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3 Oil & Gas Drilling Stocks With Potential Amid Industry Risks
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The Zacks Oil and Gas - Drilling industry faces a challenging near-term outlook, weighed down by geopolitical tensions, rising equipment costs and supply chain disruptions. Its position in the bottom 20% of Zacks-ranked industries, coupled with downward earnings estimate revisions, reflects growing concerns about profitability. Drilling contractors also face substantial investment requirements to upgrade aging rigs and meet changing customer needs. However, improving drilling activity and tighter availability of advanced rigs are supporting stronger service pricing and longer contracts. International expansion, particularly in Latin America, offers additional growth opportunities, while rising natural gas demand supports long-term prospects. Nevertheless, operational uncertainties and high capital requirements warrant caution. Even so, Patterson-UTI Energy (PTEN - Free Report) , Nabors Industries (NBR - Free Report) and Helmerich & Payne (HP - Free Report) stand out as stocks worth considering for investors seeking exposure to the industry's long-term growth potential.
Industry Overview
The Zacks Oil and Gas - Drilling industry consists of companies that provide rigs (or specialized vehicles) on a contractual basis to explore and develop oil and gas. These operators offer drilling rigs (both land-based/onshore and offshore), equipment, services and workforce to exploration and production companies worldwide. Drilling for hydrocarbons is costly and technically difficult, and its future primarily depends on contracting activity and the total number of available rigs at a given time rather than the price of oil or gas. Within the industry, it's interesting to note that the volatility associated with offshore drilling companies is much higher than that of their onshore counterparts, and their share prices are more correlated to the price of oil. Overall, oil and natural gas drilling stocks are among the most volatile in the entire equity market.
4 Trends Defining the Oil and Gas - Drilling Industry's Future
Geopolitical Disruptions and Operational Uncertainty: Geopolitical tensions remain a significant concern for the oil and gas drilling industry, particularly in regions facing ongoing conflicts. Such disruptions can force operators to suspend drilling activities, postpone equipment deliveries and delay planned projects. Even when energy prices remain favorable, producers may hesitate to expand operations amid security concerns and uncertain operating conditions. Moreover, transportation difficulties, workforce safety requirements and rising logistical expenses can increase the cost of maintaining drilling operations. These challenges may reduce equipment utilization and interrupt revenue generation..
Improving Drilling Activity and Stronger Pricing Outlook: The outlook for the oil and gas drilling industry is improving as exploration and production companies gradually increase their drilling activities. Higher forward oil prices are encouraging producers to consider expanding operations, with further momentum expected in 2027. Meanwhile, demand for modern drilling rigs is rising, particularly for equipment capable of handling deeper wells and longer horizontal drilling. With fewer high-quality rigs readily available, drilling contractors are gaining greater bargaining power. This tightening supply-demand balance is expected to support higher service rates, longer contracts and stronger profit margins, creating a favorable environment for the industry's earnings growth.
High Equipment Costs and Supply Chain Constraints: The oil and gas drilling industry faces growing financial pressure as modern equipment becomes more expensive to deploy and maintain. Many older drilling rigs require substantial upgrades before they can meet the technical demands of deeper wells and longer horizontal drilling. Reactivating idle equipment also requires significant investment, making expansion less attractive without higher service rates or long-term contracts. Meanwhile, shortages of essential materials, transportation capacity and specialized equipment can delay operations and increase expenses. These challenges become more severe when customer demand rises faster than supporting infrastructure. Consequently, drilling contractors may struggle to expand capacity efficiently, potentially limiting profitability and future growth.
International Expansion and Growing Natural Gas Opportunities: Growing international drilling opportunities offer a promising avenue for the oil and gas drilling industry. Countries across Latin America and the Middle East are pursuing resource development, creating demand for drilling equipment and related services. At the same time, concerns over energy security are encouraging greater attention toward domestic production and reliable natural gas supplies. Rising global demand for liquefied natural gas also supports the longer-term outlook for gas-focused drilling projects. As exploration programs expand across different regions, drilling contractors can benefit from broader market opportunities, improved equipment utilization and additional revenue streams beyond their traditional domestic operations.
Zacks Industry Rank Indicates Bearish Outlook
The Zacks Oil and Gas - Drilling industry is a 10-stock group within the broader Zacks Oil - Energy sector. It currently carries a Zacks Industry Rank #196, which places it in the bottom 21% of 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates fairly challenging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group’s earnings growth potential. As a matter of fact, the industry’s earnings estimates for 2026 have gone down 46.7% in the past year.
Despite the dim near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Outperforms Sector & S&P 500
The Zacks Oil and Gas - Drilling industry has fared better than the broader Zacks Oil – Energy sector as well as the Zacks S&P 500 composite over the past year.
The industry has gone up 29.3% over this period compared with the broader sector’s increase of 20.3% and the S&P 500’s gain of 7.3%.
One-Year Price Performance
Industry's Current Valuation
Since oil and gas drilling companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) ratio. This is because the valuation metric takes into account not only equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses.
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at -25.30X, compared to the S&P 500’s 15.71X. Meanwhile, the sector’s trailing 12-month EV/EBITDA is currently 5.35X.
Over the past five years, the industry has traded as high as 25.50X, as low as -30.50X, with a median of 13.54X, as the chart below shows.
Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio (Past Five Years)
3 Oil and Gas - Drilling Stocks to Watch
Patterson-UTI Energy: Patterson-UTI Energy is an integrated oilfield services company with businesses covering drilling services, completion services and drilling products. Its offerings include Tier-1 super-spec rigs, directional drilling, hydraulic fracturing, wireline, cementing, natural gas fueling, drill bits and downhole tools. This broad portfolio allows the Zacks Rank #2 (Buy) company to serve customers across different stages of well development while generating cash flow from several business lines.
Patterson-UTI operates a fleet of premium drilling rigs and has substantial hydraulic fracturing capacity. The company is focused on upgrading its equipment with advanced digital, automation and AI technologies, while expanding the use of natural gas-powered systems. Its capital-allocation strategy prioritizes investments that improve returns and free cash flow per share, while maintaining a strong balance sheet.
Patterson-UTI has a market capitalization of $3.8 billion. Over the past 60 days, the Zacks Consensus Estimate for the firm’s 2026 bottom line has moved up 200%. PTEN stock hassurged 54.3% in a year.
Price and Consensus: PTEN
Nabors Industries: Nabors Industries provides drilling and technology solutions to the oil and gas industry, combining drilling operations with specialized services and rig technologies. Its business spans U.S. and international drilling, Nabors Drilling Solutions and Rig Technologies. The integrated model is designed to improve drilling performance, reliability and customer outcomes through automation, advanced equipment and technology.
International drilling is its largest revenue contributor, accounting for around 53% of the Zacks Rank #3 (Hold) company’s third-quarter 2026 revenues, followed by U.S. drilling at 32%. Nabors is selectively expanding internationally, particularly through its SANAD joint venture, while emphasizing operational efficiency in the U.S. Lower 48. Technology-led innovation and debt reduction also remain important priorities.
Nabors has a market capitalization of $1.1 billion. The Zacks Consensus Estimate for 2026 earnings for the firm indicates 68.4% growth. NBR stock has gained 48.6% in a year.
Price and Consensus: NBR
Helmerich & Payne: Helmerich & Payne is a drilling solutions provider serving customers across North America, international markets and offshore operations. Its portfolio includes North America Solutions, International Solutions and Offshore Solutions. The #3 Ranked company combines drilling rigs with technology aimed at improving efficiency and well performance. In the U.S. Lower 48, private-operator demand remains an important source of activity, while its FlexRobotics technology is being deployed on rigs in the Permian.
Internationally, H&P is expanding in Argentina’s Vaca Muerta, where multi-year contracts are set to increase its FlexRig count to 15. It also operates in Saudi Arabia, Bahrain and Australia. Offshore operations add further diversity, supported by long-term contracts and potential renewals.
The firm has a market capitalization of $3.5 billion. Over the past 60 days, the Zacks Consensus Estimate for Helmerich & Payne’s fiscal 2026 bottom line has moved up 19%. HP stock has gained 27.3% in a year.
View the Zacks #1 Rank List
Image: Bigstock
3 Oil & Gas Drilling Stocks With Potential Amid Industry Risks
The Zacks Oil and Gas - Drilling industry faces a challenging near-term outlook, weighed down by geopolitical tensions, rising equipment costs and supply chain disruptions. Its position in the bottom 20% of Zacks-ranked industries, coupled with downward earnings estimate revisions, reflects growing concerns about profitability. Drilling contractors also face substantial investment requirements to upgrade aging rigs and meet changing customer needs. However, improving drilling activity and tighter availability of advanced rigs are supporting stronger service pricing and longer contracts. International expansion, particularly in Latin America, offers additional growth opportunities, while rising natural gas demand supports long-term prospects. Nevertheless, operational uncertainties and high capital requirements warrant caution. Even so, Patterson-UTI Energy (PTEN - Free Report) , Nabors Industries (NBR - Free Report) and Helmerich & Payne (HP - Free Report) stand out as stocks worth considering for investors seeking exposure to the industry's long-term growth potential.
Industry Overview
The Zacks Oil and Gas - Drilling industry consists of companies that provide rigs (or specialized vehicles) on a contractual basis to explore and develop oil and gas. These operators offer drilling rigs (both land-based/onshore and offshore), equipment, services and workforce to exploration and production companies worldwide. Drilling for hydrocarbons is costly and technically difficult, and its future primarily depends on contracting activity and the total number of available rigs at a given time rather than the price of oil or gas. Within the industry, it's interesting to note that the volatility associated with offshore drilling companies is much higher than that of their onshore counterparts, and their share prices are more correlated to the price of oil. Overall, oil and natural gas drilling stocks are among the most volatile in the entire equity market.
4 Trends Defining the Oil and Gas - Drilling Industry's Future
Geopolitical Disruptions and Operational Uncertainty: Geopolitical tensions remain a significant concern for the oil and gas drilling industry, particularly in regions facing ongoing conflicts. Such disruptions can force operators to suspend drilling activities, postpone equipment deliveries and delay planned projects. Even when energy prices remain favorable, producers may hesitate to expand operations amid security concerns and uncertain operating conditions. Moreover, transportation difficulties, workforce safety requirements and rising logistical expenses can increase the cost of maintaining drilling operations. These challenges may reduce equipment utilization and interrupt revenue generation..
Improving Drilling Activity and Stronger Pricing Outlook: The outlook for the oil and gas drilling industry is improving as exploration and production companies gradually increase their drilling activities. Higher forward oil prices are encouraging producers to consider expanding operations, with further momentum expected in 2027. Meanwhile, demand for modern drilling rigs is rising, particularly for equipment capable of handling deeper wells and longer horizontal drilling. With fewer high-quality rigs readily available, drilling contractors are gaining greater bargaining power. This tightening supply-demand balance is expected to support higher service rates, longer contracts and stronger profit margins, creating a favorable environment for the industry's earnings growth.
High Equipment Costs and Supply Chain Constraints: The oil and gas drilling industry faces growing financial pressure as modern equipment becomes more expensive to deploy and maintain. Many older drilling rigs require substantial upgrades before they can meet the technical demands of deeper wells and longer horizontal drilling. Reactivating idle equipment also requires significant investment, making expansion less attractive without higher service rates or long-term contracts. Meanwhile, shortages of essential materials, transportation capacity and specialized equipment can delay operations and increase expenses. These challenges become more severe when customer demand rises faster than supporting infrastructure. Consequently, drilling contractors may struggle to expand capacity efficiently, potentially limiting profitability and future growth.
International Expansion and Growing Natural Gas Opportunities: Growing international drilling opportunities offer a promising avenue for the oil and gas drilling industry. Countries across Latin America and the Middle East are pursuing resource development, creating demand for drilling equipment and related services. At the same time, concerns over energy security are encouraging greater attention toward domestic production and reliable natural gas supplies. Rising global demand for liquefied natural gas also supports the longer-term outlook for gas-focused drilling projects. As exploration programs expand across different regions, drilling contractors can benefit from broader market opportunities, improved equipment utilization and additional revenue streams beyond their traditional domestic operations.
Zacks Industry Rank Indicates Bearish Outlook
The Zacks Oil and Gas - Drilling industry is a 10-stock group within the broader Zacks Oil - Energy sector. It currently carries a Zacks Industry Rank #196, which places it in the bottom 21% of 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates fairly challenging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group’s earnings growth potential. As a matter of fact, the industry’s earnings estimates for 2026 have gone down 46.7% in the past year.
Despite the dim near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Outperforms Sector & S&P 500
The Zacks Oil and Gas - Drilling industry has fared better than the broader Zacks Oil – Energy sector as well as the Zacks S&P 500 composite over the past year.
The industry has gone up 29.3% over this period compared with the broader sector’s increase of 20.3% and the S&P 500’s gain of 7.3%.
One-Year Price Performance
Industry's Current Valuation
Since oil and gas drilling companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) ratio. This is because the valuation metric takes into account not only equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses.
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at -25.30X, compared to the S&P 500’s 15.71X. Meanwhile, the sector’s trailing 12-month EV/EBITDA is currently 5.35X.
Over the past five years, the industry has traded as high as 25.50X, as low as -30.50X, with a median of 13.54X, as the chart below shows.
Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio (Past Five Years)
3 Oil and Gas - Drilling Stocks to Watch
Patterson-UTI Energy: Patterson-UTI Energy is an integrated oilfield services company with businesses covering drilling services, completion services and drilling products. Its offerings include Tier-1 super-spec rigs, directional drilling, hydraulic fracturing, wireline, cementing, natural gas fueling, drill bits and downhole tools. This broad portfolio allows the Zacks Rank #2 (Buy) company to serve customers across different stages of well development while generating cash flow from several business lines.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Patterson-UTI operates a fleet of premium drilling rigs and has substantial hydraulic fracturing capacity. The company is focused on upgrading its equipment with advanced digital, automation and AI technologies, while expanding the use of natural gas-powered systems. Its capital-allocation strategy prioritizes investments that improve returns and free cash flow per share, while maintaining a strong balance sheet.
Patterson-UTI has a market capitalization of $3.8 billion. Over the past 60 days, the Zacks Consensus Estimate for the firm’s 2026 bottom line has moved up 200%. PTEN stock hassurged 54.3% in a year.
Price and Consensus: PTEN
Nabors Industries: Nabors Industries provides drilling and technology solutions to the oil and gas industry, combining drilling operations with specialized services and rig technologies. Its business spans U.S. and international drilling, Nabors Drilling Solutions and Rig Technologies. The integrated model is designed to improve drilling performance, reliability and customer outcomes through automation, advanced equipment and technology.
International drilling is its largest revenue contributor, accounting for around 53% of the Zacks Rank #3 (Hold) company’s third-quarter 2026 revenues, followed by U.S. drilling at 32%. Nabors is selectively expanding internationally, particularly through its SANAD joint venture, while emphasizing operational efficiency in the U.S. Lower 48. Technology-led innovation and debt reduction also remain important priorities.
Nabors has a market capitalization of $1.1 billion. The Zacks Consensus Estimate for 2026 earnings for the firm indicates 68.4% growth. NBR stock has gained 48.6% in a year.
Price and Consensus: NBR
Helmerich & Payne: Helmerich & Payne is a drilling solutions provider serving customers across North America, international markets and offshore operations. Its portfolio includes North America Solutions, International Solutions and Offshore Solutions. The #3 Ranked company combines drilling rigs with technology aimed at improving efficiency and well performance. In the U.S. Lower 48, private-operator demand remains an important source of activity, while its FlexRobotics technology is being deployed on rigs in the Permian.
Internationally, H&P is expanding in Argentina’s Vaca Muerta, where multi-year contracts are set to increase its FlexRig count to 15. It also operates in Saudi Arabia, Bahrain and Australia. Offshore operations add further diversity, supported by long-term contracts and potential renewals.
The firm has a market capitalization of $3.5 billion. Over the past 60 days, the Zacks Consensus Estimate for Helmerich & Payne’s fiscal 2026 bottom line has moved up 19%. HP stock has gained 27.3% in a year.
Price and Consensus: HP