Colorado petroleum shares has dreadful quarter for U.S. stocks amid coronavirus
The first quarter, especially March, will go down in the record books for U.S. stock markets, including a majority of Colorado companies. But investors should stay buckled in — there many more bumps ahead.
“The first quarter of 2020 was historic and terrifying,” said Fred Taylor, president of Northstar Investment Advisors in Denver. “A medical pandemic caused a financial pandemic at the exact same time oil prices collapsed to $ 20 a barrel.”
Any of those three would have been enough on its own to send the market into a correction. In a two-week window, all three arrived at once, what Taylor calls a perfect storm that “no one alive in the financial services business has ever seen before.”
The Bloomberg Colorado index, a price-weighted basket of 60 stocks based in the state, was up 4.7% through Feb. 20. By March 31, it had lost 28.6%, taking a heavier hit than the one dealt the Dow Jones industrial average, down 23.2%, the S&P 500, which shed 20%, or the Nasdaq composite index, down 14.2%.
Colorado’s large concentration of oil and gas producers explains much of the underperformance. Faced with an unprecedented drop in demand because of the pandemic, Saudi Arabia asked Russia to cut production.
Russia refused and Saudi Arabia began pouring its massive supplies out into the market at sharply discounted prices. That, in turn, pushed domestic oil down to around $20 a barrel, a price far below what U.S. producers need to cover production costs, much less all the debt they took on.
Denver-based Centennial Resource Development suffered the biggest percentage drop in market value, 94.3%, of any Colorado company. In April of last year, Centennial shares were trading at $10.95. On Tuesday, they closed at 26 cents.
Centennial Resource was hardly an exception. Shares of QEP Resources shed 92.6%, Whiting Petroleum shares dropped 90.9%, SM Energy shares fell 89.1%, Ovintiv shares careened 88.5%, Sundance Energy shares evaporated 88.1%, HighPoint Resources shares cratered 88.8%, Extraction Energy tumbled 80%.
After energy and commodity companies, businesses targeted in closure orders to reduce the spread of the novel coronavirus took the hardest hit. Shares of restaurant chain Red Robin Gourmet Burgers fell 74.2%, while Century Casinos shares dropped 69.6%, and bad times hit Good Times Restaurants, which saw a 63.5% decline in its shares.
As ugly as things were, about a half dozen Colorado stocks managed to end the quarter higher, led by Aytu BioScience. The Engelwood biotech company saw its shares surge on March 10 after it announced it had signed a distribution agreement with a Hong Kong company for a rapid novel coronavirus test.
Investors pushed Aytu shares up nine-fold from $0.33 to $2.99 in a single day. They have since retreated by about half, but Aytu shares ended the quarter with a 54.2% gain.
A Lone Tree medical device maker called Zynex saw its shares rise 37.2%, with most of that coming in the second half of February. Shares for Denver-based Newmont Corp., the country’s largest gold producer, ended up 4.2%, as investors couldn’t figure out whether they loved or hated gold.
Gold is usually viewed as a hedge in times of trouble. Shares of Newmont hit $52.35 on March 6, their highest value since 2012. But then investors had a change of heart and Newmont shares dropped all the way to $39.50 on March 13. Then investors realized gold might be useful. Newmont shares closed at $45.28 on Tuesday.
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