Traditionally, each of any 42 E&P companies’ stock-price performances, when graphed for any period of time, would shadow the others’ rise or fall across the grid, along with oil and gas prices, with some exceptions, such as company drama, good or bad. Increasingly, performances are decoupling and not just based on increasingly divergent oil and gas prices.
Investors’ view of oil- versus gas-weighted stock values during the past 15 months often has less to do with the price of the commodity. Instead, it appears potential upside based on strength of management and the story is playing a role. And, at times, there is still little apparent reason, except that the story is already played out in up- or down-trading, and the stock is fully valued or discounted.
One independent E&P company’s investor-relations chief says, “It’s war out there.” E&P stocks are trading on “hand-grenade marketing tactics” with every small doubt and rumor as to an E&Ps’ viability causing the stock to flatline.
In an OilandGasInvestor.com comparison of 15-month stock-price performances for 42 E&P companies—a list randomly borrowed from Bernstein Research’s universe of E&P stocks—more oil-weighted producers have shown tremendous growth than gas-weighted producers. Yet, a handful of each is in the bottom 10 as well. Here are some stock-price anomalies ripe for growth or decline.
--Shares of Devon Energy Corp. have grown roughly 0% between January 2, 2009, and March 17, 2010, the timeframe for which the 42 stocks’ prices were reviewed. Oil was approximately $46 and natural gas was $6 at the beginning of the timeframe. At press time, the April oil contract was trading at $82; natural gas, $4. Devon is approximately 67% weighted to natural gas, yet it announced recently it is entering a Canadian oil-sands joint venture with BP Plc.
--Six of the Top 10 stock performances are oil-weighted, and the No. 1 improved stock is Bakken oil-shale-weighted: Brigham Exploration Co., with a 400% return in the 15-month period and 55% weighting to oil production. Others are Berry Petroleum Co. (69% oil), up 260%; ATP Oil & Gas Corp. (60% oil), a conventional Gulf of Mexico oil producer, up 205%; and Pioneer Natural Resources Co. (approximately 50% oil), up 200%.
Another Top 10 Bakken oil story is Whiting Petroleum Corp. (78% oil), up 120%. Meanwhile, 53% oil Callon Petroleum Co. posted a 90% stock-price improvement on its push during the review period to onshore the U.S., particularly the oily Permian and the gassy Haynesville.
Four gas-weighted stocks appear in the Top 10 too. Newfield Exploration Co. (71% gas) posted a stock-price improvement of 160%; Quicksilver Resources Inc. (75% gas), up 150%; Cimarex Energy Co. (95% gas), up 118%; and Exco Resources Inc. (71% gas), up 100%.
--Meanwhile, six of the Bottom 10 stocks are gas-weighted, including Devon Energy Corp. Also posting 0% price growth in the 15-month period is Penn Virginia Corp., which is 84% gas-weighted. The other four are Haynesville players Goodrich Petroleum Corp. (98% gas), down 40%, and Comstock Resources Inc. (94% gas), down 30%; PetroQuest Energy Inc. (88% gas), down 20%; and Encana Corp. (now 95% gas, but whose price results are not comparable since it split from its oily half, Cenovus Energy Inc., in December).
The four oily Bottom 10 stocks are Cenovus (newly split from Encana and 53% oil); Murphy Oil Corp. (72% oil), up 19%; Clayton Williams Energy Inc. (57% oil), down 20%; and W&T Offshore Inc. (approximately 50% oil), down 40%.
--Falling in the middle include oily names such as Denbury Resources Inc. (83% oil), whose stock price has grown a mid-range 22% in the past 15 months, yet it has also shed its Barnett shale-gas assets and traded the cash for oily Encore Acquisition Co. and privately held, oily Conroe Field.
--Uber oily Occidental Petroleum Corp. (76% oil) has seen stock-price growth of a mid-range 32%, despite news in July of its discovery of the largest new oil field in California in 35 years.
--Gas-weighted (76%) EOG Resources Inc.’s stock price has improved a mid-range 40%, despite its announcement last fall that it is reprofiling its portfolio to a greater weighting to oil.
Stock-picking is easier with a rifle, instead of hand grenades. For a table containing the full review results, click here: march1710stockperformance.
–Nissa Darbonne (ndarbonne@hartenergy.com), E-Editor, Hart Energy Publishing; Oil and Gas Investor, A&D Watch, Oil and Gas Investor This Week, OilandGasInvestor.com Today, OilandGasInvestor.com, A-Dcenter.com, UGcenter.com, UGcenter.com Today, EPmag.com, E&P Buzz, PipeLineandGasTechnology.com, PGT News, HartFUEL.com, FUEL.
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