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Why W&T Offshore Stock Is Outperforming the Upstream Sector

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Sep. 20 2017, Updated 2:29 p.m. ET

W&T Offshore stock in September

So far in September 2017, W&T Offshore (WTI) stock has risen from $1.91 at the end of August to $2.57 as of September 19, 2017, a ~35.0% rise. It started its uptrend on September 11, 2017, and has been rising every day since then on very heavy volumes.

In general, there’s a positive sentiment across the upstream sector this month due to the strong up-move in crude oil (USO) and natural gas (UNG) prices. This positive sentiment coupled with positive news related to BOEM (Bureau of Ocean Energy Management) orders added fuel to WTI stock. In the first week of September, W&T Offshore announced that BOEM had rescinded its orders for WTI to provide additional bonding of $260.8 million. That’s positive news for WTI since now there are no outstanding orders from BOEM demanding financial assurance. In the same week, WTI announced that Hurricane Harvey had a minor impact on its facilities in the Gulf of Mexico in the United States.

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The strong up-move in WTI helped it cross its 50-day and 200-day moving averages. Currently, WTI is trading at $2.57, whereas its 50-day and 200-day moving averages are $1.99 and $2.37, respectively. Because of its strong up-move, WTI’s 50-day moving average turned upward. However, it’s still below its 200-day moving average, which is a particularly negative technical indication.

WTI is outperforming crude oil and natural gas prices

As of 2Q17, W&T Offshore’s production mix contains ~58.0% liquids and ~42.0% natural gas. So WTI stock may need to be more sensitive to the changes in crude oil (USO) than the changes in natural gas (UNG) prices. Since the start of September, crude oil (USO) has risen from $47.23 per barrel at the end of August to $49.90 per barrel as of September 19, 2017, a rise of almost 6.0%.

Even natural gas prices have risen ~3.0% so far this month, rising from $3.04 per mmBtu (million British thermal unit) at the end of August to $3.12 per mmBtu as of September 19, 2017. So WTI stock is significantly outperforming crude oil and natural gas prices in 2017.

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W&T Offshore’s peers

W&T Offshore primarily operates in the offshore oil and gas exploration and production segment. Its peers include Kosmos Energy (KOS) and Stone Energy (SGY), which also operate in the offshore oil and gas exploration and production segment. They’ve risen ~8.0% and ~15.0%, respectively, in September 2017.

In general, so far in September, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which represents an index of stocks across the energy industry, has outperformed the SPDR S&P 500 ETF (SPY) by a wide margin. XOP has risen ~7.0%, whereas SPY has risen ~1.5% from the end of August to September 19, 2017. However, WTI has outperformed the broad energy sector representative index (XOP) by a larger margin.

Series overview

Having analyzed the year-to-date price performance of WTI stock in this part, we’ll look at WTI’s key financial metrics in the rest of this series. Specifically, we’ll look at its earnings per share, revenues, and cash flows. We’ll also take a look at the short interest in the stock, its implied volatility, and Wall Street’s ratings for the stock.

Let’s start with WTI’s most recent earnings.

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