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Why Diamondback Energy Has Been an Outperformer This Quarter

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Oil-weighted stocks’ returns

In Q2 2019 so far, our list of oil-weighted stocks fell 20% compared to the 15% fall in US crude oil active futures. On average, our list of oil-weighted stocks outperformed US crude oil prices.

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Outperformer

Let’s take a look at the oil-weighted stocks that fell the least in this quarter:

  • Diamondback Energy (FANG) fell 3.1%.
  • Hess (HES) fell 5.8%.
  • Pioneer Natural Resources (PXD) fell 7.2%.

Despite a higher correlation, FANG’s stock prices were insulated from the fall in US crude oil prices to a larger extent. On May 7, FANG reported its Q1 2019 earnings results. It reported adjusted net income of $1.39 per diluted share for last quarter, a 15% sequential increase and 2.2% above analysts’ consensus estimates. On the next trading day, FANG stock rose 7.7% and extended its gains in the subsequent trading days, which helped FANG to outperform its peers. Pioneer Natural Resources had the second-lowest correlation to US crude oil prices among oil-weighted stocks.

Underperformers among oil-weighted stocks

Now, we’ll discuss the oil-weighted stocks that underperformed their peers and US crude oil prices this quarter:

  • Denbury Resources (DNR) fell 44.4%.
  • Whiting Petroleum (WLL) fell 38.3%.
  • California Resources (CRC) fell 37.7%.

These three stocks had correlations of at least 66% with US crude oil prices. In fact, DNR and CRC had the second and fourth largest correlation with US crude oil prices in Q2 so far. All of these oil-weighted stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They operate with production mixes of at least 60% in liquids based on the latest quarterly production data.

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