CDEV - Why Centennial Resource Development QEP Resources and SM Energy Rallied by Double Digits at the Open Today
Shares of U.S. exploration and production company Centennial Resource Development (NASDAQ: CDEV) rose as much as 18.5% in early trading on Nov. 23. Not far behind were fellow energy players QEP Resources (NYSE: QEP) and SM Energy (NYSE: SM) , up as much as 10% and 12.5%, respectively, in the first hour of trading. The big news was a rise in the price of oil, but there's so much more going on.
Centennial Resource Development, QEP Resources, and SM Energy are all small U.S. oil and natural gas drillers, with market caps of roughly $300 million, $340 million, and $460 million, respectively. They are all also carrying a fairly significant amount of leverage, with financial debt-to-equity ratios of 6.5 times, 7.2 times, and nearly 13 times, respectively. Since energy prices are the main driver of top- and bottom-line performance here, rising oil prices have a positive effect on investor sentiment in general for these energy companies. But add in the size and debt issues, and rising energy prices tend to have an exaggerated influence.
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Why Centennial Resource Development, QEP Resources, and SM Energy Rallied by Double Digits at the Open Today