Shares of Range Resources (NYSE:RRC) slumped more than 10% by 12:45 p.m. EDT on Wednesday, after the gas producer reported second-quarter results.
Range Resources earned an adjusted $16 million, or $0.06 per share in the second quarter. While that was a noticeable improvement from the second quarter of last year -- when it lost $23 million, or $0.14 per share -- it was below the consensus estimate by $0.02 per share.
One of the issues is that Range's costs rose 1% versus last quarter due to higher workover and well service costs. Meanwhile, transportation, gathering, processing, and compression expenses were higher than last year's, though higher realized prices more than offset that impact.
In addition to those weaker earnings, Range also reduced its production growth forecast. The company now expects production to increase 30% this year, which is down from its initial guidance that output would jump 33% to 35% in 2017. Furthermore, the company narrowed its growth projection for 2018 and now sees it rising 10% to 20%, down from the initial forecast that it would rise 20% next year.
That forecast is in contrast with rival Cabot Oil & Gas (NYSE:COG), which recently reaffirmed the updated guidance it provided in the first quarter. That's worth noting because Cabot's updated projection is that it will boost production by 8% to 12% this year, which is above the initial forecast that output would increase 5% to 10%. Cabot can achieve that growth while generating free cash flow, which enabled it to boost the dividend 150% and start repurchasing stock. Range, on the other hand, is outspending cash flow right now, which is leading the company to start pursuing non-core asset sales to bridge the gap.
Range Resources provided investors with a double dose of bad news by missing expectations and reducing its forward guidance. The guidance cut is a bit concerning, because it's coming at a time when many rivals are accelerating their growth rates. That said, for investors who are bullish on natural gas, Range is now much cheaper. And the company still plans to deliver robust growth in the coming years, which could pay off if gas prices rebound.