Why WPX Energy Inc's Stock Is Tumbling Today

MarketsMotley Fool

What happened

Shares of WPX Energy Inc (NYSE: WPX) tumbled on Monday and were down 10% at 2:45 p.m. EDT, getting pulled under alongside the stock market and oil prices.

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So what

The market took another nasty dive on Monday, driven by a variety of fears from rising interest rates to increasing trade war tensions. This decline seemed to weigh on oil prices as well, with crude sliding about 3% in its worst sell-off in nearly seven weeks, closing at around $63 per barrel. That drop in crude prices sent most oil stocks down today, though WPX Energy took one of the worst beatings by declining about 10%.

The reason WPX Energy's stock is taking a tumble today is that it might not earn as much money if oil prices remain at current levels or fall further. However, it's worth noting that WPX Energy has hedges in place covering 56,979 barrels per day (BPD) this year at an average price of around $53 a barrel. For a company that's on pace to produce 75,000 to 80,000 BPD this year, that's a significant level of coverage, meaning that today's drop would have a minor impact on cash flow overall. Further, the company recently sold several assets, including a $700 million sale that closed last week, which significantly improved its balance sheet so that it can better withstand another dive in oil prices.

Now what

Today's sell-off in WPX Energy is still a bit of a headscratcher. While the company does produce oil, it has hedged the bulk of it at well below the current price, minimizing the impact. Because of that, growth-focused investors might want to consider taking a closer look at this high-octane oil stock.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.