Head for Houston to Power Up Your Portfolio

If you've been to Houston recently, the mere mention of the city probably conjures up images of urban sprawl the size of Rhode Island and traffic that's reminiscent of either an inchworm convention or a NASCAR rerun, depending on the time of day. And then, of course, there's that world-class humidity. But despite those characteristics, the city also likely constitutes the world's only urban area that houses enough solid companies for Fools to gather up a promising portfolio without leaving its environs.

Teeming with energy
Since Houston is the unquestioned mecca of energy, I'm clearly displaying a bias. Indeed, while both of the two largest U.S.-based international oil companies are technically headquartered elsewhere, each has a massive presence in and around the city. ExxonMobil (NYS: XOM) technically is based in Irving, Texas, near Dallas, but the company has embarked upon a massive campus construction in the Woodlands, north of Houston. Once completed, the spread will be the workday home of 10,000 Exxon employees.

That's a similar number to the Houston complement of California-based Chevron (NYS: CVX) . And the 50-story One Shell Plaza skyscraper has graced the Houston skyline for more than 40 years, serving as headquarters for Royal Dutch Shell's (NYS: RDS.B) 22,000 U.S. employees.

But even if you stick to those companies that are actually headquartered in the Bayou City, you'll enjoy a sumptuous investment repast. Let's begin with one of my favorites -- and that of many other Fools, judging from its five-star CAPS rating -- National Oilwell Varco (NYS: NOV) . With our clearly long-lasting demand for fossil fuels -- and since technological advancements continue to become increasingly important to the satisfaction of that demand -- Varco stands to be a winner.

Rigging up the world's energy
If you're at all prone to cast some of your pesos in the direction of energy companies, you probably recognize that National Oilwell Varco is a rapidly expanding provider of systems and components -- up to and including full-scale rigs -- used in drilling for oil and gas, both on land and offshore. In addition to rig structures, the company's list of wares includes derricks, pipe-handling equipment, instrumentation systems, and coiled tubing equipment, among other products. In addition, the company sells and rents a range of tubular goods -- "energyese" for drill pipe and casing -- drilling motors and bits.

I could go on enumerating Varco's range of offerings, but you get the picture: If you're going to drill a well, either in the U.S. or overseas, you'll almost certainly do business with National Oilwell Varco or one of its competitors, such as Cameron International (NYS: CAM) . In addition to drilling in progressively deeper waters and undertaking onshore techniques that increasingly resemble rocket science for their sophistication, the geographic spread of the search for oil and gas is materially benefiting Varco, et al.

Driving drilling's global spread
It wasn't really very long ago that oil and gas drilling was largely limited to onshore North America, the Gulf of Mexico shelf, the North Sea, the nations that today constitute OPEC, and a few other locations. Now, however, rigs are being employed in Europe and China in an effort to duplicate the unconventional natural gas explosion in the U.S.

Offshore operations have moved into thousands of feet of water, in such relatively newly fertile areas as Brazil, offshore Africa, and the deepwater Gulf of Mexico. In addition, preparations are being made for adventurous expansion into the challenging waters off Alaska, the Russian Arctic, and the South China Sea, among a host of additional likely locations.

A key result for National Oilwell Varco has been spectacular growth that is unlikely to abate anytime soon. For instance, in the past quarter alone, the company shelled out $2 million for a half-dozen acquisitions, three of which were Canada-based. Those additions, coupled with the sort of organic expansion you'd expect for Varco from the global energy spread, led to an order backlog on June 30 that was nearly half-again larger than that of the same date in 2011.

Perhaps even more encouraging was a pair of directions included on the order sheet: Fully 86% were tilted to the offshore, while most -- 92% -- were destined for overseas markets. Those balances should assuage any concerns investors might have about ongoing softness in the North American natural gas markets.

The Foolish bottom line
There's a bevy of other Houston-based energy companies worth your time and attention. I'll be focusing on several in the days and weeks to come. But for now, National Oilwell Varco appears to be the leader of the pack. Why not keep close tabs on this fast-moving company by simply adding it to My Watchlist?

The article Head for Houston to Power Up Your Portfolio originally appeared on Fool.com.

Fool contributor David Lee Smith doesn't own shares of any of the companies mentioned in the article above. Motley Fool newsletter services have recommended buying shares of Chevron and National Oilwell Varco. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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