What happened

Shares of natural gas producers Antero Resources, (NYSE:AR) Chesapeake Energy (NYSE:CHK), and EQT (NYSE:EQT) tumbled in November, according to data from S&P Global Market Intelligence. That slump came even though the price of natural gas was red-hot last month. Instead, a sell-off in the oil market, as well as other issues, weighed on these gas stocks.

So what

A burst of cold air across the U.S. in November caused the price of natural gas to rocket 41% for the month, as the frigid weather stoked demand for the heating fuel. That marked the best month in the gas market in 18 years.

A natural gas well covered in snow.

Image source: Getty Images.

That surge in the price of gas should have fueled big gains for natural gas stocks. Instead, most gas producers tumbled last month because oil prices went in the opposite direction, plunging more than 20%. Since oil generates higher margins than gas, its slump will have a greater impact on the profitability of many gas producers, because oil and natural gas liquids (NGLs) -- which derive their price from oil -- supply a large percentage of their revenue. 

In Antero Resources' case, it's the country's largest NGL producer. As a result, liquids supplied 43% of the company's revenue during the third quarter even though it accounted for only 29% of its production. That's why the sell-off in the oil market spoiled what should have been a good month for Antero, since it reported stronger-than-expected third-quarter results after the market closed in October. Instead of rising on earnings and gas prices, shares of Antero sank 20.3% for the month because of the impact lower oil prices will have on its future NGL profits.

Meanwhile, Chesapeake Energy has been growing its oil production in recent years and expects its growth rate to accelerate after it completes its acquisition of the oil-focused WildHorse Resource Development (NYSE:WRD). That focus on oil is why Chesapeake's stock slumped 18.2% last month even though shares should have rallied along with gas prices, as well as the fuel from an upgrade from Raymond James, which raised its rating on the stock from "underperform" to "outperform" while setting a price target of $5 per share. Raymond James called the deal "transformative" as it solves multiple issues at the company, including the need to de-lever its balance sheet and increase oil as a percentage of its output. It also believes Chesapeake is buying WildHorse for a "rock-bottom price," which adds to the appeal.

Finally, EQT experienced the biggest drop last month, as its stock plunged 46.4%. However, that happened in large part because the company spun off its midstream assets into Equitrans Midstream (NYSE:ETRN) last month. That spinoff will enable EQT to focus on its natural gas production business, which is the largest in the country, while Equitrans will operate the midstream assets independent of EQT, though the gas giant will remain its largest customer. Goldman Sachs likes EQT as a standalone company, which led it to upgrade the stock from "neutral" to "buy" last month while setting a $23 price target. Goldman believes the market is underappreciating the company's long-term free cash flow potential now that it doesn't have to reinvest cash into building new midstream assets.

Now what

Despite one of the best monthly gains in the natural gas market in years, several gas stocks took it on the chin last month because they generate a significant portion of their revenue from oil and other liquids, which plunged in price during November. That's why it's important for investors to know how an energy company generates its revenue, since that can have a big impact on its stock price.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.