This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.
Shares of Southwestern Energy (SWN) jumped more than 6% in midday trading Tuesday, topping the S&P 500 along with industry peer Williams Companies (WBS), amid a rally in natural gas prices.
The Spring, Texas-based natural gas and oil exploration giant has so far managed to make 2016 into a major turnaround year, with shares up 96% so far, despite a Standard & Poor's downgrade of its nearly $5 billion debt to sub-investment grade in February.
"The reality is prices are going up and it's predicated on the weather," Kyle Cooper, an analyst with IAF Advisors, said in a Tuesday phone interview with Real Money, noting that natural gas prices are generally quickest to respond in forecasts of rising temperatures, especially in demand fluctuations for air conditioning units.
Southwestern Energy shareholders should also keep a close eye on the U.S. Energy Information Administration monthly report, Cooper added, noting the Thursday publication will likely show a significant contraction in the pace of natural gas surplus building year over year.
"The underlying demand for natural gas is very strong," he said. "It's actually not that much above normal in forecast, and am honestly surprised today by the strength of the market. We're still building, but the storage report set to be released Thursday is going to be significantly reduced inventory surplus," he added.
Natural gas companies, including Chesapeake Energy (CHK) and Diamond Offshore (DO), were lifted Tuesday by a more than 4% gain in July futures contracts, which ticked up on forecasts of warmer weather to $2.28 per British thermal unit -- hitting a four-month high. (Chesapeake and Diamond are on Real Money's "Stressed Out" watch list.)
Meanwhile, shares of Chesapeake Energy were up 5%, followed by 4% gains in Diamond Offshore share prices.
Southwestern Energy shareholders have also benefited this year from a sharp rise in crude oil prices, which jumped more than 1% Tuesday to just under $50 a barrel, and have risen more than 33% on the year, based on U.S. benchmark West Texas Intermediate.
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