Oilfield Profits: BAS and KEG

It's easy to think of energy companies in broad strokes. Either there are the big integrated firms, or there arehundreds of independent E&P firms, drillers, and refiners. But, of course, in between are lots of companies that specialize in providing services to all these firms. Names like Halliburton (HAL - Analyst Report), Schlumberger (SLB - Analyst Report), and Baker-Hughes (BHI - Analyst Report) are the big players here.

Oilfield services is an industry group with 32 companies in it currently, according to the Zacks Industry Rank which follows about 4,400 equities. And two smaller companies that stand out this week -- with a better earnings front than the three giants -- are Basic Energy Services (BAS - Snapshot Report) and Key Energy Services (KEG - Snapshot Report), both of which are Zacks #1 Rank (strong buy) stocks.

Doubling Profits and Then Some

Basic Energy Services provides drilling services to US oil and gas producers that support the entire life cycle of a well, from drilling to production and, finally, abandonment. The $1.1 billion company, which has not yet returned to profitability since the 2008 recession, has seen its stock more than triple in the last nine months, rising from below $10 to a 52-week high above $31.50 in April.

But it's the earnings visibility that has analysts consistently raising their estimates and keeping BAS on the buy list. In the past 90 days, earnings revisions have vaulted 2011 full-year EPS expectations from $0.61 to $1.39 and the 2012 profits picture from $0.94 to $1.91.

BAS became a Zacks #2 Rank stock in mid-January when shares were still trading below $17, as analysts began raising their earnings estimates up from the recession trough. If you had bought BAS on that recommendation, you would have made over a 50% return inside of two quarters as the #2 Rank stuck for over three months. Since late April, the stock has earned a #1 Rank in five of the past seven weeks.

Onshore Drillers Gain New Ground

Key Energy Services, Inc., a $2.4 billion market cap firm, is one of the largest providers of onshore oil and gas well services in the United States and Argentina. In addition to maintenance and work-over services, they also provide services which include the completion of newly drilled wells, the recompletion of existing wells and the plugging and abandonment of wells at the end of their useful lives.

KEG has consistently been a Zacks #1 or #2 Rank stock since early May as analysts boosted estimates from $0.63 to $0.83 for this year, and from $1.03 to $1.39 for 2012. After the company's earnings surprise in late April, the stock surged from $16 to $18, but has spent the last two months carving out a trading range between $15 and $18.

If the current stock market weakness should abate or stabilize, these strong onshore drilling service companies should be looked at for long entry opportunities. As long as their earnings picture is strong, they are good aggressive growth candidates and may provide balance to portfolios holding large cap energy names.

Kevin Cook is a Senior Stock Strategist for Zacks.com