National-Oilwell Varco, Inc. (NOV): The “Black Gold” Rush

The American gold rush is back, but this time prospectors are digging for “black gold.”  Of course the quest for oil never really went away, but interest in domestic production does seem to be rising.   According to the Department of Energy, the U.S. is expected to produce more crude oil than it imports in 2013 — the first time that’s happened since 1995.  Meanwhile, the International Energy Agency projects the U.S. to outproduce Saudi Arabia’s production by 2020.

For investors who want to get in on the stampede, oil and gas stocks are one way to gain exposure.  Oil production is a complex process that requires coordinated efforts down a long chain of businesses.  From exploration, to extraction, to refining, there is no shortage of opportunities to consider.  In this post, we’ll check out some companies involved in oil production that also look solidfundamentally.

National-Oilwell Varco, Inc. (NYSE:NOV) is a $30 billion company based in Texas.  It designs, manufactures, and distributes equipment used in oil and gas drilling worldwide. The company is considered to be vital to the oil and gas equipment / services industry.  According to National-Oilwell Varco, Inc. (NYSE:NOV), more than 90% of mobile offshore rigs, and more than 50% of large-sized land-based rigs use its parts and components.  This kind of market dominance makes National-Oilwell Varco, Inc. (NYSE:NOV) a leader in its business.  Meanwhile, it has impressive financials to match.  Relative to its industry and market averages, National-Oilwell Varco, Inc. (NYSE:NOV) looks good in terms of financial condition, growth, and valuation.   The only thing to gripe about is its stock price, which is down about 14% over the past year.

Helmerich & Payne, Inc. (NYSE:HP) is a $5 billion dollar company based in Oklahoma.  It provides contract drilling services for oil and gas wells worldwide.  Helmerich’s long history of R&D has made it an industry leader.  Its proprietary line of “FlexRigs” are some of the most advanced on the market.  Simply stated, FlexRigs can drill where others cannot.  That makes them more nimble and cost efficient versus competitors.  Operators have taken note and increased demand, which has caused a shortage of high-end rigs.  According to Helmerich, this has allowed the company to fill its order book and sign long term contracts at premium rates.  By the numbers, Helmerich looks strong financially and has a relatively attractive valuation.  Earnings growth, however, has been lackluster, which looks to be an issue with its industry in general.  Helmerich stock price is up about 10% over the past year.