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Why Hess Stock Tumbled 15% in January

By Matthew DiLallo – Updated Feb 4, 2020 at 10:54AM

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Dual headwinds weighed on the oil company last month.

What happened

Shares of Hess (HES 0.35%) slumped 15.3% in January, according to data provided by S&P Global Market Intelligence. Weighing on the oil stock was a sell-off in the price of oil and the release of its fourth-quarter results

So what

Crude prices tumbled in January, fueled by fears that the coronavirus would sap demand for oil in China. WTI, the U.S. oil benchmark, fell 15.6% for the month, closing below $52 a barrel, its lowest level since August. Meanwhile, the global oil benchmark, Brent, fell about 12% for the month, ending around $58 per barrel. That sell-off weighed on most oil stocks, including Hess, since it will produce less cash this year if crude remains at these lower levels. The slump is coming at an unfortunate time for Hess since it recently started up production at the first phase of its offshore development near Guyana

An oil pump next to a pond of water.

Image source: Getty Images.

Also weighing on Hess' stock last month were its fourth-quarter results. While the energy company's production soared well past its expectations, its net loss came in much worse than analysts had anticipated. The culprit was weaker pricing for natural gas and natural gas liquids (NGLs), which tumbled 27.8% and 34.5%, respectively, during the quarter. 

Now what

Several analysts believe that last month's sell-off in Hess is a buying opportunity. Scotiabank, for example, upgraded the stock at the end of the month to sector outperform while setting a $79 price target (38% above the current price). Meanwhile, Morgan Stanley said that the stock's sell-off "is overdone," which led the bank to reiterate its overweight rating while boosting its price target from $79 to $82 (43% above the current price). Given that bullishness, investors might want to consider buying last month's dip in Hess since it's now trading at a more compelling price given its long-term growth potential in Guyana.

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.

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