Value Line has initiated coverage of Superior Energy Services (SPN) in its flagship product, The Value Line Investment Survey. The company is a leading provider of specialized oilfield services and equipment, offering a wide variety of products and services that support oil and gas wells. Its customers are members of the energy industry engaged in the development and production of oil, primarily in the United States and the Gulf of Mexico. It also operates internationally, though on a much smaller scale.
The company traces its roots back to 1980, when it first started out as an oilfield products manufacturing firm. Since then, it has expanded its roster tremendously, eventually branching out into oil and gas services. It now offers a wide range of solutions, including tools for drilling, production, and well-workover activities. Superior completed its initial public offering in 1995 and now trades on the New York Stock Exchange under the ticker symbol SPN. It is currently incorporated in Delaware, with principle offices in Houston, Texas.
Superior operates through four reportable segments: Onshore Completion and Workover Services (34%of 2013 revenue), Production Services (31%), Drilling Products and Services (18%) and Technical Solutions (17%). In 2013, revenues totaled $4.6 billion, increasing just slightly (about 1%) over the 2012 result. More recently, harsh winter weather has hurt the U.S. land market unit, leading to lackluster results in the first quarter of 2014. However, prospects appear much more favorable for the back half of the year, with top- and bottom-line gains probable for the whole of 2014.
The oil and gas market is quite competitive, with the likes of Halliburton (HAL) and Schlumberger (SLB) serving as major rivals for Superior. That said, the company has done a fine job of diversifying its customer base, with only one client, EOG Resources (EOG), making up a disproportionately large amount of the top line (about 10%). Going forward, the company appears focused on expanding its footprint internationally, which should lead to an even more diverse client mix.
The company has grown its business primarily through acquisitions, allowing it to expand at a fast pace. Notably, Superior acquired Complete Production Services in 2012, which strengthened its grip on the U.S. land market considerably. Indeed, this addition allowed the firm to begin offering more products and services related to the completion of a well prior to full production. It also enhanced Superior’s suite of intervention services.
In terms of stock price performance, SPN has been somewhat volatile over the past few years, which is no doubt a reflection of the company’s competitive operating environment. That said, decent growth prospects for the long haul may make it a worthwhile candidate for those with longer investment time frames. Indeed, the company will probably benefit from more favorable trends in the U.S. land market, coupled with increased activity in the Gulf of Mexico, in the years ahead. The aforementioned global expansion efforts should prove fruitful, as well. Too, management recently initiated a quarterly dividend of $0.08 a share ($0.32 annually). And, although its dividend yield is below the Value Line median, Superior will likely raise its payout in the years to come, which is worth noting.
All told, we suggest that subscribers take heed of our full-page report in The Value Line Investment Survey, as well as any supplementary reports that may follow in accordance with newsworthy items related to Superior, before making any financial commitments.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.