Why Boeing, Yahoo, Schlumberger, Halliburton, and Seadrill Are Trending

Energy service companies Seadrill Ltd (NYSE:SDRL), Halliburton Company (NYSE:HAL), and Schlumberger Limited. (NYSE:SLB) are each in the spotlight after OPEC snatched victory from the jaws of defeat on Wednesday and agreed for the first time in eight years to cut/limit production to 32.5 million-to-33 million barrels per day from the current mark of about 33.4 million-barrels per day. The cartel will wait until its formal November meeting to iron out the specifics of how to execute its policy. News of the production cut caught many market participants by surprise, as most investors thought that the geopolitical squabble between Iran and Saudi Arabia was too great for the organization to bridge. The rift between the two nations was the primary reason why previous gatherings between oil producers had failed. Apparently, economic conditions have become so dire in Saudi Arabia and Iran that the leaders of the two countries were willing to overlook their differences.

News of the agreement sent crude prices surging by around 5% on Wednesday and could be a long-term positive if U.S. inventories continue to decline. If long-term crude prices rise, major oil service companies like Schlumberger and Halliburton will be able to charge more for their existing services, improving their margins and profits. If prices rise to $60-to-$65 per barrel or higher, Seadrill becomes interesting as well, despite its big debt load and near/medium-term maturities.

According to our data, hedge fund sentiment in the largest oil service company was relatively stable. The number of funds in our system with holdings in Schlumberger Limited. (NYSE:SLB) fell by one during the second quarter to 55 at the end of June. Meanwhile the smart money was a big fan of former Vice President Dick Cheney’s former company, as 62 funds had a long position in Halliburton Company (NYSE:HAL) at the end of June, up by eight funds quarter-over-quarter.

Going the opposite way was sentiment towards Seadrill Ltd (NYSE:SDRL), as 17 funds reported owning shares in the offshore driller as of the end of June, down by five funds from the end of March.

Disclosure: None