Shares of large-cap energy equipment maker National Oilwell Varco Inc. (NOV) fell almost 6% on the NYSE to touch a 52-week low of $58.18, on Jan 12. The decline followed a fresh crude price slump. Most importantly, the company’s shares plunged roughly 30% during the last six months.
What Led to the Share Price Decline?
The price of West Texas Intermediate (WTI) crude tumbled more than 57% since June last year. This is owing to plentiful supply of the commodity especially in the face of lackluster global demand.
Yesterday, WTI crude closed at $46.07 per barrel, the lowest mark since April 2009. Oil hit a new low after investment bank The Goldman Sachs Group Inc. (GS) reduced its three-month WTI forecast to $41 per barrel from $70 and Brent crude forecast to $42 per barrel from $80. Moreover, the investment management firm slashed full-year 2015 estimates for WTI and Brent to $47.15 and $50.40 from $73.75 and $83.75 respectively.
Société Générale, a French multinational banking and financial services company, also lowered 2015 WTI forecasts to $51 per barrel and Brent to $55 per barrel. This projection also contributed to the oil price slide.
This is indeed a hard time for all the energy equipment makers. In a weak crude pricing environment, drilling activities are bound to be low. This will get converted to reduced demand for equipment used in oil and gas drilling and production worldwide.
All these are reflected in the 52-week low share price of the company.
Zacks Rank & Stock Picks
Currently, National Oilwell carries a Zacks Rank #4 (Sell).
Better-ranked players in the energy sector include Seadrill Partners LLC (SDLP) and Enbridge Energy Management LLC (EEQ). Both stocks sport a Zacks Rank #1 (Strong Buy).
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