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Cabot Oil and Gas Has Been the Outperformer in Q2 So Far

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Natural-gas-weighted stocks’ returns

In Q2 2019 so far, our list of natural-gas-weighted stocks fell 33.7%, while Henry Hub natural gas active futures fell 10.4%. On average, natural-gas-weighted stocks underperformed natural gas futures during this period. These natural-gas-weighted stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They operate with production mixes of at least 60.0% in natural gas.

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Cabot Oil and Gas

Among the natural-gas-weighted stocks, Cabot Oil and Gas (COG) had only a single-digit fall of 8.8% compared to a double-digit fall in the remaining natural-gas-weighted stocks. In fact, Cabot Oil and Gas had the only negative correlation with natural gas futures.

Pricing dynamics might have insulated it from Henry Hub natural gas prices to a larger extent. In Q1 2019, Cabot Oil & Gas’s realized natural gas sale price was $3.35 per thousand cubic feet including hedges, 7.7% higher on a sequential basis despite a 23.1% decline in Henry Hub natural gas active futures. Moreover, in the first quarter, Cabot Oil & Gas’s EPS were $0.73, 12.3% higher than analysts’ consensus estimate. Improvement in transportation infrastructure and rising demand near its production location could be behind higher price realization.

Underperformers

The following natural-gas-weighted stocks were the underperformers in this quarter:

  • Gulfport Energy (GPOR) fell 40.5%.
  • Range Resources (RRC) fell 41.5%.
  • Chesapeake Energy (CHK) fell 43.2%.

Chesapeake Energy had the highest correlations with US crude oil prices. The remaining two stocks had higher correlations with oil than natural gas prices. A fall of 15% in WTI crude oil prices made these natural-gas-weighted stocks’ fall sharper.

Natural gas’s 17-year low

Between March 3, 2016, and June 12, 2019, natural gas active futures rose 45.6% from a 17-year low. Our list of natural-gas-weighted stocks fell 56.9% during the same period.

Cabot Oil & Gas has risen 9.8% since March 3, 2016. Cabot Oil & Gas was the only gainer on our list of natural-gas-weighted stocks during that period. Let’s take a look at the natural-gas-weighted stocks that fell the most during this period:

  • Antero Resources fell 75.9%.
  • Range Resources fell 78.3%.
  • Gulfport Energy fell 81.1%.
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