Crude oil prices
Although crude oil prices have rallied by ~89% from their lows in February 2016, crude is still trading ~54% lower than its high, which was about two years ago. Remember, when crude oil prices are in decline, profit margins for crude oil producers get affected adversely, making stock prices fall along with crude oil prices. Stone Energy (SGY) is no exception to this trend and has seen its stock price decline by ~97% since the peak in crude oil prices in June 2014.
S&P 500 (SPY) upstream companies EOG Resources (EOG), Occidental Petroleum (OXY), and Southwestern Energy (SWN) have also seen their share prices decline—by ~21%, ~18%, and ~72%, respectively—during the same period.
Stone Energy’s steep downtrend
Stone Energy’s stock price was in a downtrend from May 2014 to May 2016, where it was making a clear pattern of lower highs and lower lows. The downtrend caused SGY’s stock price break the 200-day moving average in August 2014. During its downtrend, SGY never tried to regain its 200-day moving average and is currently trading ~39% below it.
Stone Energy finally catches bid
But since May 2016, due to higher trending crude oil prices, Stone Energy’s stock price has started to increase. In June 2016, Stone Energy regained its 50-day moving average successfully and is currently trading at about ~18% above it. Since its bottom in May 2016, Stone Energy’s stock price has increased from $2.70 to $13.94, or by ~416%.
In this series
Is this bounce in Stone Energy sustainable from a point of view of fundamentals? How have past declines and the recent uptick in crude oil prices affected Stone Energy production, realized prices, and margins most recently? Did SGY benefit from its hedges during the crude oil decline? What are Stone Energy’s cash flow and debt situation?
In this series, we’ll try to answer all these questions and more. We’ll study Stone Energy’s operational strategies as well as its past events, production, hedges, costs and margins, cash flows, and debt. We’ll also compare Stone Energy with its peers by looking at these companies’ relative valuations.
Let’s start with the Stone Energy’s 2Q16 earnings.