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Cactus (WHD) Joins Forces With National Energy in Middle East

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Cactus, Inc. (WHD - Free Report) recently announced that the company has made an agreement with National Energy Services Reunited Corp. (NESR - Free Report) to boost its presence in the Middle East and other locations. The agreement is expected to allow Cactus to deploy its frac rental equipment in the Middle East.

The agreement with National Energy Services, which has an immense presence in the Middle East and North Africa (MENA) regions, will likely boost Cactus’ scope of offering services to new clients in hydrocarbon-rich areas. The company has already shipped equipment in the Middle East this January, which is expected to have provided it with growth momentum starting from the beginning of the year.

The company is trying to utilize the model that it had used in the unconventional basins of the United States for clients in the MENA region. Its highly-engineered products, which can yield improved pad drilling and completion efficiencies, coupled with National Energy’s market reach in the region can generate incremental cash flows in the coming days. This is a prudent move by Cactus’ management, considering that its net cash from operations took a hit due to the COVID-19 pandemic. In first-half 2021, the metric came in at $43.2 million compared with $102.5 million in the year-ago period. Considering the company’s free cash flow situation, the metric decreased 37.6% in the trailing 12-month period.

Conservative spending by clients and weak North American drilling are hurting demand for its oilfield services. With decreased demand for equipment and services amid ample supply, product pricing has become highly competitive. As a result, there is limited room for equipment providers like Cactus to charge premium prices. Given such a condition, the company increasing its reach beyond domestic markets and diversifying revenue sources through a strategic deal can be viewed as a step in the right direction. The agreement to deploy its frac rental equipment can help the company boost revenues from the Rental business, which was responsible for generating 19% of total revenues in 2020.

Price Performance

The stock has gained 38.6% in the year-to-date period compared with 0.8% rise of the industry.

Zacks Investment Research
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Zacks Rank & Stocks to Consider

The company has a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space include Suburban Propane Partners, L.P. (SPH - Free Report) and Comstock Resources, Inc. (CRK - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Suburban Propane’s bottom line for 2021 is expected to rise 62.9% year over year.

The Zacks Consensus Estimate for Comstock Resources’ earnings for 2021 is pegged at $1.10 per share, signaling a major improvement from the year-ago figure of 23 cents.

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