Natural Gas Services Stocks: Ready to Rise? NGS, EXH, EXLP

2011-5-24

Natural Gas Services Group (NYSE: NGS) provides small to medium sized horsepower compression equipment to the natural gas industry – primarily to non-conventional natural gas producers (e.g. gas shale, coal bed methane and tight gas). For 1Q2011, NGS’s total revenue increased 30.3% from $11.6 million in 1Q2010 to $15.1 million thanks to an 165% increase in sales revenue and a 10% increase in rental revenue. In addition, NGS’s net income for 1Q2011 increased 83% to $2.5 million from $1.36 million back in 1Q2010. NGS’s CEO did note that he expects to see continued choppiness on a quarterly basis thanks to the sales nature of the business but he also expects overall the positive trends to continue. Natural Gas Services Group recently closed at $17.09 and has a 52 week trading range of $13.75 to $19.86 a share.
Exterran Holdings, Inc. (NYSE: EXH) provides a range of services and equipment to the oil and natural gas industries. Specifically, Exterran Holdings has a fleet of 10,433 natural gas compression units in North America and another fleet of 1,164 units for international operations. Exterran Holdings recently reported a net loss of $30.0 million or $0.48 per diluted share for the 1Q2011 – beating Wall Street estimates. In comparison, Exterran Holdings had a 4Q2010 loss of $118.0 million (or $1.90 per diluted share) but for the 1Q2010, it had $16.7 million (or $0.27 per diluted share) in net income. The CEO of Exterran Holdings did note that the company’s revenue has increased thanks to shale play developments in the USA and that EXH is well positioned to take advantage of infrastructure development opportunities around the world. Exterran Holdings recently closed at $20.29 and has a 52 week trading range of $19.66 to $29.96 a share.
Exterran Partners, L.P. (NASDAQ: EXLP) is a natural gas contract operations services provider for USA and international customers that is structured as a master limited partnership (MLP) – meaning no corporate income tax is paid as income passes through to investors. Near the end of 2009, EXLP acquired contract operations customer service agreements with 18 customers along with a fleet of approximately 900 compressor units from EXH – which also has an equity interest in EXLP. Being an master limited partnership, the main reason to invest in Exterran Partners would be for its juicy dividend – currently $1.91 for a 7.10% dividend yield. Combine a dividend yield like that with some growth in the underlying stock and you will be in investor heaven. Exterran Partners recently closed at $26.83 and has a 52 week trading range of $18.66 to $31.35 a share.

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