What’s Holding Back Natural-Gas-Weighted Stocks’ Returns?

Returns

Between January 10 and January 17, the natural-gas-weighted stocks on our list rose 1.4%. This rise in natural-gas-weighted stocks was 9.8 percentage points below natural gas February futures’ gain during this time period. The outperformers on our list of natural-gas-weighted stocks in the trailing week were:

  • Antero Resources (AR) at 3.5%
  • Gulfport Energy (GPOR) at 2.8%
  • WPX Energy (WPX) at 2.3%

What’s Holding Back Natural-Gas-Weighted Stocks’ Returns?

AR was among the natural-gas-weighted stocks that had the highest correlation with oil prices, which we discussed in part four of this series. Moreover, GPOR and WPX had higher correlations with oil compared to natural gas prices. US crude oil futures rose 0.6% in the trailing week. The small rise in oil prices could have limited the upside in these natural-gas-weighted stocks.

These natural-gas-weighted stocks are from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) with at least a 60% production mix in natural gas.

The natural-gas-weighted stocks that underperformed in the trailing week were:

  • Cabot Oil & Gas (COG) at 0.1%
  • Southwestern Energy (SWN) was unchanged
  • Range Resources (RRC) was unchanged

These three natural-gas-weighted stocks had higher correlations with US crude oil compared to natural gas prices.

Since March 2016

Between March 3, 2016, and January 17, 2018, natural gas active futures gained ~97%. In March 2016, natural gas prices settled at their 17-year lowest closing level.

The ProShares Ultra Bloomberg Natural Gas ETF (BOIL), an ETF that has exposure to natural gas futures, fell 20.7%, while the United States Natural Gas ETF (UNG) rose just 10.5% from March 2016. Natural-gas-weighted stocks gained 8.4% since natural gas’s low in 2016.

The natural-gas-weighted stocks with the highest gain over this time period are:

  • WPX Energy (WPX) at 182.7%
  • Cabot Oil & Gas (COG) at 27.4%

The natural-gas-weighted stocks with the lowest gain or the highest fall over this time period are:

  • Southwestern Energy (SWN) at -26.3%
  • Range Resources (RRC) at -45.1%
  • Gulfport Energy at -48.3%