Sunday, October 20, 2013

Exterran: Why Am I Bullish On This Natural Gas Focused Energy Service Firm?

Exterran Holdings is a natural gas focused oilfield services firm with a positive long term outlook due to improvements in macro-economic environment, growth of fabrication business, strong compression numbers in North America and lucrative opportunities in the international compression market. 

Exterran Holdings (EXH) is a Houston, Texas based oilfield services firm which specializes in the natural gas sector, particularly natural gas compression technology. The company has a workforce of ~10,000 and has operations in more than 30 countries. Its clients include oil majors, state-owned enterprises and independent E&P firms. The business holds an equity and all the general partner interests in Exterran Partners (EXLP), which focuses on providing natural gas contract operation services in the United States. In this article, I will discuss the major operations of Exterran Holdings, its top and bottom line and its future prospects.

Exterran was formed in 2007 through a merger of Universal Compression, which started operations in 1954, and Hanover, which has been operating since the early 90s. The business is currently headed by Brad Childers, a former Occidental Petroleum (OXY) veteran, who serves as the President and CEO of Exterran Holdings and Exterran GP LLC. The latter is the managing general partner of Exterran Partners.

Macro Environment

The macro environment is looking better now than it was a year ago. Natural gas prices have fallen in the last four months ending August, but August-2013 prices are still up 20.7% from the same month last year.

Meanwhile, according to Energy Information Administration's estimates, the long-term outlook for shale gas and natural gas liquids is extremely bright. The markets are expecting a significant increase in shale gas production in the coming decades. Adding the expected increase in global drilling and production expenditure of 6% … read full article