Oil stocks slip as crude falls below $62
by Jim JelterEnergy stocks bounced through a rocky session Monday, with sharply weaker crude-oil prices taking a late-day toll on the oil sector. Natural gas stocks fared better, managing to gain ground despite the late sell-off.
At the close, the Amex Oil Index ($XOI :1,238.20, -4.39, -0.4% ) was down 0.4% at 1,238 points, retreating from a midday high of 1,253 that established a new all-time intraday high for the index. The Philadelphia Oil Service Index ($OSX :0.00, 0.00, 0.0% ) slipped 0.1% to 219.6 points while the Amex Natural Gas Index ($XNG :488.59, +2.61, +0.5% ) posted a 0.5% advance to 488.6 points, also notching a 52-week high along the way.
Crude oil for May delivery was stung by a $2.77, or 4%, drop to $61.51 a barrel. The move built on follow-through selling on the heels of Iran's release last week of 15 British sailors and marines. The New York Mercantile Exchange was closed on Friday. See Futures Movers.
Several downgrades clipped the sector,
all citing valuation as a key reason.
all citing valuation as a key reason.
Standard & Poor's cut its rating on refiner Tesoro Petroleum Corp. (TSO :107.56, +1.77, +1.7% ) to sell from hold, pointing to a 67% jump in its share price since January. This is putting the company on track toward overvaluation, according to analyst Tina Vital. But the message was mixed, tempered by an upward revision in Tesoro's price target and near-term earnings outlook.
"We are raising our 2007 operating EPS estimate by $1.45 to $10.23, but reducing our 2008 by 72 cents to $8.23. Blending our DCF and relative valuations, we are lifting our target price by $2 to $83, reflecting an expected enterprise value of almost four times our 2007 EBITDA estimate, a discount to peers. Well above that level, we see shares overvalued and are cutting our opinion to sell," Vital said.
At the end of the day, investors appeared most impressed with the positive factors in S&P's research note, sending Tesoro shares 1.7% higher to close at $107.56.
Meanwhile, Lehman Brothers singled out Murphy Oil Corp. (MUR : 53.16, -0.71, -1.3% ) and Hess Corp. (HES :55.08, -1.21, -2.1% ) for downgrades, pointing to share prices now at lofty premiums to their underlying net asset values. Murphy fell 1.3% to $53.16 a share while Hess fell nearly 2.2% to $55.08 -- a major drag on the Amex oil group. At the opposite end of the scale, Valero Energy Corp. (VLO :67.15, +1.14, +1.7% ) led percentage gainers in the group on a 1.7% advance to $67.15.
Among index heavyweights, Exxon Mobil Corp. (XOM :76.80, -0.42, -0.5% ) fell 0.5% to $76.80, Chevron Corp. (CVX : 75.49, -0.12, -0.2% ) dropped 0.2% to $75.49, coming off a 52-week high of $76.40, and ConocoPhillips (COP :68.42, +0.46, +0.7% ) rose 0.7% to close at $68.42.
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