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Natural Gas Is Up, but Gas-Weighted Stocks Diverge

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Natural-gas-weighted stocks and natural gas

Between October 10 and October 17, 2016, an equally weighted basket of natural-gas-weighted stocks fell 5.9%. These stocks operate with a production mix of at least 60% in natural gas (UNG) (BOIL) (UGAZ) (FCG) (GASL). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). There was a 0.9% fall in natural gas futures contracts for November delivery for the same period.

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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 October 10 to October 17, 2016. Natural-gas-weighted stocks that outperformed their peers during this period include:

  • WPX Energy (WPX): -1%
  • Gulfport Energy (GPOR): -1.4%
  • Antero Resources (AR): -2.9%

Natural-gas-weighted stocks that underperformed their peers during this period were:

In the previous part of this series, we saw how natural gas impacted these stocks. Apart from their earnings in the long term, the performance of these natural-gas-weighted stocks could also be impacted by movements in crude oil (USO) (UCO) prices in the short term. Crude oil prices can drive the sentiment for the entire energy complex and not just for crude oil stocks. We discussed crude oil prices in part one of this series. Crude oil fell ~2.7% between October 10 and October 17, 2016.

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 October 17, 2016, natural gas (UNG) (BOIL) (UGAZ) (FCG) rose 97.8% on a closing price basis. Our basket of equally weighted upstream stocks rose only 5.1% during the same period.

The smaller gain in gas-weighted stocks compared to natural gas could be attributed to the weaker position that some of these natural-gas-heavy companies are in because of chronically low natural gas prices over the last few years.

Here’s how some of the companies in the basket performed during this period. The following natural-gas-weighted stocks were among the outperformers:

  • Rice Energy (RICE): 49.7%
  • WPX Energy (WPX): 42.9%
  • Antero Resources (AR): 14.1%

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

  • EQT (EQT): -13.6%
  • Gulfport Energy (GPOR): -20.8%
  • Chesapeake Energy (CHK): -24.4%
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