With West Texas Intermediate teasing $40 per barrel (bbl) once more, significant volatility is being reintroduced to more than just E&Ps through the midway point of 2017, namely in the oil and gas service sector as well.

As the turn of 2017 brought positive change in oil prices (up to near $50/bbl), many service companies saw the light at the end of the tunnel as a sign that they could lift some of the heavy discounts many operators were taking advantage of during the supply glut. However, these bullish possibilities are now at risk once more, as shale production from the Lower 48 continues to grow through first-half 2017.

The top three service companies, Schlumberger Ltd., Halliburton Co., and Baker Hughes Inc., have all been working to gain better positioning within the market, and the following content details each company to help gauge the health of the service sector and what can be expected in the near term.

Schlumberger has long been considered the frontrunner within oilfield services. As seen in the chart below, the company’s market cap far exceeds that of its competitors, which allows for its increased funding to R&D and cutting-edge subsurface technology.

The company has made major strides in D&C modeling in recent months with its integrated OneDrill and OneStim drilling and completion systems, utilizing machine learning and technical expertise to model the well development process.

Halliburton also posted favorable earnings in the first quarter, reporting a net income of $203 million over the period. The company’s bread and butter has long been in its fracturing and acidizing services, which has recently led to improved pressure pumping prices and utilization in the Lower 48 market. Conversely, the company has seen lower revenue from its drilling and evaluation services, due largely to lower software sales across all regions and lower pricing and fluid sales in the Middle East.

Halliburton has also been busy developing subsurface technology, with its FracInsight Service, which utilizes well logs, LWD data and geological properties, to allow customers to customize perforation clusters and frack stage locations to optimize production and minimize costs. Look for Halliburton to continue to focus on unconventionals in the Lower 48 moving forward in 2017.

While the latest earnings release indicates that Baker Hughes continued to incur losses through first-quarter 2017, the company is looking to hedge its market position with the pending merger with GE Oil & Gas, which is expected to close within the next one to two months. The two companies believe that the integration of Baker Hughes’ oilfield technology with GE’s big data capabilities will make them considerably more competitive with the other major service companies. Even though predictive analytics is already prevalent within the oilfield, Baker Hughes and GE could bolster its use in offshore drilling and for wellbore development, two areas where each company has relatively high exposure.

Though the pecking order hasn’t shifted significantly within the service sector, each of the big three are making strategic moves to differentiate their products and services and remain relevant in the ever-evolving oil industry.

The next several months should be very interesting, as the industry response to the Baker Hughes-GE merger unfolds and potentially shakes up the current status quo of energy services.

The state of flux will also likely continue, as recent increases in production and activity remain at war with volatile commodity prices, making it difficult to raise service prices in the long term.

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