After dipping 4% and closing below $45 per barrel last week, crude came roaring back this week. Thanks to a one-two punch of supply issues in Nigeria and a report that demand growth accelerated in the second quarter, crude prices rose more than 5% this week and closed above $46 per barrel.
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That rally in the oil market, along with some company specific news, sent oil stocks bounding higher. According to data from S&P Market Intelligence, several oil stocks scored double-digit gains this week. Leading the way were Halcon Resources (NYSE: HK), Weatherford International (NYSE: WFT), Resolute Energy (NYSE: REN), Noble Corp (NYSE: NE), and Basic Energy Services (NYSE: BAS).
Halcon Resources led the charge, surging a remarkable 57% on the week after the driller announced that it sold its entire Bakken shale position for $1.4 billion in cash. That deal marks the culmination of a dramatic transformation for Halcon Resources, which recently emerged from bankruptcy. The transaction will accomplish two things. First, the cash infusion will enable the driller to pay off nearly all its high-cost legacy debt. In fact, the company will have a net cash position after the deal closes. Second, it will transform the company into a high-growth, Permian Basin-focused driller, with it on pace to nearly double its production from that play by year-end. That cash-rich balance sheet when combined with a fast-growing position in America's top shale play has investors growing bullish on Halcon's prospects.
Meanwhile, oilfield service stocks Weatherford International, Noble Corp, and Basic Energy Services all rallied more than 15% this week thanks to the rebound in oil prices as well as bullish commentary by analysts at Instinet. The research firm put out a report with nine reasons to be optimistic about oilfield services, which it sees making a comeback later this year. One of the reasons Instinet's analysts are bullish on the sector is that the oil market needs more than $40 oil to stay in balance, suggesting that oil could continue heading higher, which would drive demand for the services these companies provide. In addition to that, Noble Corp released its fleet status report this week, noting that it won a contract to drill one well later this year. While not a huge deal, it will keep that rig working for three more months.
Finally, shale driller Resolute Energy also rallied 15% this week, driven by the move in oil. After going on a stunning run last year thanks to rising oil prices, the company's stock has slumped in 2017 along with those prices as well as renewed balance sheet concerns after it tacked on $125 million of high-yield debt to finance an acquisition. While the company hopes to reduce its leverage later this year by finding a buyer for one of its legacy properties, it needs higher oil prices to keep its growth engine humming along. This week's data suggests that those rising prices just might be on the horizon.
The one move that clearly stood out was Halcon Resources. Investors loved that the company has completed a dramatic transformation, which positions it to deliver high-return growth in the coming years even at lower oil prices. That makes it an interesting stock to keep an eye on because it could have much more upside if its drilling program in the Permian delivers the results the company believes that it can.
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