3 Stocks Hitting Gold in the Digital Oilfield

Big Data has come to the oil patch, and these three stocks are the ways to play it

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3 Stocks Hitting Gold in the Digital Oilfield

Rockwell Automation

When people think of Rockwell Automation (ROK), the oil and gas industry doesn’t usually come to mind. That’s because the firm is one of the largest producers of equipment and software for the textile and food & beverage industries. However, ROK is quickly becoming a force in the energy sector.

Through its acquisition of vMonitor, Rockwell has become one of the leading purveyors of digital oilfield technology — in both data management and remote sensing. By using ROK’s products, well operators can improve efficiency and reduce costs by as much as 20%. That’s a huge number, which can mean the difference between failure and profitability. Needless to say, the E&P industry is flocking to ROK’s vMonitor in spades.

Rockwell estimates that its digital oilfield solutions will add about $100 million to its sales in a little less than two years. With the shale and deepwater boom not stopping, ROK expects that division to be one of its largest in the long term. Meanwhile, ROK stock is still pretty cheap at a forward P/E of 16.

Baker Hughes

While Halliburton (HAL) and Schlumberger (SLB) are the kings of the frackers, oil service firm Baker Hughes (BHI) has quickly gained the digital oilfield crown.

The creator of the digital oilfield moniker, BHI offers one of the largest ranges of products designed to improve efficiency at hydraulically fracked wells. These include its WellLink suite of software and well watching devices in addition to its BEACON remote monitoring platform. The platform allows E&P firms to centralize their entire operations from a single control room miles away from their actual wells and make real-time decisions based on data mining.

All in all, its expertise in digitizing the oilfield could give Baker Hughes a long-term leg up on its main rivals, HAL and SLB. BHI shares currently trade for a forward P/E of 12.5. But that amount doesn’t truly take into account the digital oilfields potential on BHI’s future bottom line.

Cisco Systems

That’s right, Cisco Systems (CSCO). I know this may be a stretch for some investors, but the tech stalwart is becoming a huge player in data management and wireless networking solutions for the modern oil field.

CSCO’s First Mile Wireless for Drilling (FMWD) solution is becoming the standard IP protocol at many wells, allowing for communication between field and office workers as well as full automation of well activities. Cisco also provides a whole suite of security software for drilling rigs.

Providing this huge necessity — creating the required wireless network that all of this data flows on — ultimately will be an enormous win for CSCO shareholders in the future. While oilfield services are still a small part of overall business mix, the growth in energy production around the world could be a nice new source of revenues for the company — something CSCO certainly needs help with after its latest earnings report.

With a 3.2% dividend yield and a cheap valuation, CSCO could be one of the secret stars in the oil patch.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities. 


Article printed from InvestorPlace Media, http://investorplace.com/2013/12/rok-csco-bhi-digital-oilfield/.

©2014 InvestorPlace Media, LLC

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