29 January 2021 10:00am Author: Michael Baxter

I would say that a key phrase to look for when considering this sector is diversification away from oil. With the threat of climate change becoming more apparent, with electric vehicles set to take over from internal combustion engine cars and with the cost of energy generated by renewables falling all the time, the oil industry may be close to experiencing an existential crisis.

So, who are the key players in the Oil Equipment Services & Distribution market?

Genel Energy 

Genel Energy has exploration and production operations in Northern Iraq with plans to expand its activities into other Middle East and North African countries.

The company has enjoyed rapid growth, moving from a massive $1.2 billion loss five years ago to a $105 million profit last year. It emphasises the low unit cost of oil it produces and also goes into detail outlining its values, for example, stating "Genel is a company that cares – about our employees, about the environment, about doing things in a better way and make a tangible difference to people's lives in the areas in which we operate."

But the phrase diversifying away from oil is missing from how it describes itself.

Share price 155p
One year high 193p
Five year high (2018) 237p
Change last 12 months -13%
Change last five years 8%
Market cap £m 430
Yield % 7.66
P/E 5
Revenue growth since 2015 97.4%
Pre-tax profits growth since 2015 387.1%
Total assets/total liabilities 3.4%
net assets £m  1,386

Hunting

The company says: "We specialise in the global manufacture, trade and rental of high-quality upstream equipment for the wellbore." Established in 1874, the company is a premium listed public company traded on the London Stock Exchange.

It may have been around for a long time, but in the last five years revenue has doubled and pre-tax profits went from a $144m loss five years ago to a $46million profit last year. In other words, it is a 150-year-old company with recent P&L growth like that pertaining to a start-up.

The company says: "Change is our travelling companion; we have demonstrated endless resilience and willingness to embrace new industrial and societal contexts. Entrepreneurial spirit has been ever-present during our history, from the founding by Charles Samuel Hunting right through to today, where we are continually driving new possibilities for oil and gas extraction."

Even so, one must ask whether it is ready for the changes that will occur over the next decade?

Share price 236p
One year high 423p
Five year high (2018) 912p
Change last 12 months -44%
Change last five years -4%
Market cap £m 390
Yield % 2.7
P/E 13
Revenue growth since 2015 110.5%
Pre-tax profits growth since 2015 From loss-making to profit
Total assets/total liabilities 7.3%
net assets £m  1,224

Petrofac 

The company says: "Petrofac designs, builds, manages and maintains oil, gas, refining, petrochemicals and renewable energy infrastructure."

When the company released results for the six months to the end of June, Petrofac's Group Chief Executive, commented:

"Our first-half results reflect the deterioration in market conditions triggered by the Covid-19 pandemic and subsequent decline in oil prices.  In response, we are doing everything in our control to protect both the health and well-being of our people, suppliers and communities, and the long-term health of the business.

"These swift and decisive actions are structurally reducing costs, conserving cash and maintaining our competitiveness.  At the same time, we have preserved core capability whilst continuing to invest in digitalisation and client relationships. 

"Furthermore, our longer-term strategy has transformed Petrofac into a more resilient, capital-light business with a strengthened balance sheet and a clear commitment to sustainability.  I am confident that this strategy and our actions best position Petrofac for the recovery when it occurs.  In the meantime, I want to thank all our people and suppliers for their hard work, commitment and support in continuing to deliver best-in-class execution for our clients." 

Share price 162p
One year high 393p
Five year high (2016) 982p
Change last 12 months -59%
Change last five years -77%
Market cap £m 562
Yield % 6.3
P/E 10
Revenue growth since 2015 -19.2%
Pre-tax profits growth since 2015 From loss-making to profit
Total assets/total liabilities 1.2%
net assets £m  914

Wood (John) 

The company is an international energy services company which provides the oil and gas and power generation industries with engineering design, production support and industrial gas turbine services.

The company is investing heavily in new cleaner energies, including wind farms and carbon capture.

It is the only company in this sector with a market cap over £100m, and which has enjoyed good growth in recent years that seems to tick the box I was looking for — namely diversification away from oil.

Share price 356.9p
One year high 422p
Five year high (2017) 887p
Change last 12 months -12%
Change last five years -35%
Market cap £m 2,457
Yield % 2.6
P/E 44
Revenue growth since 2015 97.8%
Pre-tax profits growth since 2015 7.2%
Total assets/total liabilities 1.6%
net assets £m  4,446

All prices are approximate figures taken from 8 January 2021.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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