The last few quarters have not been the easiest for energy services sector, as troubles in Mexico, lower activity in the Gulf, weather difficulties, and project delays have all led to lower demand and lower prices. Still, it was not as though the sector closed up shop, as many U.S. natural gas shale play are economical below the $4 natural gas price level.

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On a more positive note, it looks like the operating conditions may be about to turn. The earnings and commentary we have seen from the past week was supportive, and should give fundamentally-inclined investors a bit more evidence that the turn in the business is real.

A leading provider of premium jack-up rigs, Ensco (NYSE:ESV) posted a solid beat for the quarter ($1.11 versus $1.01), though revenue was down about 10% on a sequential basis. On a more positive note, the company pointed to high utilization in the deepwater business and rates appear to be moving up.

Weatherford's (NYSE:WFT) results were not quite so stellar, as the company missed the average estimate. Even still, the company has remained profitable and is still a leading player in equipment and services. Weatherford sees the engine for growth in the next year coming from overseas. In the case of Weatherford, that means the Eastern hemisphere (including a major project in Iraq) will be a key market as well.

Diamond Offshore
Diamond Offshore (NYSE:DO) had a solid earnings report relative to expectation, reporting earnings of $2.09 per share versus an average estimate of $1.93. While much of that beat was due to lower expenses, most of the attention was on the company's decision to cut its special dividend.

Diamond's decision to cut the dividend may actually be one of the most telling acts to come out of last week's reports. The company stated that they were going to conserve cash with an eye towards buying additional rigs. Diamond has been a relatively savvy operator in the past, and if the company is looking to buy rigs, investors can view that as a pretty meaningful sign that at least this company expects higher rate of return in the foreseeable future.

Schlumberger (NYSE:SLB) is undoubtedly the largest energy services company in the game today. So when this company's CEO talks about the energy markets, it is a good idea to listen.

CEO Andrew Gould referred a few times to an improving outlook for international demand. The demand for new deepwater rigs seems to be there, and these higher energy prices have renewed interest in projects around the world. At the bottom line, the company now believes that international margins have troughed. Gould is not known to be a giddy optimist or a tireless promoter, so his optimism is rather significant.

Like Schulmberger, Halliburton (NYSE:HAL) is a huge player in the energy services world and a relatively thorough barometer of the market. Here, the overseas business was weak, while the U.S. business was helped by activity in the natural gas market.

Looking ahead, the company does see more interest and activity in the liquids business (that is, oil). It would be fair to assume, then, that if oil keeps moving higher, Halliburton will continue to see stronger bidding in this sector.

The Bottom Line
The bottom line from last week's earnings reports seems to boil down to this - nothing is ever guaranteed in this business, but the indicators all seem to be pointing up for the energy services sector. It was not that long ago when oil was well above $120 a barrel, and as economic activity recovers, the price of energy will continue to rebound, and that will filter into the energy services sector.

If we can see deepwater rig rates back in the $400,000 per day (or higher) level, stocks like Diamond Offshore and Transocean (NYSE:RIG) should work. Likewise, so long as energy companies continue drilling wells and building fields, companies like Cameron (NYSE:CAM), Weatherford, Schlumberger and National Oilwell Varco (NYSE:NOV) should do well for their owners.

Just remember that this is a boom-bust industry, so the timid and risk-averse may want to look elsewhere. (Find out how to stay on top of data reports that could cause volatility in these markets. (Read Become An Oil And Gas Futures Detective for more information.)

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