Equipment Makers Profiting More From Oil Prices Than Producers

Oil prices above $90 a barrel are doing more for shareholders of Cameron International and Baker Hughes than Exxon Mobil and Chevron. A lot more.

Exxon, the world’s largest oil company; Chevron, the second-biggest in the United States; and the rest of the industry are struggling to increase production and profits because the most promising new fields are miles beneath the ocean. Their difficulties are making Houston-based Cameron and Baker Hughes richer, since they provide the valves, pumps and fluids needed to extract crude from the waters off Brazil to the Arctic Ocean.


Producers will spend a record $369 billion on energy projects next year, 11 percent more than in 2007, Lehman Brothers Holdings estimated on Dec. 7. Services and equipment companies will return 22 percent in the next 12 months, double the gains of the oil companies, according to Sanford C. Bernstein & Co. forecasts.

Equipment makers are “a better place to be than the integrated oil companies because they’re still a growth industry,” said Cato Brahde, a portfolio manager at the British hedge fund Tufton Oceanic. They’re in a “long-term sweet spot,” he said. Tufton’s $1.2 billion hedge fund is up 22 percent this year.

Washington Post