For the past few years, I have primarily focused on the oil and gas producers as a way to play the energy trade, generally avoiding the services companies. One of the reasons for using this strategy is that part of the bull case for oil prices rests on the idea that shale wells deplete much faster than traditional ones and so overall supplies may be far more limited than most imagine. Furthermore, because so much of our domestic production is now dependent on shale, rapid depletion could mean that demand for oilfield services may have already peaked and now be in structural decline.
That said, among all of the insider buying in the energy space in recent months, some of the most compelling activity has been focused in the services space. It is critical to note, however, that these companies are not involved in providing services used in shale drilling; they are concentrated in offshore drilling services where well dynamics are more aligned with traditional characteristics. So this does nothing to contradict the bull thesis that rests on the idea that shale production could peak far sooner than most currently believe. In fact, it may validate it.
Because for offshore drilling to really take off in a way that would validate insiders’ optimism in the space, it may require a peak in shale production that would threaten the outlook for supply in a way that would make offshore appear to be a suitable replacement. Whether this is what insiders in the space are anticipating is still only conjecture at this point. Either way, the executives and directors at Helmerich & Payne (HP), Tidewater (TDW) and Noble (NE), specifically, appear to see an opportunity in their own shares at present which suggests there is likely opportunity that may be bigger than just a company-specific trade.
| Symbol | Owner | Relationship | Date | Cost | # Shares | Value ($) |
| HP | Foutch Randy A | Director | 18-Feb-25 | $26.25 | 3,800 | 99,750 |
| HP | Chariag Belgacem | Director | 10-Feb-25 | $27.08 | 37,356 | 1,011,600 |
| HP | LINDSAY JOHN W | PRESIDENT AND CEO | 10-Feb-25 | $27.55 | 20,000 | 551,000 |
| HP | Vann J Kevin | SENIOR VP AND CFO | 27-Sep-24 | $30.19 | 3,300 | 99,627 |
| Symbol | Owner | Relationship | Date | Cost | # Shares | Value ($) |
| TDW | ROBOTTI ROBERT | Director | 13-Mar-25 | $40.11 | 25,000 | 1,002,717 |
| TDW | ROBOTTI ROBERT | Director | 5-Mar-25 | $40.95 | 1,770 | 72,477 |
| TDW | ROBOTTI ROBERT | Director | 17-Dec-24 | $48.26 | 2,067 | 99,758 |
| TDW | Kneen Quintin | DIRECTOR, PRESIDENT & CEO | 13-Dec-24 | $48.06 | 41,615 | 1,999,921 |
| TDW | ROBOTTI ROBERT | Director | 13-Dec-24 | $47.59 | 17,147 | 815,985 |
| TDW | ROBOTTI ROBERT | Director | 16-Dec-24 | $47.47 | 4,000 | 189,888 |
| Symbol | Owner | Relationship | Date | Cost | # Shares | Value ($) |
| NE | Hirshberg Al J. | Director | 11-Mar-25 | $23.00 | 5,000 | 115,000 |
| NE | Hirshberg Al J. | Director | 11-Mar-25 | $23.00 | 5,000 | 115,000 |
| NE | SLEDGE CHARLES M | Director | 20-Feb-25 | $27.83 | 8,992 | 250,247 |
| NE | Barker Richard B. | EVP and CFO | 20-Feb-25 | $27.94 | 8,000 | 223,520 |
| NE | Eifler Robert W. | President & CEO | 20-Feb-25 | $27.85 | 12,568 | 350,019 |
Data via InsideArbitrage.com
There’s no disputing the fact that the energy space is deeply out-of-favor right now. As Deutsche Bank point out, investors haven’t been as underweight the sector as they are today since 2020, when the oil price briefly traded below $0. In fact, if you look at 36-month flows into XLE, investors have become far more bearish today than they were back then. That oil trades just under $70 and investors are more negative on the sector today than they were when it actually went negative is saying something. Moreover, the price strength in the face of these outflows suggests that it wouldn’t take much of a shift to see a major breakout to new highs here.
The offshore space, however, may be even more shunned than the broad energy sector. The only ETF I can find that focuses solely on the group (OFOS) has just $9 million in assets. To put this into some sort of perspective, the 2x Long NVDA ETF has $4.2 billion in assets currently, or almost 500x what currently sits in OFOS. Clearly, nobody has any interest, other than the insiders, in owning these things. And you can also see this sentiment extreme in the valuation of the shares of these companies which generally trade below 5-times EBITDA. This is a level only seen over the past decade in 2020 and in 2015, both times when the oil price had crashed.
From a technical perspective it is interesting to note that, while prices remain in a downtrend, long-term momentum in the Oil Service Sector Index broke out of a major bear trend back in 2021 and has been working off a monster overbought condition ever since. The price chart is poised to complete a new monthly DeMark buy setup next month right as it tests the 50% retracement of its post-Covid gains. This could mark the end of a three-year consolidation in the sector before a major breakout in price to the upside.
Turning to the weekly charts of the individual companies at hand, HP just completed a new weekly DeMark Combo buy signal this week, after completing a weekly DeMark Sequential buy signal a few weeks ago, which comes just as it tests horizontal support at the $24 level.
TDW is currently on a 12 count of 13 toward a weekly DeMark Combo buy signal of its own (and 11 of 13 toward a Sequential buy signal – not shown) as it tests support at the $40 level.
Finally, Noble recently completed both weekly DeMark Combo and Sequential buy signals just as it tests horizontal support at the $23 level.
So there are a number of technical signals suggesting that the corrective period of the past few years, which saw an extreme washout in investor sentiment that pushed valuations down to the bottom of their multi-year range, could soon be coming to an end. And if the primary bull market that began five years ago is now set to resume, we will look back at this recent cluster of insider purchases as an unusually clear premonition of that outcome on the part of those most well-positioned to see it coming well in advance.
