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Energy Stocks: Quantitative Insights for the New Year

PART:
1 2 3 4
Part 2
Energy Stocks: Quantitative Insights for the New Year PART 2 OF 4

Are Oil-Weighted Stocks Underperforming Crude Oil?

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 production mixes of at least 60.0% crude oil (USO) (OIIL). These stocks also make up part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Are Oil-Weighted Stocks Underperforming Crude Oil?

Are Oil-Weighted Stocks Underperforming Crude Oil?

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From December 23 to December 30, 2016, these stocks fell 1.2%, compared to the 1.3% rise in WTI (West Texas Intermediate) crude oil futures contracts for February 2017 delivery during the same period.

During the period, California Resources (CRC) rose 14.1%, Kosmos Energy (KOS) rose 1.2%, and Occidental Petroleum (OXY) fell 1.2%. These three stocks outperformed their peers.

Denbury Resources (DNR), Oasis Petroleum (OAS), and Carrizo Oil & Gas (CRZO) fell 3.9%, 3.9%, and 4.8%, respectively, during the same period. These stocks underperformed their peers.

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

Performances of crude oil, oil-weighted stocks since 2016 lows

On February 11, 2016, US crude oil touched a 12-year low. From February 11 to December 30, 2016, US crude oil active futures contracts rose 105% on a closing price basis. Our basket of equally weighted upstream stocks rose 122.7% during the same period. Let’s take a look at the returns of some upstream companies.

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

  • Denbury Resources: 257.3%
  • Oasis Petroleum: 252.9%
  • California Resources: 248.8%

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

  • Concho Resources (CXO): 56.2%
  • Diamondback Energy (FANG): 48.8%
  • Occidental Petroleum: 12.3%

So, crude oil–weighted stocks have underperformed crude oil in the last five trading sessions, but they’ve outperformed oil since it hit its February 2016 low. In the next part of this series, we’ll see how much natural gas prices impact natural gas–weighted stocks.

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