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Energy Stocks: Key Quantitative Insights for Investors

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Part 2
Energy Stocks: Key Quantitative Insights for Investors PART 2 OF 4

Have Energy Stocks Outperformed Crude Oil in 2016?

Oil-weighted stocks and crude oil

In this part of the series, we’ll look at the returns of an equally weighted basket of oil stocks that operate with a production mix of at least 60.0% crude oil (USL) (OIIL) (UWTI) (DWTI). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Have Energy Stocks Outperformed Crude Oil in 2016?

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From December 5 to December 12, 2016, these stocks rose 1.8% compared to a 2% rise in WTI (West Texas Intermediate) crude oil futures contracts for January delivery during the same period.

During that period, Kosmos Energy (KOS) rose 14.1%. California Resources (CRC) and Hess Corporation (HES) rose 10.8% and 6.6%, respectively. These three stocks outperformed their peers. California Resources, Kosmos Energy, and Hess Corporation are among the stocks that have the highest correlation with US crude oil. We looked at these correlations in the previous part of the series.

Diamondback Energy (FANG), Carrizo Oil & Gas (CRZO), and Continental Resources (CLR) fell 1.8%, 2.6%, and 8.1%, respectively, during the same period. They underperformed their peers.

In the previous part of this series, we saw how crude oil can impact some of these oil 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 December 12, 2016, US crude oil active futures contracts rose 101.6% on a closing price basis. Our basket of equally weighted upstream stocks rose 127.1% during that period. Below are the returns of some upstream companies during this period.

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

  • Denbury Resources (DNR) – 286.4%
  • Oasis Petroleum (OAS) – 264.1%
  • California Resources (CRC) – 226%

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

  • Diamondback Energy (FANG) – 54.6%
  • Kosmos Energy (KOS) – 45.4%
  • Occidental Petroleum (OXY) – 12.5%

Crude oil–weighted stocks performed nearly the same as crude oil in the last five trading sessions. However, they clearly outperformed since oil’s 2016 low in February. In the next part of this series, we’ll see how much natural gas prices impact natural gas–weighted stocks.

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