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Energy Stocks that Could Outdo Natural Gas

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Dec. 4 2020, Updated 10:42 a.m. ET

Natural gas–weighted stocks and natural gas

Between May 15 and May 22, 2017, natural gas June futures fell 0.6%. During that same period, an equally weighted selection of natural gas–weighted stocks fell 1.5%. Importantly, all these stocks operate with production mixes of at least 60.0% in natural gas (UNG)(GASX)(FCG)(GASL), and are all part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

The natural gas–weighted stocks that outdid their peers from May 15 to May 22, 2017, include the following.

These stocks also outperformed natural gas in the week. All three stocks had a higher correlation with crude oil compared to natural gas last week. Crude oil gained 4% between May 15 and May 22.

The stocks that underperformed their peers during this period include the following.

  • Gulfport Energy (GPOR): -5.5%
  • Rice Energy (RICE): -4.7%
  • Southwestern Energy (SWN): -4.2%

These stocks also underperformed natural gas the previous week.

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Natural gas–weighted stocks and natural gas since 2016 lows

Natural gas futures touched a 17-year low of $1.64 on March 3, 2016. Since then, natural gas (UNG)(BOIL)(UGAZ) (FCG) active futures have risen 103%. During the same period, our equal-weighted collection of upstream stocks gained just 24.6%.

The underperformance of natural gas-weighted stocks compared to natural gas itself could be because of the weaker positions that some of these companies are in due to sustained low natural gas prices over the past few years. These stocks are also likely pricing in weaker natural gas prices in the future in anticipation of rising natural gas production despite weak prices.

Since March 3, 2016, the following natural gas–weighted stocks were among the outperformers.

  • WPX Energy (WPX): 138%
  • Rice Energy (RICE): 115.1%
  • Chesapeake Energy (CHK): 34.2%

WPX and RICE have also outperformed natural gas since its low in March 2016.

On the other hand, these natural gas–weighted stocks underperformed their peers during this period.

  • Antero Resources (AR): -9.3%
  • Range Resources (RRC): -17.4%
  • Gulfport Energy (GPOR): -36.6%

Natural gas beat natural gas–weighted stocks in the trailing week and since natural gas’s low in March 2016.

Meanwhile, read our coverage of natural gas every Thursday on Market Realist’s Energy and Power page.

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