Please ensure Javascript is enabled for purposes of website accessibility

Energy Stocks Are Getting Crushed By Oil Prices Today (CPE, WPX, CNX, WLL, RICE)

By Matthew DiLallo - Jan 11, 2016 at 5:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Callon Petroleum, WPX Energy, CONSOL Energy, Whiting Petroleum, and Rice Energy are all getting pounded today.

What: The price of crude oil continues its slide down a seemingly bottomless pit, ending down 5% today to below $32 per barrel. That brought crude to its lowest settlement price since 2003 and took oil stocks down with it. Among the worst performers were Callon Petroleum (CPE 1.35%), WPX Energy (WPX), CONSOL Energy (CNX 0.88%), Whiting Petroleum (WLL), and Rice Energy (NYSE: RICE), all of which down by more than 10% by 3:00 p.m. EST on Monday.

So what: The continued slide in oil prices has two big impacts on producers such as Callon Petroleum and WPX Energy. First, it squeezes drilling returns, which for Callon Petroleum means that the 40% return it expected at a flat $40 oil price is no longer in its sights. Meanwhile, for a company like WPX Energy it will receive less cash flow on its unhedged oil production. With nearly 10,000 barrels of oil production per day currently unhedged, or roughly a quarter of its oil production, this drop will eat into WPX Energy's projected cash flow. Having said that, despite the impact oil prices have on producer cash flow and drilling returns, Whiting Petroleum's stock was actually upgraded by an analyst today. The analyst sees the recent pull back as a long-term opportunity, with Whiting Petroleum being a higher risk/reward name that has a lot of upside to a potential oil price rally. 

Meanwhile, natural gas-focused producers CONOSL Energy and Rice Energy are falling today because of the impact oil prices have on NGL prices, which is a big cash flow driver for these companies. NGLs are typically priced as a percentage of the oil price and with that price falling it is taking NGL values with it. In addition to that, CONSOL Energy is facing the additional weight from the fallout of a bankruptcy announcement from a rival in the coal sector, which is the other major commodity it produces.

Now what: With no bottom in sight for crude oil, it will likely lead to a lot more volatility for energy stocks. While there is a case to be made that producers like Whiting Petroleum or WPX Energy could be good long-term buys, these stocks are very high risk given that oil might still have further to drop.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

CONSOL Energy Inc. Stock Quote
CONSOL Energy Inc.
$17.19 (0.88%) $0.15
Whiting Petroleum Corporation Stock Quote
Whiting Petroleum Corporation
WPX Energy, Inc. Stock Quote
WPX Energy, Inc.
Callon Petroleum Company Stock Quote
Callon Petroleum Company
$41.22 (1.35%) $0.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/13/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.