Energy stocks were due for Friday’s rally. Here’s how we’re approaching our oil-and-gas names now
Oil stocks showed signs of life Friday, boosted by a sharp rise in crude prices. It’s an overdue move that may portend a further recovery rally. However, the energy sector still posted another weekly decline. West Texas Intermediate crude — the U.S. oil benchmark — jumped 4% to once again trade above $70 per barrel, although it’s still on track for its third-straight weekly loss. Natural gas on Friday rose nearly 2% to $2.14 per million British thermal units (BTUs). But that also wasn’t enough of an advance to avoid a weekly decline, its first in the past four weeks. Energy was the top-performing S & P 500 sector Friday, climbing around 2.6%, on pace for its best day since April 3. The energy sector entered the day down 10 of the last 14 trading sessions. CTRA YTD mountain Coterra Energy YTD performance A bright spot in Friday’s trading was Club holding Coterra Energy (CTRA), which rose as much as 9% before giving back some of those gains. The oil and natural gas exploration and production (E & P) company on Thursday evening reported better-than-expected results in the first quarter. Coterra skews higher on nat gas than many of the other E & Ps out there. On Friday’s post-earnings call, CEO Tom Jorden said he’s “highly constructive on gas” in the long run despite the commodity’s crash from more than $10 per million BTUs back in August to under $2 last month. Coterra’s guidance generally matched expectations. “This is the beginning, I think, of a real trend in oil,” Jim Cramer said Friday. PXD YTD mountain Pioneer Natural Resources YTD performance The Club took action on Jim’s bullish view early in the session, buying an additional 75 shares of Pioneer Natural Resources (PXD) after watching its stock fall from around $230 per share in mid-April — driven partially by a weak takeover report — to its Thursday close of around $206. In that time, the oil-and-gas firm reported solid first-quarter numbers and reinforced its strong capital return initiatives despite an impending CEO shakeup. The primary drag on E & P stocks over the past few weeks has been economic concerns. As fears of a recession — and, by extension, less demand for oil — mounted, the price of crude and related stocks sank. The slide completely erased any boost to prices provided by a surprise OPEC+ production cut in early April. WTI crude closed above $83 per barrel on April 12 and then began a downward trend that accelerated into this week. WTI settled $68.56 on Thursday, its fourth negative session in a row. Our calculus on energy stocks has changed as a result of this vicious move. After the unexpected OPEC+ output cut created a window to pare back exposure , the risk-reward in the oil patch looks more favorable. HAL YTD mountain Halliburton YTD performance We took advantage of that notion early Friday with the Pioneer purchase. Then later on the “Morning Meeting,” Jim said he’s taking a closer look at Halliburton (HAL), our third energy holding, to determine whether adding to that position is appropriate in the near future. Shares of the oilfield services firm tumbled 14% in less than three weeks, going from just under $34 each on April 18 to $29 on Thursday. Halliburton rose nearly 4% to $30 on Friday. Bottom line Ultimately, oil markets may have grown too pessimistic about the demand picture in the near term — for example, the April jobs report Friday morning painted a pretty robust labor picture in the U.S. — creating the conditions for a price comeback. If the recession narrative begins to dominate again and sink prices once again, we’re mindful that OPEC and its allies could take additional actions to try putting in a floor. All the while, our energy holdings — Coterra, Pioneer and Halliburton — are still quite profitable at current commodity levels and employ dividend and buyback programs that we covet. (Jim Cramer’s Charitable Trust is long CTRA, PXD and HAL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Oil stocks showed signs of life Friday, boosted by a sharp rise in crude prices. It’s an overdue move that may portend a further recovery rally. However, the energy sector still posted another weekly decline.
