Oil services exchange traded funds are trading higher Monday ahead of the start of the industry’s earnings season and on expectations the current quarter is shaping up to be a busy one.
Shares of the Market Vectors Oil Service ETF (OIH) are up 2.1% while the iShares U.S. Oil Equipment & Services ETF (IEZ) is up almost 2%. The two ETFs each reside about 2.2% below their 52-week highs.
Sterne Agee analyst Stephen Gengaro says pent-up demand caused by harsh winter conditions in the first quarter should prompt a busy second quarter for the likes of Schlumberger (SLB) and Halliburton (HAL), the world’s two largest providers of oil services. Gengaro “says difficult conditions across the U.S. negatively impacted efficiency at well sites during Q1. The problems included weather-related logistical difficulties and freezing temperatures that limited the ability to work,” reports Vance Cargiaga for Investor’s Business Daily.
The near-term catalysts for the $1.3 billion OIH and the $522.7 million IEZ come in the form of first-quarter earnings reports. On Thursday, Schlumberger and Baker Hughes (BHI) step into the earnings confessional. Those stocks combine for almost 26% of OIH’s weight with 20.9% going to Schlumberger.
Next week, Halliburton, Cameron Interational (CAM) and Noble (NE), to name a few, deliver results. Those stocks combine for over 19% of OIH’s weight and nearly 17% of IEZ. These earnings reports and others from oil services firms arrive in what is typically a strong month for the group relative to the broader market. April OIH’s third-best month in terms of out-performance of the S&P 500 and OIH has topped the U.S. benchmark index in nearly two-thirds of Aprils dating back to 2000. [Grab Energy ETFs Right Now]
Another option to consider is the SPDR Oil & Gas Equipment & Services ETF (XES) . XES noticeably differs from OIH and IEZ in that the State Street offering is an equal weight fund with a weighted average market value of $9.8 billion. That does not mean the 49 stocks found in XES are all small caps, but XES does provide an alternative to the investor looking to escape the dominance of Schlumberger and Halliburton in in traditional oil services ETFs. [Oil Services ETFs in the Groove]
The $295.5 million XES is up 4.7% in the past month. Schlumberger accounts for just 2.4% of the ETF’s weight and Halliburton is not a top-10 holding in the fund.
Market Vectors Oil Service ETF