A hot topic for energy production, hydraulic fracturing, or fracking, extracts oil and gas by injecting high-pressure fluids underground. For the U.S. this has boosted domestic energy production potential but has also sparked environmentalist concerns. As such, the proliferation of the energy extraction method has become a divisive political issue. Under the Trump administration, fracking had a heyday, but from day one, the Biden administration reversed this. With a potential change of president this November, investors should watch these three shale stocks to buy before the 2024 election,
Though some regions ban fracking due to environmental concerns, a broad federal attitude towards the practice can change everything. Thus, the industry’s future hinges on governmental priorities regarding energy prices, regulation and general public opinion. Though some technological advances may address environmental issues, resource extraction in the U.S. always comes down to political will.
Baker Hughes (BKR)
A prominent American specialist in oilfield services and equipment, Baker Hughes (NASDAQ:BKR) caters directly to the oil and gas industry. The company’s core offerings encompass a broad oilfield services portfolio. Chief among its more profitable products are its equipment and digital technologies aimed at enhancing operational efficiency and safety.
This approach has positioned Baker Hughes as one of the more sustainability-focused contributors to the fracking industry. One example of BKR’s efficiency use of modular gas processing to capture well exhaust gas rather than flaring it. This enables it as a highly efficient power source for the extraction system. By building this reputation now, BKR is positioning itself well should government regulation on fracking shift.
Furthermore, the company remains financially robust even in a fracking cooldown. It has been able to consistently report strong revenue growth thanks to its astute relationship management with industry customers.
Halliburton (HAL)
Perhaps the most controversial on this list, Halliburton (NYSE:HAL) remains a key player in the fracking industry. The company boasts extensive technological expertise dating back to the 1940s when it originally patented the technology. By offering essentially every type of fracking service, from pressure pumps to fluid design, HAL has the most to gain from a change in government.
The company is no stranger to controversial government relationships, thanks to the “Halliburton Loophole.” This lobbying exception exempted fracking fluids from regulation, which has further spurred environmentalists against the industry. Regardless, HAL’s dominance in the sector primes it to profit should a new administration loosen the reigns on fracking.
HAL regularly beats earnings per share predictions and ended Q4 FY2023 with a revenue of $5.7 billion and an operating margin of 18%. For investors looking for generous profits in the event of a new U.S. president, Halliburton could be the answer.
Patterson-UTI Energy (PTEN)
Over the years, through various mergers, Patterson-UTI Energy (NASDAQ:PTEN) has become a significant contributor to the oilfield services industry. One of its more profitable sections provides products and services for supporting hydraulic fracturing operations. The company also manages well completion, which provides post-fracking tasks like hydraulic pumping and nitrogen services to optimize well production.
Thus, PTEN positions itself as a comprehensive solution provider for the entire well lifecycle, making the company indispensable to its industry. This has led to robust financial performance for the company in recent years. With a market cap of $4.87 billion and a price-to-earnings ratio of 13.55, PTEN stock seems perfectly priced. With a current 2.68% dividend yield, PTEN is likely to keep growing in the event of eased fracking regulations.
Investors should keep an eye on PTEN simply because it offers so many facets to the fracking industry. This diversification keeps the company’ stable amidst the volatile nature of resource extraction, making it one of the shale stocks to buy before the 2024 election.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
