What happened

Earnings season was in full force this week as several energy companies reported second-quarter results and provided updates on what to expect for the back half of the year. That said, not all those reports were positive, which caused the market to punish the offending parties.

In fact, the stocks of several energy companies plunged 20% or more this week after unveiling weak quarterly results and watering down their outlook. Among the biggest losers, according to data from S&P Market Intelligence, were Plains All American Pipeline (NASDAQ:PAA), Plains GP Holdings (NASDAQ:PAGP), Key Energy Services (OTC:KEG), and Smart Sand (NASDAQ:SND).

Oil workers clamping a pipe.

Image source: Getty Images.

So what

Key Energy Services tumbled more than 23% over the past week on the heels of its second-quarter report. That's after the oil-field service provider recorded an adjusted net loss of $29.4 million, or $1.42 per share, which was much worse than the $1.12 per share that analysts expected. Driving the weak result was further deterioration in its international businesses, which more than offset the fact that all its U.S. business segments generated positive underlying earnings thanks to the recovery in the U.S. shale market. While Key Energy Services noted that it sees opportunities on the horizon to capture the upside when market conditions improve, oil still hasn't stabilized to a level where its customers are comfortable ramping up activities.

Meanwhile, both Plains All American Pipeline and Plains GP Holdings plunged 20% this week after reporting second-quarter results. Overall, the oil pipeline company booked $451 million of adjusted EBITDA, which was down 12% sequentially and 5% versus the prior year. The culprit was margin pressure on its oil and natural gas liquids marketing activities, which it expects will continue throughout the second half of the year. As a result, Plains All American Pipeline pulled back its adjusted EBITDA forecast from $2.26 billion to $2.08 billion. Furthermore, it warned that it might need to reduce its distribution from $2.20 per unit to $1.80 per unit, which would force its parent Plains GP Holdings to cut its payout as well.

Finally, Smart Sand sank 20% this week after releasing its second-quarter results. The frack sand producer missed analysts' expectations on both the top and bottom line. While the company noted that revenue and earnings increased versus the first quarter, CEO Charles Young stated that "our results were not where we wanted them to be." Young noted that unplanned downtime at its Oakdale facility, operational inefficiencies due to the unavailability of railcars, and the timing of the completion of a third rail loop were all factors in results missing expectations. While Smart Sand believes it's getting these issues under control and sees heavy demand for its sand, there are increasing concerns that a sand glut might develop over the next year because rivals are boosting capacity, which has the market worried that profitability in the sector could fall.

Now what

The market punished these companies because their results and guidance suggest that they are falling behind rivals that faced many of the same challenges but still overcame them. That's why, despite their lower stock prices, shares of these companies aren't the best to buy because they have internal issues that they must first fix.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.