The pummeling of oil and natural gas producer stocks, which began last week, continued Monday as the Dow Jones Industrial Average plunged 634 points on the first day of trading after Standard & Poor’s (S&P) late Friday downgraded the United States credit rating from “AAA” to “AA+.”

The Dow plunged below 11,000 for the first time since last November, dropping 5.55% to settle at 10,809.85. But the index was still well above its drop below the 7,000 level in March 2009.

Independent producers took a bigger hit than the integrated majors since last Tuesday, when the steep and steady decline in stocks began. Newfield Exploration, Range Resources, Chesapeake Energy and Anadarko Petroleum incurred the greatest percentage losses during the past week — 26.3%, 21.8%, 20.8% and 22.6%, respectively, according to NGI’s estimates.

During the last week, Newfield’s stock dropped from $66.91 to $49.31, while Range Resources’ stock fell to $51.90 Monday from $66.33 the prior Monday. Chesapeake Energy’s stock tumbled to $27.20 a share from $34.15 week-over-week. Anadarko’s stock, which was extremely volatile Monday, fell to $64.12 a share from $82.66 last Monday.

Devon Energy suffered a 16.1% drop in its stock to $65.35 from $78.32 on August 1.

The integrated majors generally fared better than the independents since their refinery and diversified holdings lessened the pain of the last week’s drop in oil prices. However, Hess Corp. slid from $68.44 to $53.55 over the last week, a drop of 21.8%.

BP plc’s stock, which had been working its way up from the large hit it took after its Deepwater Horizon explosion and oil leak in April 2010 (see Daily GPI, April 26, 2010), also lost ground in the latest market crash. BP’s stock dropped 15.4% in the last week to $38.19 from $45.13 a share.

Chevron Corp., with the highest stock price going into the dip, dropped 14.4% within a week’s period to $90.25.

Royal Dutch Shell posted 17.3% decline in its A shares to close Monday at $60.01 compared to $72.55 last week.

ExxonMobil Corp.’s stock took the smallest hit, dropping 11.8% to $70.19 a share from $79.60 last Monday.

Overall, the five aforementioned independent stocks fell by an average of 21.6%, while the comparative list of five integrated companies declined by 16.1% on average. On a total return basis, the integrated companies fell somewhat less than that, since BP and Royal Dutch Shell paid respective dividends of $0.42 and $0.84 on August 3.

“North American oil and gas equities plummeted at the end of last week in anticipation of a downgrade of U.S. credit (which occurred on Friday) and the ongoing debt crisis in Europe. West Texas Intermediate [WTI] crude oil hit [its] lowest in six months amid growing concerns that the world is slipping back into a recession, although positive U.S. jobs data offered some hope,” analysts with BMO Capital Markets wrote Monday.

“We continue to recommend that investors exercise caution. While good value has arguably emerged within the [oil and gas] group, we believe the economic turmoil will not end soon and will keep downward pressure on oil prices and oil and gas equities,” they said.

On the same day that it downgraded the U.S. credit rating, S&P released a report saying the “credit quality for the U.S. oil and gas sector is — and should remain — relatively stable for the remainder of 2011 and into 2012” in its view.

“The ongoing gradual improvement in GDP [gross domestic product] supports oil prices and could aid natural gas, which accounts for 30% of industrial energy demand, though excess supply will continue to set the direction of natural gas prices. Our 2011 and 2012 forecast for [WTI] oil of $97.67 and $103.59 per barrel bodes well for exploration and production companies with a focus on oil and oilfield services and drilling contract companies,” the report said.

“We believe only a decline in supply could trigger an improvement in natural gas prices,” S&P said. Specifically, it said natural gas prices would rise when:

“Barring a recession, the confluence of these factors could reestablish the relationship between gas prices and rig count and ultimately lead to a reduction in natural gas inventories, thus increasing prices,” the S&P report said.