Workers at a CNX Resources site in Pennsylvania in September.
Justin Merriman/Bloomberg
Short selling most energy stocks has been a losing bet for the past year and a half. Even companies that loaded up on debt to get through the pandemic have been rescued by the rise in oil and gas prices, so wagers against “problem” operators were likely to fail.
That may be one reason why short sellers are shying away from oil and gas producers now. In the middle of 2020, with oil prices down below $40, 13% of the float of the average producer was shorted, according to MKM Partners analyst John Gerdes. As of this month, only 4% of the shares available for trading by the public were shorted.
It’s tough to bet against the industry now, given that there are several factors that could make the stocks go higher. Most notable is the possibility that Russia will invade Ukraine, triggering sanctions that could lift prices of both oil and natural gas.
And yet, it is arguably a smart time to go short, because the consensus wisdom is that oil prices will stay high all year. Evidence to the contrary could send the stocks tumbling.
Gerdes listed the stocks in order based on the percentage of their float that has been shorted. One thing that stands out is that small stocks seem more attractive to shorts, at least on a percentage basis.
Seven stocks had at least 10% of their float shorted as of Jan. 31. They were Comstock Resources (CRK), Centennial Resource Development (CDEV), CNX Resources (CNX), Callon Petroleum (CPE), Laredo Petroleum (LPI), Magnolia Oil & Gas (MGY), and Chesapeake Energy (CHK).
“Conversely, companies with less than 2% float shares short include Equinor ASA (EQNR), Shell PLC (SHEL), TotalEnergies (TTE), BP (BP), Exxon Mobil Corporation (XOM), EOG Resources (EOG), Chevron (CVX), and ConocoPhillips (COP),” Gerdes wrote.
Write to Avi Salzman at [email protected]
