Riding steadily rising natural gas prices, stocks in Appalachian shale drillers have rebounded from a turbulent 2015 to outperform benchmark indexes throughout 2016.

An equal-weighted basket of the top 10 independent Appalachian gas producers gained 51% year-to-date through the end of trading Dec. 27, according to S&P Capital IQ data. By comparison, stocks in the 61-member S&P Oil & Gas Production Index rose 41%, while the S&P 500 gained 11%.

Two Appalachian shale producers, the coal miner-turned-gas-startup CONSOL Energy Inc. and the gas-startup-turned-mega-producer Rice Energy Inc., have more than doubled the value of their shares in 2016, while the stalwart shale pioneers Southwestern Energy Co. and Chesapeake Energy Corp. gained more than 50% after a disastrous 2015 that saw their market values cut by roughly 75%.

"We continue to see an underlying shift occurring in the U.S. natural gas production profile," S&P Global Ratings analyst Tom Watters said as he hiked the credit rating agency's benchmark natural gas price assumption to $3/MMBtu on Dec. 14. "Production growth has veered ... to the prolific Marcellus and Utica shale formations in the Northeast. We don't believe Marcellus and Utica have reached their full production potential."

Several years of reduced drilling activity, particularly for oil in Texas with its associated gas, were finally felt in 2016's commodity markets as injection rates into storage slowed during a long, hot summer, Watters said. But any upside is limited. "Producers are quickly able to meet any uptick in demand by, for example, increasing power generation, industrial production, or liquid natural gas exports. This effectively creates a cap on prices," Watters said. "While production of associated gas has slowed as shale oil production has fallen over the past year, any meaningful recovery in oil production will add volumes of gas that are insensitive to changes in gas prices."

Both the Appalachian and S&P driller indexes lost value after peaking in early December.

"Some investors are starting to question the bullish winter natgas trade, as natgas traded down ~3% despite [the U.S. Energy Information Administration] reporting the largest natgas draw (147 Bcf) at this time of the year since 2013," Sanford C. Bernstein & Co. LLC market watcher Alex Leung told his clients on Dec. 12. "I think the recent weakness is just profit taking as natgas is still up 27% in the last 20 days. If anything, the data is further confirmation that natgas markets are tightening up faster than expected, coinciding with natural gas consumption that is beginning to spike in December."

Leung dismissed the notion that natural gas stocks were benefiting from any "Trump bump" to the market following Donald Trump's November electoral victory. "Many investors think that Trump has 'reset' the cycle and early cyclicals are therefore the way to go," Leung said. "I argue that the recent rally has only accelerated the early cycle trade that was already picking up steam before the elections (as industrials are coming out of a recession)."

The 10 independent Marcellus and Utica shale drillers making up the Appalachian index are CONSOL, Rice, Southwestern, Chesapeake, EQT Corp., National Fuel Gas Co., Gulfport Energy Corp., Cabot Oil & Gas Corp., Antero Resources Corp. and Range Resources Corp.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.