“Lower oil prices may reduce the amount of cash returned to E&P shareholders but this is where the complaint of OFS stocks not keeping pace with oil prices provides an opportunity,” said Wicklund in a note cited by Barron’s.

OIH tracks the 25 largest oil services companies in the space. Both XES and IEZ track a slightly broader 37 components, but XES follows a more equal-weight indexing methodology that favors midsized companies while IEZ reflects a traditional market cap-weighted indexing methodology. Lastly, PXJ follows a fundamentally weighted index, which selects stocks based on price momentum, earnings momentum, quality, management action, and value.

“While the retreat in oil prices from four-year highs has reduced the outlook for deepwater stocks–not surprisingly, given the expense of extracting crude from the bottom of the ocean–Wicklund argues that E&P companies’ conservative budgets means that onshore and shallow water activity wont’ be hurt, and ‘the recovery is well underway,’” reports Barron’s

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