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Will W&T Offshore’s Stock Rally Resume?

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W&T Offshore holding on to the gains

So far in 2H17, W&T Offshore (WTI) stock price rose from $1.96 at the end of June 2017 to $3.15 as of November 16 – a very strong rise of ~61%. W&T Offshore started its uptrend in September 2017 and rose on very high volumes during the month. However, WTI faced stiff resistance at around $3.50 and failed to close higher on a weekly basis. Historically, $3.50 level acted as a very strong resistance for WTI’s stock price, given where its previous two rallies in 1Q16 and 4Q16 terminated. However, since then, WTI’s stock price is consolidating below this level, holding the majority of the gains achieved from September’s rally. This is certainly a positive sign for WTI’s uptrend. If WTI stock closes above $3.50 on a weekly basis, then it could rally strongly.

The strong upward movement in WTI helped it pass its 50-day and 200-day moving averages in September 2017. In October, WTI’s 50-day moving average beat its 200-day moving average—a particularly positive technical indicator. Currently, WTI is trading at $3.15, whereas its 50-day and 200-day moving averages stand at $2.97 and $2.44, respectively.

WTI outperforming crude oil and natural gas prices

As of 3Q17, W&T Offshore’s production mix contains ~60% liquids (crude oil and natural gas liquids) and ~40% natural gas. So WTI’s stock price should be more sensitive to the changes in crude oil (USO) than natural gas (UNG) prices. Since the start of 2H17, crude oil (USO) prices rose from $46.04 per barrel at the end of June to $55.35 per barrel as of November 16, a rise of more than 20%.

Natural gas prices are up by less than a percentage point in 2H17. Natural gas prices rose from $3.04 per MMBtu (million British thermal units) at the end of June to $3.05 per MMBtu as of November 16. So WTI’s stock is hugely outperforming crude oil and natural gas prices in 2H17.

W&T Offshore peers

W&T Offshore mainly operates in the offshore oil and gas exploration and production segment. WTI’s peers Kosmos Energy (KOS) and Stone Energy (SGY) are up ~21% and ~81%, respectively, in 2H17.

In general, so far in 2H17, the SPDR S&P Oil and Gas Exploration & Production ETF (XOP)—which represents an index of stocks across the energy industry—has outperformed the SPDR S&P500 ETF (SPY) by a small margin. XOP is up 7.70%, whereas SPY is up 7.49% from the start of July to November 16. However, WTI has outperformed this broad energy sector representative index (XOP) by a larger margin.

Series overview…

Having analyzed the 2H17 price performance of WTI’s stock, we’ll move on to WTI’s key financial metrics. Specifically, we’ll look at WTI’s earnings, revenues, and production. We’ll also take a look at Wall Street’s ratings for the stock.

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

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