What happened
Shares of exploration and production company Range Resources (RRC 1.30%) were lower by nearly 16.5% at one point this week according to data from S&P Global Market Intelligence. Antero Resources (AR 2.14%) wasn't far behind, with a decline of a little more than 15%. And yet energy sector peer Vermilion Energy (VET 1.35%) rose more than 12.5% at one point.
By the start of trading on Friday, Dec. 3, in what has been an incredibly volatile week for the S&P 500 index, Range remained off by roughly 12.5% while Antero was lower by 11%. And Vermilion was still holding on to most of its gains, sitting with an uptick of nearly 11.5%. So what's going on? Ultimately, every industry is impacted by a mixture of big events and smaller company-specific ones. That's the story with this trio. Range and Antero were largely hit by the big stuff, while Vermilion benefited from a company-specific move.
Image source: Getty Images.
So what
The entire energy industry has been on edge of late thanks to the new coronavirus variant, omicron, that's starting to spread around the world. Although little is really known about the impact of this new, highly mutated version, investors have bounced back and forth between fearing the worst and assuming it will have a minimal impact. That said, oil prices are materially lower than they were just a week ago. Before the Thanksgiving holiday Brent crude prices were over $82 per barrel and in early trading on Dec. 3 they were in the $70-per-barrel range.
Investors have reacted to that drop as you would expect, by selling upstream energy names (drillers) like Range and Antero. That makes total sense, given that their top and bottom lines are directly tied to the price of energy. It hasn't helped that OPEC has decided to keep increasing its production as planned despite the new variant having clearly upset investors. In fairness, the oil group did note that it could adjust, if needed, but clearly the fear on investors' minds is about more supply and less demand. So, given that backdrop, it's not shocking that oil stocks were lower.
But what about Vermilion, which clearly bucked the trend this week? That comes down to an acquisition the company announced on Nov. 29, the Friday after Thanksgiving when trading on Wall Street is light because a large number of people take a four-day weekend. So a lot of people, from floor traders to mom-and-pop investors, didn't really get around to looking at Vermilion's purchase of a 36.5% interest in the Corrib Natural Gas Project until Monday of this week. The deal will bring Vermilion's total position in the project to 56.5% and make European natural gas 22% of Vermilion's production and 42% of its funds from operations. European natural gas often fetches premium prices, so the move should be a net positive. The company also increased its full-year 2022 production guidance.
These two bits of news led to a string of analyst upgrades and price target increases. Investors reacted accordingly and bid up the price of Vermilion, despite the other headwinds facing the energy sector right now.
Now what
Wall Street is not a simple place to understand. Sometimes big-picture issues drive the day and sometimes small, company-specific changes are paramount. And then there are times when both are playing a role at the same time. That's basically what happened this week with the disparate performances of Range, Antero, and Vermilion. Of the three, Vermilion's acquisition is probably the most interesting story and one that investors might want to look into a bit deeper as it changes the company's business in a potentially exciting way.
