Shares of W&T Offshore (NYSE:WTI) are up 12% as of 11:30 a.m. EST today. Over the past month, shares are up an incredible 125%. Without much news from the company or a noticeable jump in oil prices, it would seem that this is just more investors adding to the optimism of an oil industry rebound.
W&T Offshore is one of those stocks that's going to be very, very susceptible to these big price movements over a short period of time. The combination of oil's decline from 2014 to the middle of this year with the company's scary-looking financial statements has sent shares into penny stock territory. Consider this for a moment. Even though its stock has been gaining rapidly over the past several weeks, it's still down more than 80% since oil prices started to fall. That kind of volatility is probably going to see more days with double-digit movements than without them.
If we were to look purely at the business, it's still very hard to make a case for investing in W&T Offshore. The recent rise in oil price will likely help, but this is a company where EBITDA has barely outpaced its interest expenses over the past 12 months. On top of that, W&T's business is exclusively in the Gulf of Mexico, where exploration and production costs are going to be higher, and investment decisions are less responsive to the ups and downs of oil prices than a land-based shale producer.
Shares of W&T Offshore are firmly in the grips of day traders and investors looking to cash in on a little momentum. Considering the company's stock was basically priced for bankruptcy just a few months ago, any sign that the company can avoid this fate is going to send the stock soaring. For those of us looking to make long-term investments, though, this is a company that doesn't have the traits likely to produce returns over several years, and it's best left for the day-trading vultures to pick over.