Energy Stocks Slump This Week

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Image Source: Transocean.

The price of crude oil seems to have hit a ceiling at $40 a barrel and has been heading in reverse ever since it topped

that mark last week. Just this past week alone it fell about 6%, closing at just under $37 per barrel. That slump pushed down a whole host of energy stocks and, according to S&P Capital IQ data, some of the worst-performing energy stocks during

this week were Transocean (NYSE: RIG), California Resources (NYSE: CRC), Tesoro (NYSE: TSO), Unit (NYSE:

UNT), and CARBO Ceramics (NYSE: CRR).

What:

Transocean (NYSE: RIG) slumped 10% this week.

So What: Key driver: Oil prices and an

offshore driller downgrade Crude oil was weak again this

week, which put downward pressure on oil stocks, especially offshore drillers because they need oil to really rebound in order to fuel a rebound in drilling activity

Now What: In fact, with crude back below $40

a barrel, analysts at Barclays don’t expect the offshore drilling market to recover until 2018

Given this outlook, Barclays downgraded Ensco and Atwood Oceanics this week, which both joined Transocean with an underweight rating

Key takeaway: With no apparent upside for a few years, investors have no reason to be bullish

What:

Tesoro (NYSE: TSO) fell 10.3% this week.

So What: Key driver: Gasoline market

update The U.S. Energy Information

Administration’s weekly petroleum report showed that crude oil imports were 9.8% higher than last year’s average at the time

Meanwhile, gasoline supplies rose 5% over last year to 9.4 million barrels

Now What: Given that imported oil is

typically more expensive, it suggests that refining margins could be squeezed

Key takeaway: Investors didn’t like what they saw in the data and sold off refining stocks like Tesoro

What:CARBO Ceramics (NYSE: CRR) dropped 10.7% this week.

So What: Key driver: Weak crude oil

prices The slump in oil and gas prices

has had a deep impact on the business of proppant producers like CARBO Ceramics

With the price of oil weakening again over the past two weeks, it suggests that the worst might not be over for the industry

Now What: That’s a tough break for CARBO

Ceramics because it needs much higher oil and gas prices in order for its customers to be able to justify the higher costs of its products

Key takeaway: With oil prices deflating, its taking with it the hope that activities will improve and provide a needed boost to CARBO’s business

What:

Unit (NYSE: UNT) fell more than 11% this week.

So What: Key driver: Slumping oil

prices All three of Unit’s business

units are impacted by lower commodity prices

As such, when oil slumps it has the potential to weaken the cash flow generated across the company

Now What: That said, Unit’s oil and gas

segment is seeing the biggest impact of the decline in oil prices with the company choosing to cease all drilling activity after the first quarter while it waits for prices to improve

Key takeaway: With prices not improving, Unit could have a very tough year in 2016

What:California Resources (NYSE: CRC) slumped over 20% this week.

So What: Key driver: Slumping oil

prices After roaring higher earlier in

the month California Resources has been coming back down to earth in recent weeks

Despite that breather, the stock is still up 75% during the past month

Now What: The reason the stock is

coming back down so sharply is because it does need much higher oil prices to support its large debt load

Key takeaway: With oil coming down, it could impact this company's ability to stay afloat

This could be the next billion-dollar iSecret