Relative price performance
Between May 2 and 9, 2016, an equally weighted basket of oil-weighted stocks that operate with a production mix of at least 60% in crude oil (USL), and that are the part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), lost 10.8%—compared to a 2.9% fall in WTI (West Texas Intermediate) crude oil during the same period.
During the same period, Continental Resources (CLR) returned 1.9%. RSP Permian (RSPP) and Diamondback Energy (FANG) fell 1.7% and 2.1%, respectively. However, these three stocks outperformed their peers. Halcon Resources (HK), Synergy Resources (SYRG), and Kosmos Energy (KOS) lost 21.5%, 21.8%, and 26.7% respectively, over the same period. Halcon Resources, Synergy Resources, and Kosmos Energy fell the most compared to their peers. Apart from crude oil’s impact that we discussed in the previous part, the relative performance of these oil-weighted stocks could be related to their earnings. The earnings were reported in the last few days.
Historical performance
Between June 20, 2014, and May 9, 2016, this basket of oil-weighted stocks lost 64.4%. During the same period, WTI crude oil lost around 59.5%. On June 20, 2014, WTI crude oil closed at $107.26 before it started declining. During this period, US-based (VOO) upstream stock Diamondback Energy, RSP Permian, and Concho Resources (CXO) fell the least compared to their peers. They fell 4.5%, 4.8%, and 20.8%, respectively. During the same period, Halcon Resources, Triangle Petroleum (TPLM), and Bonanza Creek Energy (BCEI) lost 97.3%, 96.7%, and 94.7%, respectively.
So, our basket of oil-weighted stocks underperformed crude oil since May 2, 2016, and June 20, 2014.
Oil-Weighted Stocks after Crude Oil’s 2016 High and Low
On February 11, 2016, US crude oil (USL) touched a 12-year low. Between February 11, 2016, and May 9, 2016, US crude oil gained 65.7%. The basket of these equally weighted upstream stocks gained 69.8% over this period. Denbury Resources (DNR), California Resources (CRC), and Bill Barrett (BBG) returned 241.7%, 167%, and 128% during this time. During the same period, Synergy Resources (SYRG) and Vaalco Energy (EGY) gained 2% and 1.9%. Triangle Petroleum (TPLM) lost 7.2%. These three stocks underperformed their peers between February 11, 2016, and May 9, 2016.
Oil-weighted stock performance from crude oil high in 2016
On April 28, 2016, US crude oil futures closed at $46.03—the highest level for crude oil for 2016 to date. Between April 28, 2016, and May 9, 2016, crude oil lost 17.4%. The basket of these equally weighted upstream stocks lost 14.6%. During the same period, US-based (SPXL)(SPY)(QQQ)(IWM)(IWF) upstream stock Continental Resources (CLR) gained 2.1%. RSP Permian (RSPP) and Diamondback Energy (FANG) fell 0.68% and 1.3%. However, these three stocks outperformed their peers between April 28 and May 9, 2016. California Resources (CRC), Halcon Resources (HK), and Kosmos Energy (KOS) fell 26.5%, 27%, and 27.5%, respectively, over this period. Halcon Resources and California Resources lost the most compared to their peers.
So, our basket of oil-weighted stocks outperformed crude oil since its 2016 low on February 11 and since its 2016 high on April 28.
SOURCE: MarketRealist.com
