National Energy Services Reunited Corp. (NESR Quick QuoteNESR - Free Report) and Par Pacific Holdings (PARR Quick QuotePARR - Free Report) are two energy-sector players with contrasting business operations. NESR is an oilfield services provider operating in the Middle East and North Africa. The company derives a major part of its revenues from the Production Services segment, which provides services including hydraulic fracturing, coiled tubing, stimulation and pumping, and artificial lift services, among others. It also offers drilling and evaluation services, including tubular running services, directional drilling, wireline logging, pressure control and related services.

On the other hand, Par Pacific operates an integrated downstream energy business across the United States, with fuel retail operations in Hawaii, Washington and Idaho; refining operations in Hawaii, Wyoming, Washington and Montana; a cumulative refining capacity of 219,000 barrels per day; and a supporting logistics network.

Over the past year, NESR shares have rallied 218.7%, outperforming PARR’s 112.3% gain. Price performance alone does not fully indicate a stock’s attractiveness or strength, as it primarily reflects investor sentiment across market cycles. Hence, it is necessary to assess the fundamentals and broader operating environment of both stocks before arriving at an investment decision.

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NESR’s 3B3 Strategy and Jafurah Operations Offer Growth Potential

National Energy Services’ operations are mainly concentrated in the Middle East, including Saudi Arabia, Oman, Kuwait, Algeria and the United Arab Emirates (UAE). NESR highlighted its 3B3 corporate strategy in its latest earnings call, which consists of three key pillars aimed at achieving a $3 billion revenue run rate within three years. The first pillar is fueling the contract funnel. As a leading frac company in the Middle East, NESR’s scale provides it with the agility to easily deploy equipment and personnel across the region and enhance supply chain efficiency.

NESR’s scale, visibility and successful track record should enable it to bid for larger contracts across various service lines, increasing its project backlog and moving toward its $3 billion revenue target. The second pillar is expanding its geographical footprint by either establishing its presence in new markets or expanding its smaller existing operations in the Middle East. The third pillar involves commercializing its technology portfolio, particularly the NESR Environmental and Decarbonization Applications, which emphasizes decarbonization and water and mineral recovery, and ROYA, which is focused on advanced drilling technologies.

In addition, the Jafurah unconventional gas development has been identified as a major growth catalyst for NESR’s business. The Jafurah project is one of the world’s largest unconventional developments and requires multi-well pads and multi-stage hydraulic fracturing. This contrasts with the single-well, single-frac operations seen in conventional projects across the Middle East. Management said the ramp-up of Jafurah was a significant contributor to NESR’s second-quarter revenue growth. The project is also helping NESR build unconventional expertise that can potentially be replicated across other Middle Eastern markets. However, geopolitical risks remain a concern, as NESR’s operations are concentrated in the Middle East and North Africa.

Refining Strength Fuels PARR’s Growth

The outlook for Par Pacific’s refining business remains constructive in the third quarter, supported by constrained refining capacity and elevated crack spreads. In fact, its combined market refining index was $31.34 per barrel at the beginning of the third quarter, slightly lower than $33 in the second quarter. Refining market conditions have tightened further since the beginning of the conflict in the Middle East, primarily due to damage to Russian refining facilities and lower Chinese exports. These factors have kept refined product inventories low, thereby supporting refining fundamentals.  

Elevated refining margins are expected to persist, as inventory normalization and the recovery of damaged refining infrastructure are expected to take time. These factors are anticipated to support refining margins in the upcoming quarters, thereby aiding PARR’s refining profits. Additionally, PARR’s retail and logistics businesses provide additional sources of earnings and cash flow, helping diversify the company’s earnings base. The commercial flexibility of its integrated downstream network enables the company to capitalize on favorable market conditions and support profitability. However, refining remains a cyclical industry, and margins may weaken significantly as market conditions normalize.

Image Source: Par Pacific Holdings

Valuation Snapshot

Considering the valuation snapshot, it has become evident that NESR is currently trading at a premium compared with Par Pacific. This is reflected in the fact that NESR trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.84X, higher than 3.33X for PARR.

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NESR vs PARR: Final Verdict

NESR and PARR have contrasting business models, resulting in different strengths and risk profiles. National Energy Services' 3B3 strategy, innovative technology portfolio and increasing activity at Saudi Arabia’s Jafurah gas development position it for significant growth in the upcoming years. Meanwhile, PARR is positioned to benefit from elevated refining margins due to constrained refining capacity and low refined-product inventories globally and is currently trading at a lower valuation than NESR.

Overall, National Energy Services Reunited currently emerges as the more compelling investment between the two stocks, with a strong growth runway and expanding technology portfolio. NESR currently sports a Zacks Rank #1 (Strong Buy), while PARR carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.