Introduction
Oil services stocks could be entering a pivotal growth phase in 2025, aligning with the fourth stage of George Soros’ “boom and bust sequence model.” Bernstein analysts suggest that improving fundamentals, coupled with tempered investor expectations, create a compelling environment for equity returns in the sector. Let’s delve into this promising outlook and the key factors shaping it.
The Soros Model: Why Stage 4 Matters
Bernstein analysts led by Guillaume Delaby argue that oilfield services (OFS) stocks—particularly in Europe—are in the early stages of phase 4 of Soros’ model. Historically, this phase has been marked by:
Improving Economic Fundamentals: A strong recovery in exploration and production (E&P) activity.
Low Investor Expectations: Skepticism that lags behind the economic reality, creating a favorable risk-reward ratio.
This divergence has traditionally resulted in robust equity performance, a pattern Bernstein believes will extend into 2025.
2024 Performance Sets the Stage
The oil and gas sector in 2024 laid a solid foundation:
E&P Spending Growth: Up 5% to $600 billion.
Offshore Investments: Grew by 8%, reaching $250 billion.
Onshore Investments: Marginal growth of 1%, totaling $350 billion.
This backdrop supports modest spending growth in 2025, forecasted at 1-2%, bringing total capex to approximately $610 billion. Offshore spending is projected to rise by 3-4%, while onshore investments remain flat.
Subsea: The Most Attractive Segment
Bernstein analysts highlight subsea as the standout subsector within OFS due to:
Long-Term Demand Visibility: Driven by the energy transition and global energy security.
Oligopolistic Market Structure: Limited competition enhances pricing power.
Capacity Constraints: A shortage of available vessels supports favorable margins.
These factors position subsea services for sustained growth, with the potential for upside surprises in late 2025 or early 2026 as gas and LNG projects ramp up.
Regional Highlights: Europe vs. North America
European OFS Stocks: Poised for stronger performance, benefiting from the favorable phase 4 dynamics.
North American Stocks: Outlook remains less certain, reflecting weaker market dynamics and investment sentiment.
Key Drivers for Oil Services Stocks in 2025
Offshore Spending Momentum
Projected to grow by 3-4% in 2025, reaching $260 billion.
Supported by continued exploration in deepwater regions.
Gas and LNG Projects
Late 2025 could see an uptick in LNG and gas-related investments.
Middle East Capex Expansion
Increased capital expenditures expected over 2026-2027, with potential spillover effects starting in late 2025.
Investment Implications
Investors should closely monitor:
Subsea Market Leaders: Companies with strong positions in this segment stand to benefit from the visible demand and constrained supply.
European OFS Stocks: Positioned for stronger returns relative to North American peers.
For financial metrics and in-depth analysis, the Financial Growth API and Key Metrics (TTM) API provide valuable insights into company performance and sector trends.
Conclusion
The oilfield services sector is entering a promising phase in 2025, supported by improving fundamentals and lagging investor expectations. With offshore spending poised for growth and subsea services leading the charge, European OFS stocks are positioned for robust performance. While North America’s outlook remains uncertain, the broader sector appears to be on the cusp of significant opportunities.
Investors should stay informed and agile as market conditions evolve, leveraging data-driven insights to make strategic decisions.
