Hope (for Oil) Springs Eternal

Oil Services companies are driven by the capital expenditure portion of the oil business, meaning that the revenues of these companies are received from the capital expenditures made by international and nationally-owned oil companies to discover and develop oil. Because I have an aversion to companies with high capital expenditures, lovingly termed "capital pigs," I have never been willing to invest in the Oil Services business. Yet, the cyclical financial strength (as measured by margin of profit and return on capital) of some of these companies has repeatedly peaked my interest. A graph from a Deutsche Bank publication shows that despite heavy participation in Oil Services by both U.S. and European companies, the U.S. market capitalization is four times as great: The publication states that the underlying factor is that U.S. Oil Services companies have margins of 30-50%, while European Oil Services companies have margins of 6%. This is surprising. The publication attributes this sizeable difference to U.S. Oil Services companies being focused "below the mudline (land or seabed)," while European Oil Services companies being focused "above the mudline." If so, there must be a principle operating here of something like "hope (or oil) springs eternal," meaning that the oil companies are willing to pay more for what is unseen and hoped, than for what is seen and known.