The Hot Stock: Southwestern Energy Soars as Energy Flies

Energy stocks continued their strong performance following Opec’s potential agreement to limit oil production–and no energy stock in the S&P 500 was stronger today than Southwestern Energy (SWN).

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Southwestern jumped 4.8% to $13.84 today, easily topping the S&P 500′s 0.8% rise to 2,168.27, and the Energy Select Sector SPDR ETF’s (XLE) 1.4% gain to $70.61.

Southwestern Energy drills primarily for natural gas, not oil, but Opec’s agreement, if put into action, should lift all boats. Evercore ISI’s James West and team write that the Algiers framework “is a big step forward.” They explain why:

Following what OPEC leaders had previously referred to as “informal meetings” in Algeria this week, the cartel announced a coordinated output cap of 32.5-33.0 MMBPD to be implemented toward the end of the current calendar year. Needless to say, the surprise deal announcement is another stark reminder of the importance of OPEC cooperation for global crude markets, and while several logistics details still need to be discussed before executing a group output limit, we are encouraged by OPEC’s cooperation thus far. Getting Russia and several other non-OPEC producers involved in the production plan will also be important, but we remain constructive on supply fundamentals, and anticipate that flat OPEC output would cause demand to exceed production in every quarter of 2017. Algiers was a big step forward.

Oil stocks responded immediately to Opec–Murphy Oil (MUR) was our Hot Stock on Wednesday when the deal was reached, while Transocean (RIG) was our Hot Stock on Monday even before an announcement was made–Southwestern is only now catching a bid, a bid that pushed its market capitalization up to $6.5 billion.

Southwestern Energy reported a net loss of $4.6 billion on sales of $2.9 billion in 2015.

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