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Crude oil had another fairly quiet week. While the U.S. oil benchmark did slip roughly 1.5% to around $53 per barrel, notching its first weekly loss in three weeks, that decline was tame compared to what the market has endured over the past few years.
One thing weighing on oil prices is the concern that supplies could grow more than expected this year due to U.S. shale, which could keep a lid on oil prices. Those fears, along with some other company-specific issues, pushed down several oil stocks this week. Leading the way, according to data fromS&P Global Market Intelligence, were Hornbeck Offshore Services (NYSE: HOS), World Fuel Services (NYSE: INT), Denbury Resources (NYSE: DNR), and Jones Energy (NYSE: JONE):
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Hornbeck Offshore Services' stock got obliterated this week after reporting a deeper fourth-quarter loss than analysts expected. On top of that, the company warned that its liquidity could dry up at the end of next year because it has debt that starts maturing in 2019 that it does not think it can refinance unless offshore market conditions vastly improve. This revelation shocked the market and sent investors fleeing to avoid going down with what they fear is a sinking ship.
World Fuel Services' stock also got hammered this week after reporting weak fourth-quarter results and tepid forward guidance. The fuel logistics company missed the consensus estimate by a country mile and issued forward guidance for 2017 that was below expectations. At best, World Fuel Services sees a low-single-digit earnings rise this year, despite a focus on cost reductions and growth projects. Even with that meager growth, earnings would still trail 2015's result.
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Denbury Resources slumped after releasing its 2017 capex budget this week. While the enhanced oil recovery specialist said it would boost spending by 44% to $300 million, that would just be enough capital to keep its output roughly flat with last year. That outcome wasn't what investors wanted to hear, especially since most of Denbury's shale-focused U.S. rivals are returning to growth mode this year, with several large-cap producers aiming for double-digit oil growth.
Finally, Jones Energy's decline this week was largely a follow-through from last week's drop after it released its proved oil reserves and 2017 guidance. The company's reserves fell 7.6% year over year to 23.6 million barrels due to lower oil prices. In addition, Jones unveiled an initial capex budget of $275 million, which is up sharply from the $105.9 million it spent last year. That capital will enable the company to drill enough new wells to boost output to a range of 20,700 to 23,000 barrels of oil equivalent per day, which is up from last year's average of 19,200 BOE/D. However, investors are concerned that the company only had $282 million of liquidity and might be overreaching to fuel growth this year.
While top-tier shale drillers are predicting that 2017 will be a banner year, that outlook isn't shared by the entire industry. Companies focused on non-shale sources like Hornbeck and Denbury still need much higher oil prices to fuel growth. So while these stocksare all much cheaper after last week's sell-off, none appear to be compelling buys right now in my opinion.
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