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Evaluating Energy Portfolios: Oil Recovered and Natural Gas Fell

PART:
1 2 3 4
Part 2
Evaluating Energy Portfolios: Oil Recovered and Natural Gas Fell PART 2 OF 4

How Do Oil-Weighted Stocks Fare Compared to Crude Oil?

Oil-weighted stocks and crude oil

In this part of the series, we’ll look at an equally weighted basket of oil stocks that operate with a production mix of at least 60% crude oil (USO) (OIIL) (UWTI) (DWTI). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

How Do Oil-Weighted Stocks Fare Compared to Crude Oil?

How Do Oil-Weighted Stocks Fare Compared to Crude Oil?

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From August 8 to August 15, 2016, these stocks rose 4.7%—compared to a 6.3% rise in West Texas Intermediate crude oil contracts for September delivery during the same period. The returns of these oil-weighted stocks are adjusted for dividends.

During this period, Clayton Williams Energy (CWEI) rose 17.8%. Synergy Resources (SYRG) and Bill Barrett (BBG) rose 13.3% and 11.9%, respectively. These three stocks outperformed their peers.

On the other hand, Triangle Petroleum (TPLM), Bonanza Creek Energy (BCEI), and Northern Oil & Gas (NOG) fell 8.7%, 2.6%, and 2.5%, respectively, over the same period. They underperformed their peers.

In the previous part of this series, we saw the impact of crude oil on these stocks. The performances of these oil-weighted stocks could also be related to their earnings and the market’s expectation for their future prospects.

Performance of oil-weighted stocks and crude oil since 2016 lows

On February 11, 2016, US crude oil touched a 12-year low. From February 11 to August 15, 2016, US crude oil has risen 74.5% on a closing price basis. Our basket of equally weighted upstream stocks rose 78.2% during this period. Below are the returns of some upstream companies during this period.

Stocks that outperformed their peers during this period include the following:

  • Clayton Williams Energy (CWEI) – 388.6%
  • Denbury Resources (DNR) – 203.8%
  • Continental Resources (CLR) – 153.4%

Stocks that underperformed their peers during this period include the following:

  • Halcón Resources (HK) at -26.2%
  • Triangle Petroleum (TPLM) at -33.7%
  • Bonanza Creek Energy (BCEI) at -55.4%

Crude oil–weighted stocks have underperformed crude oil in the last five trading sessions, but outperformed since oil’s 2016 low in February.

In the next part of this series, we’ll see how natural gas prices have impacted natural gas–weighted stocks.

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