The rapidly escalating Russian invasion of Ukraine has driven global crude oil prices to cross the $110 per barrel mark. On Wednesday, Brent crude futures, the global benchmark, surged nearly 9% to $113.65 per barrel, their highest level since 2014. U.S. oil futures also gained more than 8% to trade at $112.25 per barrel.
According to Richard Spears, Vice-President of consultants Spears & Associates, the oil price increase should lift global spending on oilfield equipment and services by 30% this year versus last year to $260 billion. U.S. oilfield companies expected to withdraw from Russia and replace their lost revenue through new oil and gas drilling elsewhere.
Because the U.S. Energy Information and Administration (EIA) forecasts crude oil production in the country to rise to an average of 12.6 million b/d in 2023, we think the oil and gas equipment and services stocks ChampionX Corporation (CHX) and USA Compression Partners, LP (USAC) could be still worth buying.
ChampionX Corporation (CHX)
CHX operates as a chemistry solutions and engineered equipment and technologies provider for oil and gas companies globally. The Woodlands, Tex.-based company operates through the segments of Production Chemical Technologies; Production & Automation Technologies; Drilling Technologies; and Reservoir Chemical Technologies.
On December 8, CHX announced that it had acquired nano-technology platforms with proven commercial applications Tomson Technologies LLC and Group 2 Technologies LLC. The acquisitions should add to the company’s portfolio and enable its customers to reduce their carbon footprint, thereby aligning with CHX’s long-term strategy of portfolio evolution for sustained growth.
In October, CHX announced that its Spotlight EDGE™ device had received Microsoft Corporation’s (MSFT) ‘Azure Certified Device’ and ‘Edge Managed’ certifications. The certifications reflect the company’s commitment to driving technology that supports its customer’s sustainability and efficiency goals.
For its fiscal fourth quarter, ended December 31, CHX’s revenue increased 16.4% year-over-year to $822.15 million. Its adjusted net income and adjusted EPS, attributable to CHX came in at $54.23 million and $0.26, respectively, up 278.4% and 271.4% from the prior-year period. Its adjusted EBITDA improved 22.5% from the prior-year quarter to $133.11 million.
The $0.21 consensus EPS estimate for the quarter ending March 31, 2022, indicates a 162.5% year-over-year increase. And the $825.11 million consensus revenue estimate for the same quarter reflects a rise of 20.5% from the same period in the prior year. Furthermore, CHX has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 7.5% in price year-to-date and 2.7% over the past five days to close its last trading session at $21.72.
CHX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CHX has a Momentum and Quality grade of B. In the 43-stock Energy – Services industry, it is ranked #6.
Click here to see the additional POWR ratings for CHX (Growth, value, Stability, and Sentiment).
USA Compression Partners, LP (USAC)
USAC is an Austin, Tex.-based partnership that operates as a natural gas compression services provider in terms of total compression fleet horsepower. The company’s offerings include compression services to oil companies and independent producers and transporters of natural gas and crude oil.
On December 8, USAC announced that it has entered its seventh amended and restated credit agreement, extending the maturity of its senior secured credit facility until December 2026. Eric Long, President, and CEO of USAC, said, “The new credit facility provides the Partnership with additional flexibility at lower interest margin spreads–consistent with the overall compression financing market and other industry peers. Given our current drawn balance of approximately $514 million, this new credit facility provides the Partnership ample capacity with which to grow and manage the business in the coming years to the benefit of all our stakeholders.”
USAC’s revenue increased 1% year-over-year to $159.94 million in its fiscal fourth quarter, ended December 31. Its net income came in at $3.11 million, up substantially from its negative year-ago value. And its operating income improved 16.5% year-over-year to $36.34 million.
Analysts expect USAC’s EPS to increase 20% year-over-year for its fiscal quarter, ending June 30, 2022, while the Street expects its revenue for the same period to increase 6.6% from the prior-year quarter to $166.90 million.
The stock has gained 24.1% in price over the past year and 15.9% over the past six months to close its last trading session at $17.75.
It’s no surprise that USAC has an overall B rating, which equates to Buy in our proprietary rating system.
USAC has a B grade for Momentum, Stability, Sentiment, and Quality. It is ranked #7 of the 35 stocks in the MLPs – Oil & Gas industry. The industry is rated A.
To see the additional POWR Ratings for Growth and Value for USAC, click here.
CHX shares were unchanged in premarket trading Friday. Year-to-date, CHX has gained 7.47%, versus a -8.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
2 Oil & Gas Equipment & Services Stocks Still Worth Buying StockNews.com
