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Analyzing Natural Gas–Weighted Stocks’ Returns

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Natural gas–weighted stocks and natural gas

Between August 8 and August 15, 2016, an equally weighted basket of natural gas–weighted stocks rose 2.2%. These stocks operate with a production mix of at least 60% in natural gas (UNG) (BOIL) (UGAZ) (FCG). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). This compares to a 5.7% fall in natural gas futures contracts for September delivery for the same period. The stock returns are adjusted for dividends.

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Best and worst natural gas stocks

Below are the returns for the best-performing and worst-performing stocks from our basket of natural gas–weighted stocks from August 8 to August 15, 2016.

Natural gas–weighted stocks that outperformed their peers during this period include:

  • Comstock Resources (CRK) – 11.6%
  • Chesapeake Energy (CHK) – 9.8%
  • WPX Energy (WPX) – 7.1%

Natural gas–weighted stocks that underperformed natural gas during this period were:

  • EQT (EQT) at -2.2%
  • Range Resources (RRC) at -3.8%
  • Memorial Resource Development (MRD) at -3.9%

In the previous part of this series, we saw how natural gas impacted these stocks. However, the performance of these natural gas–weighted stocks could also be related to their earnings and the movement of crude oil (USO) (UCO) prices.

Performance of 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. From March 3 to August 15, 2016, natural gas rose 57.9% on a closing price basis. Our basket of equally weighted upstream stocks fell 3.5% over the same period.

The loss in gas-weighted stocks compared to natural gas (UNG) (BOIL) (UGAZ) (FCG) could be attributed to the recent softness in crude oil prices. Crude oil prices can drive sentiment in the entire energy complex and not just in crude oil stocks. Here’s how some of the companies in the basket performed over this period.

The following natural gas–weighted stocks were among the outperformers:

  • EXCO Resources (XCO) – 114.4%
  • WPX Energy –35.6%
  • Contango Oil & Gas Company (MCF) –25.9%

The following natural gas–weighted stocks didn’t fare as well:

  • Rex Energy at -81.5%
  • Comstock Resources at -66.5%
  • Chesapeake Energy (CHK) at -26.5%
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