What happened

Shares of major oil and gas producers Canadian Natural Resources Limited (CNQ -3.59%)Devon Energy (DVN -2.33%)Continental Resources, Inc. (CLR)Marathon Oil (MRO -1.25%), and Cenovus Energy (CVE -3.86%) dropped between 10% and 14% in May, underperforming many of their peers as well as the S&P 500

Though the companies range in size from a $9.1 billion market cap (Cenovus) all the way up to $32.2 billion (Canadian Natural Resources), all fell victim to the same factors.

Oil workers monitor an oil well, silhouetted against the sunset.

The stock market wasn't kind to the oil industry in May, even though many companies reported positive outlooks at the beginning of the month. Image source: Getty Images.

So what

May was a rough month overall for most oil and gas companies, but each of these five was hit especially hard. However, the reasons are different for each one. Let's look at the two Canadian companies, Cenovus and Canadian Natural Resources, first.

While many oil and gas exploration and production companies -- including Marathon -- are divesting their holdings in Canadian oil sands, Cenovus and Canadian Natural Resources are buying. In March alone, Cenovus inked a deal to purchase $13.3 billion of oil-sands assets from ConocoPhillips. Canadian Natural partnered with Royal Dutch Shell to buy $2.5 billion in oil-sands assets from Marathon and then bought an additional $7.5 billion in further oil-sands assets from Shell. 

The trouble is, oil sands are notoriously difficult and expensive places from which to produce oil. Refining the heavy crude from oil sands is also more complex and costly than light crude from other sources. Cenovus CEO Brian Ferguson has been criticized for the ConocoPhillips deal, although the stock did post a net profit of $0.25 a share in the first quarter of 2017. Meanwhile, Canadian Natural Resources has other issues of its own.

What else

Meanwhile, the three American companies have been focusing on high-margin shale plays. Devon Energy had an excellent quarter, with strong oil production growth driven entirely by the company's U.S. resource plays. Devon's total U.S. oil production was up 17% over the fourth quarter of 2016, bringing its revenue up 59%.

Marathon Oil, whose stock has underperformed most of its peers since oil prices began slumping in 2014, has made similar moves. The company plans to use some of the cash from its Canadian asset sales to acquire 70,000 Permian Basin acres in Texas and New Mexico, and 21,000 Northern Delaware Basin acres in New Mexico. The company is also seeing increased production from its U.S. assets, particularly in the Eagle Ford shale. 

Continental Resources, which primarily operates in the U.S. Bakken shale, also saw increased production in Q1 2017, up 4,000 barrels of oil equivalent per day from the prior quarter. The company anticipates further production increases as the year progresses and has promised to update its guidance in August. 

But in spite of all this good news at the beginning of the month in the companies' earnings reports, their shares slumped anyway. Declining oil prices at the end of the month caused all three companies' stock prices to fall.

Now what

Until oil prices stabilize -- or even rise -- investors in oil and gas exploration and production companies are in for a bumpy ride. Even for larger companies like these, volatile oil prices can wreak havoc on their stock prices. And without midstream or downstream operations to provide some ballast, there's not much the companies can do. Even positive earnings reports did little to stop the bleeding.

While it's tough to make a case for buying into oil sands right now, it might be worth keeping the U.S. producers on your radar screen at these depressed prices. Just be aware that if the oil markets drop further, the companies' stock prices are virtually certain to follow.