Halliburton Company (HAL), National-Oilwell Varco, Inc. (NOV), Weatherford International Ltd (WFT): Three Companies for Rapidly Rising Oil Capex

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Moreover, Halliburton has been faced with rising wages impacting margins as skilled labor becomes harder to find and the company has to offer workers more to stay with the company.  In particular, since 2007 Halliburton’s gross margin has been compressed from 24.5% to 14.4% as of the second quarter of 2013. During the same period, National-Oilwell Varco, Inc. (NYSE:NOV)’s gross margin only closed by 1.1%.

In addition, while Halliburton Company (NYSE:HAL)’s growth has been strong during the past 10 years, revenue has expanded 76%, National Oilwell has grown faster, notching revenue growth of 996% during the same 10-year period. Based on its historic growth and recently announced order backlog of $13.95 billion, a record for the company, I am very excited about National-Oilwell Varco, Inc. (NYSE:NOV)’s future. .

Greater risk, greater reward
One of the most active regions in the world for oil exploration and production is Iraq, which recently joined the elite club of countries producing more than 3 million barrels of oil per day. The country wants to triple this output by 2020, although many remain skeptical of this target and believe a lower estimate of 6 million barrels per day is more achievable.

Whatever the case, the oil industry is certainly going to be active within Iraq during the next few years. The major players are active within Iraq but so is smaller Weatherford International Ltd (NYSE:WFT). Weatherford International Ltd (NYSE:WFT)’s largest and most recent contract within Iraq was the $843 million Zubair Field contract. The company has been contracted to increase the field’s output along with the general drive for higher rates of production throughout the country.

However, Weatherford International Ltd (NYSE:WFT) is a somewhat risky turnaround play. Weatherford International Ltd (NYSE:WFT) has been marred in the past by accounting troubles, and the company has only been profitable for two out of the past five years. Still, the company has recognized that it cannot compete with larger peers, such as Halliburton and Schlumberger, so instead it has decided to concentrate on higher-margin sections of the business by selling off non-core businesses.

Foolish Summary
Capital spending within the oil and gas industry is on a solid upward trajectory, and this is forecast to continue for many years yet. Order backlogs are building at oil service companies and it looks as if investors are going to see rapidly rising profits over the next few years as well.

The article Three Companies for Rapidly Rising Oil Capex originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves owns shares of National Oilwell Varco. The Motley Fool recommends Halliburton and National Oilwell Varco. The Motley Fool owns shares of National Oilwell Varco.

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