4 Small-Cap Oil & Gas Equipment & Services Stocks to Buy Right Now

NYSE: OII | Oceaneering International, Inc.  News, Ratings, and Charts

OII – Oil prices have been rallying because demand has exceeded expectations. On Wednesday, Dated Brent crossed the $100 per barrel mark for the first time since 2014. In addition, analysts expect Brent Crude to climb to $125 per barrel or even higher. Hence, we believe the stocks of small-cap oil and gas equipment and services companies Oceaneering (OII), Archrock (AROC), NOW Inc. (DNOW), and North American Construction (NOA) are solid bets. Let’s discuss.

Oil prices have been skyrocketing on greater-than-expected demand amid tight supply. On Wednesday, Dated Brent reached $100.80 per barrel for the first time since 2014. Because dated Brent reflects more immediate prices than the futures markets, its rise indicates how much traders are willing to pay to secure actual barrels of oil for delivery to refineries.

Furthermore, Brent Crude surpassing $100 per barrel now seems imminent, according to energy analysts, with forecasters expecting the commodity to rise to  $125 per barrel or even higher.

In addition, the SPDR S&P Oil & Gas Equipment & Services ETF’s (XES) 29.7% gains over the past six months have been broadly outpacing the broader SPDR S&P 500 ETF Trust (SPY) marginal declines over the same period. Hence, we believe small-cap oil and gas equipment and services stocks Oceaneering International, Inc. (OII), Archrock, Inc. (AROC), NOW Inc. (DNOW), and North American Construction Group Ltd. (NOA) could be solid bets now.

Oceaneering International, Inc. (OII)

OII is an engineered services and products provider to the offshore oil and gas, defense, aerospace, and commercial theme park industries over the world. The Houston, Tex.-based company operates through Subsea Robotics; Manufactured Products; Projects Group; Integrity Management and Digital Solutions; and Aerospace and Defense Technologies segments. It has a market capitalization of $1.48 billion.

On January 6, OII announced that its Integrity Management and Digital Solutions (IMDS) segment had been awarded multiple contracts, with more than $80 million booked in the fourth quarter of 2021. Rod Larson, President, and Chief Executive Officer, said, “These new bookings increase our confidence for continued growth in this segment, which is integral to achieving our previously guided EBITDA expectations for 2022.”

For its fiscal third quarter, ended September 30, OII’s revenue increased 6.2% year-over-year to $466.81 million. Its gross margin rose 101.8% from the prior-year quarter to $59.85 million, while income from operations came in at $15.77 million, up substantially from its negative year-ago value.

The Street’s $0.11EPS estimate for its fiscal year 2021 reflects a 140.7% year-over-year rise. And the Street’s $1.87 billion revenue estimate for the same year indicates a 2.3% increase from the prior year. OII has topped consensus EPS estimates in three out of the trailing four quarters.

Over the past year, the stock has gained 50.1% in price and 31.2% year-to-date to close yesterday’s trading session at $14.84.

OII’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

OII has a Value, Momentum, and Quality grade of B. In the 42-stock Energy – Services industry, it is ranked #5.

Click here to see the additional POWR Ratings for OII (Growth, Stability, and Sentiment).

Archrock, Inc. (AROC)

AROC is a Houston, Tex.-based energy infrastructure company that operates in the United States. The company operates through the two broad segments of Contract Operations and Aftermarket Services, and designs, owns, installs, repairs, and services its fleet of natural gas compression equipment. It also provides maintenance, overhaul, and reconfiguration services. It has a $1.32 billion market capitalization.

On January 27, AROC announced a $0.145 per share quarterly dividend, which aggregated $0.58 per share on an annualized basis and was payable to shareholders on February 15. This reflects the company’s ability to pay back its shareholders.

AROC’s aftermarket services revenue increased 19.2% year-over-year to $36.26 million in its fiscal third quarter, ended September 30, while its aftermarket services gross margin rose 19.2% from the prior-year quarter to $5.60 million. The company’s free cash flow came in at $120.83 million, up 20.3% from the same period the prior year.

Analysts expect AROC’s EPS to increase 76.5% year-over-year to $0.30 for its fiscal year 2022. The Street expects its revenue for the same year to improve 6.5% from the prior year to $873.56 million.

AROC’s shares have gained 10.4% in price over the past six months and 14.6% year-to-date to close yesterday’s trading session at $8.57.

It is no surprise that AROC has an overall B rating, which translates to Buy in our POWR Rating system.

AROC has a B grade for Momentum and Quality. It is ranked #6 in the Energy – Services  industry.

To see the additional POWR Ratings for Growth, Value, Stability, and Sentiment, click here.

NOW Inc. (DNOW)

DNOW in Houston, Tex., is a distributor of downstream energy and industrial products used in petroleum refining, chemical processing, LNG terminals, and industrial manufacturing operations. The company markets its products under the brand names DistributionNOW and DNOW. The company has a market capitalization of $1.09 billion.

On December 17, DNOW announced an amendment to its existing senior secured credit facility with a lenders syndicate. The amended credit facility extends the maturity date to 2026 and is expected to provide cost savings and other improved terms.

For its fiscal fourth quarter, ended December 31, DNOW’s revenue increased 35.4% year-over-year to $432 million. Its non-GAAP net income and non-GAAP EPS, excluding other costs, came in at $8 million and $0.07, respectively, registering a substantial increase over their negative year-ago values.

The consensus EPS estimate of $0.07 for its fiscal quarter ending March 2022 indicates a 275% year-over-year increase. And the $458.02 million consensus revenue estimate for the same period reflects a 26.9% improvement  from the prior-year quarter. Furthermore,  DNOW has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters.

The stock has gained 34.4% in price over the past six months and 14.9% year-to-date to close yesterday’s trading session at $9.81.

This promising outlook is reflected in DNOW’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

DNOW has a Growth grade of A and a Momentum, Sentiment, and Quality grade of B. It is ranked #4 in the Energy – Services  industry.

Click here to see the additional POWR Ratings for DNOW (Value and Stability).

North American Construction Group Ltd. (NOA)

NOA provides equipment maintenance, mining, and heavy construction services in Canada. It operates through the broad divisions of Heavy Construction & Mining; and Equipment Maintenance. The company is headquartered in Acheson, Canada, and has a $428.88 million market capitalization.

NOA’s total combined revenue increased 38.2% year-over-year to CAD234.90 million ($185 million) in its  fiscal fourth quarter ended December 31. Its adjusted net earnings improved 62% from the prior-year period to CAD16.78 million ($13.21 million), while its adjusted EPS stood at CAD0.59, up 63.9% from the same period the prior year.

The Street’s $1.84 EPS estimate for the fiscal year 2022 indicates a 15% rise year-over-year, while the Street’s $587.92 million revenue estimate for the same period reflects a 13.9% improvement from the prior year.

Over the past year, NOA’s stock has gained 44.9% in price to close yesterday’s trading session at $15.08. It has gained 11.3% over the past six months.

NOA has an overall B rating, which translates to Buy in our POWR Rating system.

NOA has a B grade for Value, Momentum, Stability, and Quality. It is ranked #2 in the Energy – Services  industry.

In addition to the POWR Rating grades we have stated above, one can see NOA’s rating for Growth and Sentiment here.


OII shares were trading at $14.91 per share on Thursday afternoon, up $0.07 (+0.47%). Year-to-date, OII has gained 31.83%, versus a -7.08% rise in the benchmark S&P 500 index during the same period.


About the Author: Anushka Dutta


Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...


More Resources for the Stocks in this Article

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