According to a recent report from Barclays, global exploration and production spending will reach a record $678 billion this year, representing a 10% increase over 2012 levels.
The bank’s forecast, an upward revision from its December 2012 estimate of $644 billion, would mark the fourth consecutive year of double-digit global spending increases since 2009.
Much of the expected increase in global E&P spending is attributed to new projects in the Middle East and other regions in Asia, Barclays added. North American spending, on the other hand, is forecast to grow by a relatively modest 2%.
Barclays’ assessment has important implications for one energy subsector: the services companies. Let’s check out three of them that may be worth investing in.
In general, the rise in global E&P spending bodes well for the companies that provide the equipment and expertise necessary to exploit shale reserves. One company that’s aptly positioned to profit is Halliburton Company (NYSE:HAL), which, in addition to its dominant position in the U.S., also stands to benefit from the increase in E&P activity outside North America.
In particular, the company’s Drilling and Evaluation business, which provides field and reservoir modeling, drilling, evaluation, and precise well-bore placement solutions, stands out as a big potential winner from the increase in E&P spending that Barclays expects in the Middle East and other parts of Asia.
Next up is Nuverra Environmental Solutions Inc (NYSE:NES), formerly known as HECKMANN CORP UTS (NYSE:HEK.UN), a full-service provider of water management solutions. Over the next several years, the company stands to benefit from one major trend: the scarcity of water for fracking operations and the need to efficiently recycle and reuse it.
What sets Nuverra Environmental Solutions Inc (NYSE:NES) apart from some of its competitors, such as Key Energy Services, Inc. (NYSE:KEG) — a fluid-treatment provider that focuses mainly on water disposal — is its overarching focus on treating and recycling produced water, as opposed to just disposing it.
For instance, it owns a stake in a wastewater recycling facility in the Marcellus and is working hard on improving its treatment and recycling capacity. And unlike many of its competitors, Nuverra Environmental Solutions Inc (NYSE:NES) offers its customers full-service solutions, helping them handle their water disposal and recycling needs throughout the full cycle, from delivery to disposal.
Another potential winner is National-Oilwell Varco, Inc. (NYSE:NOV), the single largest supplier of rig equipment to the oil and gas industry. Through decades of smart acquisitions, it has grown to become the most dominant, low-cost provider of rig equipment for the world’s largest drillers, commanding a whopping 60% market share.