Why Core Labs, Centennial Resource Development, and QEP Resources Stocks All Dropped This Morning
Shares of U.S. energy driller Centennial Resource Development (NASDAQ: CDEV) fell as much as 13% in the first hour and a half of trading on Monday. Following close behind was fellow exploration and production (E&P) name QEP Resources (NYSE: QEP), which dropped roughly 10.5%. Energy services name Core Laboratories (NYSE: CLB) got in on the act as well, losing about 7.5% in early trading. The big news driving these declines were weak energy prices, with both crude oil and natural gas lower. But the real story here is bigger and perhaps even more important to understand.
The top and bottom lines at Centennial and QEP are tied directly to the commodities they produce. So falling energy prices often lead investors to sell their stocks. This is pretty much the norm when it comes to commodity companies like these, especially in a sector that's known for being volatile.
It's particularly notable this year, however, because energy prices are historically low thanks to the economic shutdowns used to slow the spread of the coronavirus. In fact, oil actually fell below zero at one point in early 2020, which technically means that, for a short period, drillers were paying customers to take oil. Even though oil has rebounded from those frightening depths, it is still hard for many E&Ps to turn a profit. So the shares of drillers are, perhaps understandably, extra sensitive to energy prices today.
Source Fool.com
