3 Oil & Gas Equipment Stocks Set to Gain From Solid Industry Prospects

Core Insights - The oil price remains strong, driving exploration and production activities, which boosts demand for drilling and production equipment [1][4] - Companies in the Zacks Oil and Gas - Mechanical and Equipment industry are experiencing rising backlogs, indicating a positive outlook [5][7] Industry Overview - The Zacks Oil and Gas - Mechanical and Equipment industry includes companies that provide essential oilfield equipment such as production machinery, pumps, and valves to exploration and production firms [3] - The industry's performance is closely linked to the spending of upstream energy companies, which rely on these equipment providers for extracting crude oil and natural gas [3] Future Outlook - The U.S. Energy Information Administration (EIA) projects that the average spot price of West Texas Intermediate (WTI) crude will be $65.15 per barrel in 2025, supporting strong demand for industry equipment [4] - Companies are implementing decarbonization initiatives to reduce Scope 1 and 2 emissions, aligning with global sustainability goals and enhancing their attractiveness to environmentally conscious investors [6] Backlogs and Financial Health - The industry is characterized by significant backlogs, indicating a strong demand for equipment and the ability to secure high-value projects [5] - Key players like NOV Inc. (NOV), Oil States International Inc. (OIS), and Natural Gas Services Group, Inc. (NGS) have strong balance sheets and minimal debt, providing resilience against market volatility [2][16][19][21] Performance Metrics - The Zacks Oil and Gas - Mechanical and Equipment industry has outperformed the broader Zacks Oil - Energy sector, with a 13.5% increase over the past year compared to the sector's 5.8% [9][10] - The industry currently trades at an EV/EBITDA ratio of 7.32X, lower than the S&P 500's 18.31X but higher than the sector's 5.47X [14] Stock Recommendations - NOV has a backlog of $4.56 billion, indicating strong future cash flow generation and a focus on cost reduction [16] - OIS is focusing on profitable offshore and international projects, supported by an increasing backlog and a strong balance sheet [19] - NGS benefits from the rising demand for compression equipment as the U.S. exports more liquefied natural gas (LNG) [21]