Nine Energy Service: A Play On A Drilling Resurgence

NINE is a late-cycle leverage play on activity rather than prices, so the real convexity comes if oil/gas strength persists long enough to pull rig counts, completions, and pressure-pumping pricing higher. That creates a favorable second-order setup: capacity discipline in service names can let margins expand faster than revenue, especially if basins recover unevenly and smaller operators need to re-activate idle programs. The market may still be underappreciating how quickly earnings can inflect when a highly levered contractor moves from underutilization to modest fleet tightness.

The key distinction is timing. Spot commodity strength can move the stock immediately, but the fundamental upgrade likely lags by 1-3 quarters because operators wait to lock budgets and service crews. That lag means the best entry is usually before the drilling data turns, not after; once activity accelerates, the multiple can compress even as earnings improve. The upside case is meaningful if NINE can convert a small earnings base into a much larger equity value, but that leverage cuts both ways if pricing fades or customers delay capital spending.

The contrarian risk is that the market may be extrapolating oil prices into drilling activity too linearly. North American producers have shown a willingness to prioritize cash returns and keep activity disciplined, which can cap service demand even in a favorable commodity backdrop. In that case, the trade becomes more about sentiment and balance-sheet optionality than durable earnings power, and the stock can give back gains quickly if crude rolls over or natural gas stays strong without a corresponding rig response.