Natural gas never managed to break $2 per thousand cubic foot and oil prices actually went negative. So Q2 results for energy companies were never going to be pretty. And with Covid-19 uncertainty still a threat up and down the value chain, it’s little surprise second half 2020 guidance has remained cautious.

Nonetheless, we’re seeing unmistakable signs of resilience, as well as the green shoots of recovery. And both are good reasons to buy best in class energy stocks, which continue to offer their most attractive yields in memory.

One of the green shoots is what appears to be the first monthly rise in North American hydraulic fracturing activity in months, with the final count returning to levels not seen since April. July activity has been particularly robust in the Permian Basin. But there are some signs of improvement elsewhere also, including the Anadarko (Oklahoma), Bakken, Eagle Ford (Texas) and Niobrara (Colorado) regions.

Since the previous issue of Energy and Income Advisor, energy stocks have backed off a bit more from their June 8 recovery high. The S&P 500 Energy Sector Index finished last week down -21 percent from that level, though it’s still 60.7 percent above the March 18 low.

Super majors-focused NYSE Arca Oil Index (NYSE: XOI) has given back -20.4 percent and is now up 71.6 percent from mid-March. And the midstream-heavy JP Morgan Alerian MLP Index ETN (NYSE: AMJ) has retreated -23 percent to a point 113.2 percent above the recent bottom.

Pullbacks like this one come with the territory when a market has risen as far and fast as energy stocks have since March. If it does extend, we’ll consider it an improved opportunity to buy best in class companies at better prices, with an eye on our Dream Buy levels.

Energy stocks have rallied hard in the month of May. The S&P 500 Energy Sector Index is now up more than 70 percent from its March 18 low. The super majors-focused NYSE Arca Oil Index (NYSE: XOI) is higher by 82 percent plus. And the midstream-heavy JP Morgan Alerian MLP Index ETN (NYSE: AMJ) is now better by 140 percent.

None of these indexes is as yet anywhere close to where it started the year. The S&P Energy Index is 60 percent under its all-time high in mid-2014, the last time oil sold for more than $100 a barrel.

True, benchmark WTI Cushing crude will run you about one-third of that now. The same is true for natural gas at Henry Hub, and prices are lower still at hubs in Appalachia and Canada. Unlike oil, gas has not rebounded appreciably from the March low.