5 Oil Field Stocks That Shouldn't Be In Your Portfolio Now

The market has witnessed a surge in crude prices from the 12-year low seen in mid February. Not only has the rebound played a major role in the recovery of the market, it has also led many investors to believe that oil has started to walk in the bullish direction. But the big question is: how long can crude sustain this rally when the commodity market is still brimming over with supply.

This article focuses on the oil field services firms especially on the players' business sensitivity to oil prices and their prospects.

Struggling Oil Field Services Firms

West Texas Intermediate WTI crude futures are currently up around 53% from the 12-year low of $26.21 in February. However, we should not forget that the so called spike in oil prices is standing on a pillar that is fundamentally unstable. In details, investors should not forget that crude is still oversupplied and is the main reason for the constant drag down of oil prices since mid 2014. Most importantly, The Goldman Sachs Group Inc. GS termed the commodity price rally ‘premature and unsustainable' in a new report.

Going deep into the story, the temporary crude recovery will lead price sensitive producers specially the shale players to go on pumping oil, which will add more of the commodity when there is already plentiful supply.

Oilfield service players primarily help upstream energy players to efficiently set up oil and gas wells. The services also include manufacturing, repairing and maintaining the tools needed to pump out oil and natural gas from wells.

We need to mention that all the activities are positively correlated to oil and gas prices. Certainly, the oil carnage has taken a toll on big oil field services companies like Schlumberger Limited SLB, Halliburton Company HAL and Weatherford International plc WFT. Hence, to survive the oil rout, the firms desperately laid off thousands of employees over a period of 18 months to reduce operating expenses when they were getting significantly less orders from exploration and production companies.

Stocks to Remove from Your Basket

As already mentioned, the oversupplied commodity market might push oil prices to the bearish territory again, and only the big oil field services players may survive on the strength of their fundamentals. However, the fate of the rest remains to be seen.

So it will be prudent decision to get rid of some bottom-ranked stocks in this space if you are already holding them. Otherwise, you should stay away from these as they may slip in the near term.

Here are five such stocks:

Core Laboratories N.V. CLB: The Amsterdam, Netherlands-based firm is an oilfield services company that provides reservoir management and production enhancement services to the oil and gas industry globally.

The firm carries a Zacks Rank #5 (Strong Sell), implying that it will significantly underperform the broader U.S. equity market over the next one to three months. The company also witnessed downward estimate revisions over the last 60 days.

Emerge Energy Services LP EMES: This Southlake, TX-based firm is the owner of an energy service asset portfolio. The company is also engaged in mining, producing and silica sand distribution businesses. Moreover, the partnership has storage terminals and distributes refined motor fuels. The firm, which witnessed downward estimate revisions over the last 60 days, also carries a Zacks Rank #5.  

Oceaneering International, Inc. OII: Houston, TX based Oceaneering also with a Zacks Rank #5, provides engineered services and products to the oil and natural gas offshore players. Over the last 60 days, the company witnessed downward estimate revisions.

Newpark Resources Inc. NR: This Woodlands, TX based company assists upstream players with various products and services for exploration and production operations. Newpark Resources holds a Zacks Rank #4 (Sell) and witnessed downward estimate revisions over the last 60 days.

Hornbeck Offshore Services, Inc. HOS: This Covington, LA-based company is a provider of services that include subsea installation and oilfield services. Hornbeck Offshore carries a Zacks Rank #4.

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