Thus far, about 80 percent of S&P 500 companies which have reported second-quarter results have beaten consensus earnings expectations. Roughly 69 percent of these firms announced revenue that trumped analysts’ average estimate.

A little over half the energy companies in the S&P 500 have also released results, with about two-thirds beating expectations. Although that’s slightly worse than the S&P 500 as a whole, investors should remember that rising crude oil prices had heightened expectations for the group heading into earnings season.

But understanding a company’s quarterly results involves much more than comparing the headline numbers to consensus expectations. Earnings conference calls and the Q-and-A sessions that follow are a veritable treasure trove of profitable information. As subscribers to The Energy Strategist can attest, I always pay particular attention to quarterly earnings and conference calls from the Big Four oil-services companies: Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL), Baker Hughes (NYSE: BHI) and Weatherford International (NYSE: WFT).

These services giants perform a long list of functions related to crude oil and natural gas exploration, field development and production. These services include fracturing wells to produce oil and gas from unconventional shale fields, performing seismic shoots to explore for oil or gas, and managing pressures in underground fields during the drilling process.

Customers range from Super Oil ExxonMobil Corp (NYSE: XOM) to smaller independent operators and privately held producers. This gives services firms an unparalleled bird’s eye view of key trends in the industry and makes their quarterly conference calls mandatory listening for investors.

The oil-services business appears to have hit a long-awaited inflection point in the first half of 2011.For much of the past 18 months, North American drilling activity has remained robust, while profits from international operations have lagged. However, this quarter brought signs that business conditions have improved in international markets–a huge tailwind for these companies.

Expect these stocks to handily outperform the market in coming months. Barring another global economic downturn–a remote possibility–the Philadelphia Oil Services Index could enjoy a run-up similar to the 150 percent gain that the group posted between 2004 and 2007. Over that three-year period, oil-services stocks outperformed the S&P 500 by a more than 5-to-1 margin. Even better, trends identified by the Big Four oil-services firms should be a boon for certain smaller, niche players.

I’ll analyze the Big Four’s second-quarter results and emerging trends in great depth in next week’s issue of The Energy Strategist. I’ll also examine a handful of smaller firms that should benefit from these tailwinds. To whet your appetite, here’s a preview of three trends that caught my eye.

Takeaway No. 1: Seismic Market Has Turned

Seismic services use sound and pressure waves to map subsea rock formations that likely hold oil or natural gas. The use of advanced three-dimensional seismic data has been crucial to the discovery and development of many deepwater fields such as those in the Gulf of Guinea off the coast of West Africa that I profiled in Africa: Oil and Gas Powerhouse.

Seismic services fall into two basic categories: multi-client and contract work. Services firms market some databases of seismic information to multiple clients. For example, if a producer is interested in bidding on a deepwater block in the Gulf of Mexico, it would order seismic data on that block to determine whether and how much it should bid. Producers also use the data to pinpoint prospective areas for test drilling.

Sometimes seismic firms shoot multi-client seismic surveys on a speculative basis, marketing the data to producers after the fact. More often, seismic-services firms secure deals to sell the data to at least a few clients to offset the cost of acquiring this information and make up the balance afterward. In strong markets, an operator oftentimes can pre-fund more than 100 percent of the acquisition cost, guaranteeing a profit.

Increased spending on multi-client projects and rising levels of pre-funding are bullish indicators for providers of geophysical services.

In a contract situation, the service provider shoots a seismic survey at the request of a single operator or group of clients, charging a fee for each square mile or kilometer. Rates vary depending on the type of ship and technology used to acquire the data. After leasing acreage, exploration and production firms usually order detailed seismic data to delineate the most promising drilling prospects.

Schlumberger’s WesternGeco division is one of the world’s leading providers of seismic services. This business line has posted weak results over the past two years. In the initial stages of an up-cycle, producers tend to invest heavily in their existing fields; squeezing more oil from established plays is akin to picking low-hanging fruit. Meanwhile, an oversupply of  seismic vessels built during the 2003-08 bull market for energy commodities led to cutthroat competition and depressed prices in the aftermath of the global recession and financial crisis.

But the cycle has turned. Convinced that oil prices will support long-term investment, efforts to identify and develop new fields have picked up steam. Schlumberger noted broad-based improvement in its sales of multi-client seismic work, though management highlighted strong demand trends in the US Gulf of Mexico, Australia, the North Sea and West Africa–a sure sign that producers plan to do more exploration work in these markets.

Schlumberger also noted that capacity constraints have given seismic service providers pricing power, suggesting that demand has finally caught up to the supply. This bodes well for Schlumberger, but it’s even better news for shares of Gushers Portfolio holding Petroleum Geo-Services (Oslo: PGS, OTC: PGSVY), a pure play on rising demand for seismic services. The Norwegian coimpany posted blowout second quarter results and is poised for further upside. Petroleum Geo-Services’s American depositary receipt continues to rate a buy under USD17.50.

Takeaway No. 2: International Pricing Power is Back

Capacity constraints for key services have enabled the Big Four to push through price increases in North America. Robust drilling activity in liquids-rich shale plays such as the Bakken Shale of North Dakota and the Eagle Ford Shale of south Texas have strained the industry’s ability to provide pressure pumping and other essential services. In recent quarters, strong demand and higher prices in North America have driven margin improvements and earnings growth in recent quarters.

But the international market appears to have turned the corner in the second quarter. For example, Weatherford International’s CEO Bernard Duroc-Danner indicated in his prepared remarks that business in Latin America and the Eastern Hemisphere (The Middle East, Europe, Africa and Asia) has strengthened considerably. These improvements prompted management to raise its guidance for 2011 revenue growth.

Schlumberger’s CEO Andrew Gould noted that activity and demand continue to tick higher in the Eastern Hemisphere, enabling the firm to raise prices on some of its new international contracts. Since 2009, excess capacity in international markets has foreclosed the possibility of any price hikes. Management expressed confidence that this pricing power would continue into the second half of the year.

Takeaway No. 3: IEA Release of Oil Reserves Shows Panic about Supply

In June, the International Energy Agency (IEA) announced its members would release a total of 60 million barrels of oil per day from government stockpiles over a one-month period. I covered this curious move at some length in Oil and the Strategic Petroleum Reserve: Prices are Headed Higher.

During Schlumberger’s conference call to discuss second-quarter results, an analyst asked Gould about the implications of the IEA’s move. Gould’s response echoes my assessment:

I think it was a meaningless exercise. I heard some really strange explanations as to why it was actually done. But the underlying signal that went to everybody was that the developed nations are worried about the availability of supply long term. And to think that quantity of product could really make a difference to the oil price I think was very–a little bit of a panicky move.

Far too many journalists and analysts continue to focus on the weekly oil inventory data from the US Energy Information Administration (EIA) and how much oil developed countries have stored in commercial inventories. Others attribute the uptrend in oil prices to speculators and other scapegoats. If oil prices hinged solely on the amount of crude in storage, the influx of 2 million barrels per day might alleviate the problem.

But rising oil demand in emerging markets and the challenges producers face in producing enough oil to meet that demand are the real culprits. In their struggle to develop new sources of oil, companies are pursuing complex, expensive-to-produce plays in deepwater fields and Canada’s oil sands.

Ironically, the IEA’s move shows that developed countries are concerned about a potential shortfall in oil supply and a consequent spike in prices.  The market has received the message loud and clear: Depending on which benchmark you follow, oil prices are up 5 to 10 percent since the IEA announced this release.

Wildcatters Portfolio

Cameron International (NYSE: CAM)–07/28/2011
Dresser-Rand Group (NYSE: DRC)–07/28/2011
Eagle Rock Energy Partners LP (NSDQ: EROC)–08/04/2011
EOG Resources (NYSE: EOG)–08/05/2011
Linn Energy LLC (NSDQ: LINE)–07/29/2011
Nordic American Tanker Shipping (NYSE: NAT)–08/08/2011
Petrobras (NYSE: PBR A)–08/12/2011
Suncor Energy (NYSE: SU)—07/28/2011
World Fuel Services Corp (NYSE: INT)–08/03/2011

Proven Reserves Portfolio

Chevron (NYSE: CVX)–07/29/2011
Eni (NYSE: E)–07/28/2011
Natural Resource Partners LP (NYSE: NRP)–08/03/2011
NuStar Energy LP (NYSE: NS)–07/29/2011
Teekay LNG Partners LP (NYSE: TGP)–08/11/2011

Gushers Portfolio

Afren (LSE: AFR)–08/08/2011
Joy Global (NSDQ: JOYG)–09/01/2011
Knightsbridge Tankers (NSDQ: VLCCF)–08/12/2011
MacMahon Holdings (ASX: MAH, OTC: MCHHF)–08/17/2011
Oasis Petroleum (NYSE: OAS)–08/11/2011
Oil Search (ASX: OSH)–08/23/2011
Petrohawk Energy (NYSE: HK)–08/02/2011
Petroleum Geo-Services (Oslo: PGS, OTC: PGSVY)–07/28/2011
Seadrill (NYSE: SDRL)–08/31/2011
Spirit AeroSystems (NYSE: SPR)–08/02/2011
Tenaris (NYSE: TS)–08/04/2011

Are You Going to San Francisco?

I’m thrilled to be returning to San Francisco this year and invites you to join him at The MoneyShow, August 10-12, 2011, at the San Francisco Marriott Marquis Hotel. Be there as recommendations and advice are revealed for how to best position your portfolio for profit–in 2011 and beyond. As this new era of investing unfolds, smart investors know it’s imperative to stay informed and educated. The MoneyShow is your one-stop resource for the most comprehensive education, efficient research, and valuable advice. Don’t miss out…register FREE today and be sure to mention Priority code 022447!