Oil prices have been clawing their way back to the $50 level since reaching a low in the mid-$20s in February. The commodity's decline, predictably, has had a negative effect on stocks in the sector, and landed a number of them in TheStreet's "Stressed Out" index.
Four stressed out crude plays are gaining today as crude futures move higher Wednesday, with West Texas Intermediate crude contracts making a new seven-month high midday.
The U.S. Energy Information Administration reported that U.S. crude supplies fell 4.2 million barrels, to a total of $537.1 million, for the week ended May 20. That is slightly less than the 5.1-million-barrel decline the American Petroleum Institute reported Tuesday, but ahead of S&P Global Platts' 3.3-million-barrel decline estimate.
"Taken alone, it's a pretty decent, fairly seasonally typical set of stats. Builds have turned into draws. However, given where inventories stand, in order to get really excited, we need to see some outsized draws, which have yet to materialize," Anthony Starkey, manager of energy analysis at Platts Analytics, a unit of S&P Global Platts said, according to Market Watch.
International benchmark Brent crude futures were up $0.96 to $49.57 per barrel while WTI crude futures were up $0.73 to $49.35 per barrel.
So while these stressed out names are experiencing some relief today, the oil sector is not out of the woods yet and is still susceptible to the volatility of the market.
Weatherford International (WFT) shares were up more than 8% on heavy volume Wednesday afternoon, continuing the security's strong showing this week. Weatherford has risen about 15% this week, in conjunction with the rise in crude prices.
That slight recovery might be the bounce the stock needs after free-falling following Weatherford's release of its latest quarterly results at the beginning of the month. Weatherford closed at $7.99 on May 2, but dropped as low as $5.27 the week following its earnings release. Now trading around $5.76, it remains to be seen whether Weatherford stock can climb out of its post-earnings hole.
Shares of Transocean (RIG) were up nearly 10% in afternoon trading, continuing their upward trajectory this week, though the stock gapped lower from the Friday session to the Monday session. Year to date, the shares have fallen more than 15%.
Transocean took a dip following its first-quarter earnings release earlier this month after analysts at RBC made a bearish call on the company despite its earnings beat.
"[W]e believe Transocean shares have limited upside until the market gains more confidence in the supply/demand outlook for floating rigs in 2017-18," analysts wrote, according to Barron's. "Currently, fundamentals continue to weaken for floating rigs, and it remains unclear where dayrates and utilization may bottom."
Shares of Tidewater (TDW) were up about 6% today on weak volume ahead of the release of the company's fiscal fourth-quarter financial results.
Tidewater is expected to swing to a loss after reporting earnings of $0.50 per share on revenue of $324.76 million in the year-ago period. Analysts forecast a net loss of $0.59 per share on revenue of $192.39 million. In the previous quarter, the company reported a net loss of $0.07 per share on revenue of $218.2 million, a 43.7% decline from a year earlier.
McDermott International (MDR) shares were 1.5% higher Wednesday afternoon, after spending time in both negative and positive territory today.
The company's stock was initiated with a Neutral rating by analysts at Sterne Agee on Tuesday. MDR has risen about 14% since its earnings release on May 5 when the company reported EPS of $0.13, topping analysts' estimates by a penny. Revenue for the period was $729 million, also ahead of $700.7 million consensus estimates.
Oil and oil services companies in the Stressed Out index still have a long way to go. But improving crude prices may have already planted the seeds of recovery for these securities. If investors can weather this storm the harvest may be lucrative.