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Placing Your Bets in the Upstream Sector: What to Consider

PART:
1 2 3 4 5
Part 2
Placing Your Bets in the Upstream Sector: What to Consider PART 2 OF 5

Which Oil-Weighted Stocks Have Been Most Affected by Fall in Oil?

Oil-weighted stock returns

On average, the oil-weighted stocks we’re discussing fell 1.9% compared to a 3.6% fall in US crude oil active futures between August 7 and August 14, 2017. These oil-weighted stocks are from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and operate with a minimum of a 60% production mix in oil.

Which Oil-Weighted Stocks Have Been Most Affected by Fall in Oil?

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Except Denbury Resources (DNR), RSP Permian (RSPP), and Continental Resources (CLR), these oil-weighted stocks closed in the red in the seven calendar days to August 14, 2017. DNR, RSPP, and CLR rose 6.1%, 2.7%, and 1.4%, respectively, and outperformed their peers during this period.

Hess (HES), Diamondback Energy (FANG), and Whiting Petroleum (WLL) fell 5.4%, 5.5%, and 6.3%, respectively, underperforming in the last five trading sessions. In fact, FANG and HES had the highest correlations with oil prices during this period. We discussed these correlations in the last part of this series.

Apart from the correlation with WTI crude oil active futures, sentiments in the broader market could also influence these oil-weighted stocks.

Since February 2016

Between February 11, 2016, and August 14, 2017, US crude oil active futures rose 81.6% compared to an average gain of 36.1% in these oil-weighted stocks. On February 11, 2016, US crude oil active futures settled at their 12-year low. Oil-weighted stocks that gained the most with oil’s recovery between these two dates are as follows:

  • Oasis Petroleum (OAS): 80.9%
  • Continental Resources (CLR): 77.6%
  • Kosmos Energy (KOS): 68.6%

Oil-weighted stocks that weren’t able to follow oil’s recovery between these two dates saw the following returns:

  • Occidental Petroleum (OXY): -1.1%
  • Whiting Petroleum (WLL): -6.5%
  • Carrizo Oil & Gas (CRZO): -40.5%

So, oil prices underperformed oil-weighted stocks in the trailing week but outperformed them since their 12-year low in 2016.

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