4 Oilfield Services Stocks Set to Gain From Strong Industry Tailwinds

Demand for oilfield services is expected to be strong in the coming days as the upstream businesses of companies will likely be profitable with oil prices back to the peak levels. Moreover, the industry’s relatively low reliance on debt should enable oilfield service companies to access capital on favorable terms in a volatile business environment, underpinning a promising outlook for the Zacks Oil and Gas- Field Servicesindustry.

Oilfield service firms are also helping their customers to cut emissions and costs with the use of smarter technologies. Some key players in the industry that are well poised to gain are Halliburton Company HAL, Baker Hughes BKR, TechnipFMC plc FTI and Archrock Inc. AROC.

About the Industry

The Zacks Oil and Gas - Field Services industry comprises companies that primarily engage in providing support services to exploration and production players. These companies help in manufacturing, repairing and maintaining wells, drilling equipment, leasing of drilling rigs, seismic testing and transport and directional solutions, among others. The firms help upstream energy players locate oil and natural gas and drill and evaluate hydrocarbon wells. Hence, oilfield services businesses are positively correlated to expenditures from upstream firms. Furthermore, with countries worldwide investing heavily in liquefied natural gas (LNG) terminals, a few oilfield service companies are extending their reach beyond the hydrocarbon fields and capitalizing on contracts for manufacturing equipment used in LNG facilities to decrease carbon emissions.

What's Shaping the Future of the Oilfield Services Industry?

High Oil Price to Aid Demand: The price of West Texas Intermediate (WTI) crude is trading above the $90 per barrel mark, backed by the ongoing Middle East war. The high oil price is favorable for exploration and production activities and, in turn, will raise the demand for oil field services, as the companies belonging to the industry help upstream players in efficiently setting up oil wells.

Low Debt Exposure: Companies belonging to the industry have a significantly lower exposure to debt capital. This is reflected in the fact that the debt-to-capitalization of the industry’s composite stock stands at only 31.16%. Thus, by relying on their strong balance sheets, the companies belonging to the industry are well poised to sail through when the business environment turns challenging.

Cutting Costs and Emissions Through Smarter Technology: For producing oil at a lower cost with fewer emissions, upstream companies need smarter technologies from oilfield service players. Thus, there has been an increasing demand for electric subsea systems, digital monitoring and remote-control technologies of oilfield service companies, since the employment of these technologies allows oil and gas producers to produce more volumes with fewer environmental risks.

Zacks Industry Rank Indicates Bullish Outlook

The Zacks Oil and Gas – Field Services is a 19-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #32, which places it in the top 13% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present a few stocks that you may consider, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Outperforms S&P 500 & Sector

The Zacks Oil and Gas – Field Services industry has surpassed the Zacks S&P 500 composite and the broader Zacks Oil – Energy sector over the past year.

The industry has soared 52% over this period against the S&P 500’s rise of 18.2% and the broader sector’s 36% growth.

One-Year Price Performance

Industry's Current Valuation

Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/Earnings before Interest, Tax, Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses.

On the basis of the trailing 12-month EV/EBITDA, the industry is currently trading at 10.06X compared with the S&P 500’s 17.07X and sector’s 6.95X.

Over the past five years, the industry has traded as high as 18.23X and as low as 2.40X, with a median of 7.93X.

Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio

4 Oilfield Services Stocks Well Poised to Gain

With oil prices back at peak levels, TechnipFMC, a provider of equipment and services to upstream companies, is gaining. The company ended 2025 with a total backlog of $16.6 billion, a significant improvement over the prior year. With a strong backlog and a favorable commodity pricing environment, FTI, sporting a Zacks Rank #1 at present, is well-positioned to benefit.

Price and Consensus: FTI

To combat climate change, the world is gradually demanding cleaner fuel, which is boosting demand for natural gas. The increasing number of data centers across the globe requires massive amounts of natural gas-driven electricity. Mounting U.S. LNG exports reflect rising demand for the commodity from different corners of the world. Thus, the business outlook appears highly favorable for companies like Archrock, which provide natural gas compression services.Currently,Archrocksports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: AROC

Halliburton is an oilfield service giant and has a strong presence in all stages of the oilfield lifecycle. HAL has higher exposure to the more profitable international market than in North America. Among its key strategic priorities is backing its customers to meet the mounting demand for cleaner and more affordable energy. In return, Halliburton, currently carrying a Zacks Rank #3 (Hold), is deriving handsome cash flows and shareholders’ returns.

Price and Consensus: HAL

Baker Hughes’ Oilfield Services & Equipment business unit is well-positioned to gain as exploration and production activities will continue to be profitable amid highly favorable oil prices. This signifies that demand for BKR’s oilfield services will be favorable. Baker Hughes, carrying a Zacks Rank #3, also has a strong balance sheet, thereby providing the company with ample capacity for growth and acquisitions.

Price and Consensus: BKR

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Halliburton Company (HAL): Free Stock Analysis Report

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Archrock, Inc. (AROC): Free Stock Analysis Report

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