How Did a Gas-Weighted Portfolio Fare Compared to Natural Gas?



Natural gas–weighted stocks and natural gas

Between August 15 and August 22, 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 3.4% rise in natural gas futures contracts for September delivery for the same period. The stock returns are adjusted for dividends.

Article continues below advertisement

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 15 to August 22, 2016.

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

  • Chesapeake Energy (CHK) – 10.7%
  • WPX Energy (WPX) – 7.0%
  • Antero Resources (AR) – 4.9%

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

  • Southwestern Energy (SWN) at -5.5%
  • Antero Resources (AR) at -2.2%
  • Range Resources (RRC) at 0.7%

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 22, 2016, natural gas rose 58.6% on a closing price basis. Our basket of equally weighted upstream stocks rose 7% over the same period.

The small gain in gas-weighted stocks compared to natural gas could be attributed to the recent softness in crude oil prices. Crude oil prices can drive the 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:

  • WPX Energy – 78.6%
  • Rice Energy (RICE) – 36.1%
  • Antero Resources (AR) – 11.3%

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

  • Southwestern Energy (SWN) at -17.9%
  • Gulfport Energy (GPOR) at -19.4%
  • Memorial Resource Development (MRD) at -21.3%

More From Market Realist