We all know about the large energy corporations like Halliburton, BP, and Exxon, and how they make billions of dollars drilling for oil and gas. But there’s a side to the energy sector that you may have overlooked, and one that has tremendous profit potential: the oil field service companies.
These are the companies that provide the Halliburtons and the BPs and the Schlumbergers of the world with the necessary equipment to drill, pump, truck, and to actually produce sellable oil and petroleum. Without the proper tools, an oil rig is just a rusty speck on a map. And that’s why investing in these oil field service (OFS) companies, if you know what to look for, can be so profitable.
In the 2007 film There Will Be Blood, itself based upon the Upton Sinclair novel Oil!, we see a fairly accurate portrayal of how oil drilling rigs operated in the early years of the twentieth century: it was dangerous, messy work with many large moving parts. Since then, of course, oil production has grown exponentially, both in terms of quantity and in the sophisticated technologies used.
Today, it is no longer enough for a company to strike upon a reserve of oil and build a simple drilling rig itself. To do the job as efficiently and profitably as possible, energy corporations have turned to experts. And so OFS companies were born. These companies focus and perfect particular types of drills, pumps, pipes, trucks, and all of the other myriad pieces of equipment required by a modern oil rig. They have become such an integral part of the process of energy production that most energy companies could not operate without their products. In essence, without OFS companies there could be no oil, no coal, no energy.
And there is another potential boom in the OFS sector on the horizon: Mexico is considering a set of reforms to end the 70 year monopoly that the country’s national oil company, Petroleos Mexicanos, has enjoyed over all Mexican oil and gas space. If the monopoly is ended, it opens the market for foreign oil companies – the Halliburtons, the Exxons – to move into the Mexican oil industry.
And where the big oil companies go, so too do the OFS companies. Meaning if Mexico decides to open their oil fields to foreign oil drillers, OFS companies will be able to move into an entirely new, untapped market. The growth potential for OFS companies could be huge.
Some foreign oil companies already work in Mexico. But if the reforms that are currently being bandied about in the Mexican government are indeed pushed through, it will open up oil sites previously off limits. It will also allow more exploratory operations to take place. These new oil sites will be in more complex and difficult-to-access areas, mostly in the Gulf of Mexico. This means OFS companies will be in more demand than ever. Expect their profits and business revenue to increase.
There is also a movement in the energy field for the major energy players to acquire OFS operations themselves. In fact, Halliburton and Schlumberger have already taken steps to acquire certain OFS companies, which just further highlights their importance in the energy sector.
It just goes to show you, that when it comes to investing in energy, it’s not all about coal, oil, and natural gas. It’s also about drill bits, pumps, and pipelines.
