Oil Prices Crushed These 5 Oil Stocks This Week
The plunging price of crude crushed oil stocks again this week. After some initial enthusiasm, crude fell from $38 at the start of the week to just over $33 per barrel by Friday. That led to another awful showing for oil stocks. Some of the worst performers, according to S&P Capital IQ data, were Clayton Williams Energy (NYSE: CWEI), Enable Midstream Partners (NYSE: ENBL), Hornbeck Offshore Services (NYSE: HOS), Carrizo Oil & Gas (NASDAQ: CRZO), and Cobalt International (NYSE: CIE).
What: Clayton Williams Energy (NYSE: CWEI) slipped more than 16% this week.
So What: Key driver: The continued crash of crude oil With the price of oil now below $35 per barrel, it is significantly reducing the economic drilling inventory of Clayton Williams
Now What: The weak oil price is also cutting deeply into its cash flow, which will make it harder to maintain its debt Key takeaway: Investors worry that Clayton Williams won’t survive if crude continues to crash
What: Enable Midstream Partners (NYSE: ENBL) slumped 20% this week.
So What: Key driver: Growing concerns with its direct commodity price exposure Every 10% decrease in the price of natural gas yields a $5 million decrease in its Adjusted EBITDA for 2016
Now What: Meanwhile, a 10% decrease in NGL and condensate prices would yield a $3 million decrease in Adjusted EBITDA in 2016 Key takeaway: With its distribution coverage ratio already tight, investors are worried that falling commodity prices mean a distribution cut is on the horizon
What: Hornbeck Offshore Services (NYSE: HOS) dropped 20% this week.
So What: Key driver: The continued crash of crude With oil now falling below $35 per barrel, it makes it much less likely that new oil projects in the Gulf of Mexico will be given the green light
Now What: This will force the company to continue to stack vessels, cutting its margins and leading to lower cash flow Key takeaway: Investors are growing concerned that operating conditions could get much worse
What: Carrizo Oil & Gas (NASDAQ: CRZO) slumped more than 21% this week.
So What: Key driver: The continued crash of crude oil With oil now down below $35 per barrel, it is further reducing Carizzo’s economic drilling locations, which is a concern given that only 55% of its drilling locations were economic at an oil price below $45 per barrel
Now What: On a more positive note, FBR Capital recommended the stock and two peers this week because of its staying power, margin stability, and strong management Key takeaway: Investors are more concerned that Carrizo’s economic drilling inventory is slipping away with each drop in the price of crude
What: Cobalt International (NYSE: CIE) fell more than 21% this week.
So What: Key driver: The continued crash of crude Unlike most oil companies, Cobalt doesn’t currently produce any oil and won’t start producing until the Heidelberg project comes online next quarter
Now What: However, the slide in crude will make that, and other projects in development, less profitable than expected Key takeaway: Investors are revaluing the company’s future potential given crude’s persistent slide
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