Weakness in Energy Prices Could Affect These Stocks

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Part 4
Weakness in Energy Prices Could Affect These Stocks PART 4 OF 4

Which Gas-Weighted Stocks Could Outdo Natural Gas?

Natural-gas-weighted stocks and natural gas

Between April 17, 2017, and April 24, 2017, natural gas futures contracts for June 2017 fell 2.8%. An equal-weighted basket of natural-gas-weighted stocks fell 1.6% during that same period. These stocks operate with production mixes of at least 60.0% in natural gas (UNG) (GASX) (FCG) (GASL). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Which Gas-Weighted Stocks Could Outdo Natural Gas?

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Best and worst natural gas stocks

The natural-gas-weighted stocks that outperformed their peers from April 17, 2017, to April 24, 2017, include the following:

  • Gulfport Energy (GPOR): 6.7%
  • Southwestern Energy (SWN): 0.5%
  • EQT (EQT): 0.1%

The stocks that underperformed their peers during this period include the following:

Apart from their correlations with natural gas in the short term and their earnings in the long term, the performances of some natural-gas-weighted stocks could also be impacted by movements in crude oil (USO) (UCO) prices. Crude oil prices can also drive the sentiment across the entire energy sector, not just crude oil stocks. Crude oil fell 7.3% in the trailing week.

Natural-gas-weighted stocks and natural gas since 2016 lows

On March 3, 2016, natural gas futures touched a 17-year low of $1.64. But from March 3, 2016, to April 24, 2017, natural gas (UNG) (BOIL) (UGAZ) (FCG) prices rose 92.7% on a closing price basis. Our equal-weighted basket of upstream stocks rose 26.9% during the same period.

The weaker rise in natural-gas-weighted stocks as compared to natural gas could be attributed to the weaker positions of some of these natural-gas-heavy companies due to chronically low natural gas prices over the past few years.

Since March 3, 2016, the following natural-gas-weighted stocks are among the outperformers:

  • WPX Energy (WPX): 130.3%
  • Rice Energy (RICE): 125%
  • Chesapeake Energy (CHK): 33.3%

WPX and RICE have also outperformed natural gas since its low in March 2016. The following natural-gas-weighted stocks didn’t fare as well during the same period:

  • Antero Resources (AR): -10%
  • Range Resources (RRC): -11.1%
  • Gulfport Energy (GPOR): -33.9%

Natural-gas-weighted stocks outperformed natural gas in the trailing week but underperformed it since the commodity’s low in March 2016. We’ll have to wait and see if the trend continues, particularly if natural gas continues to fall due to the lack of weather-related triggers at the moment.

Visit Market Realist’s Energy and Power page for more analysis on natural gas’s fundamentals.


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