Returns of upstream stocks with high implied volatilities
As we saw in the previous part of this series, on February 3, 2017, Cobalt International Energy (CIE) had the highest implied volatility among the upstream stocks that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Its stock fell ~69.1% in the last year—the only loser among upstream stocks with the highest implied volatilities. In the last five trading sessions, the stock fell 14.3%.
Stocks that move sharply usually experience rises in volatility, which could explain Cobalt’s high implied volatility—as you can see in the above table. High implied volatility stocks moved sharper in the last year and in the last few days.
Among the high volatility companies, California Resources (CRC) fell the least in the last five days, while Cobalt International Energy (CIE) lost the most. On January 30, 2017, Cobalt International Energy stock fell 8%. On January 30, 2017, Carlson Capital LP disclosed that it owns 6.9% passive stake in Cobalt International Energy.
Cobalt International Energy reported an operating loss of $199.6 million in 3Q16—compared to an operating loss of $36.5 million in 3Q15.
Sanchez Energy (SN) rose the most in the last year on our list of high implied volatility upstream stocks. In the last four quarters, its revenue rose 2.6%. It incurred an operating loss of $52.2 million in 3Q16—compared to an operating loss of $488.5 million in 3Q15. Sanchez Energy’s operating profit margin is -9.1%—compared to the industry median of 4%.
Low implied volatility upstream stock
Among the low volatility companies, ConocoPhillips (COP) rose the most during the year. ConocoPhillips announced its 4Q16 earnings results on February 2, 2017. The stock rose 0.4% on the same day.
EOG Resources (EOG) was the only stock that fell in the last five days among the low implied volatility upstream stocks. On January 27, 2017, Reuters reported that because of mark-to-market losses on its commodity derivative contracts, EOG Resources expects a non-cash net loss of $65.8 million for 4Q16. It’s expected to announce its 4Q16 earnings on February 28, 2017. In the previous part, it was the stock that saw the largest gain in implied volatility—compared to its 15-day average.
In the final part of this series, we’ll look at the upstream stocks with the highest short interest-to-equity float ratios. High short interest can reflect expectations of large downsides in stocks.