Shares of Laredo Petroleum (NYSE:LPI) sold off on Thursday and were down 11.5% at 12:56 p.m. EDT. While the company met expectations for earnings and production, investors' seemed to want even more after several rivals recently reported expectation-beating results.
Laredo Petroleum reported adjusted net income of $33.1 million, or $0.13 per share, which was in line with analysts' expectations. The company hit that target by delivering a 17% year-over-year increase in production while pushing lease operating costs down 8%. Those improvements came despite challenging conditions during the quarter, including one of the worst hurricanes in decades in terms of impact on the U.S. energy industry.
That said, its peers faced those same headwinds, and were still able to come out ahead of expectations. For example, fellow Midland Basin producer Pioneer Natural Resources (NYSE:PXD) smashed analysts' expectations during the third-quarter despite the heavy weather and a fire at a third-party natural gas processing plant, both of which forced the company to hold back some production. Pioneer shrugged off those drags on its results by drilling exceptional wells and driving down costs.
One other factor that could be weighing on Laredo's stock is that the company plans to join Pioneer and outspend its cash flow while chasing growth. The company noted that its current plan is to deliver a double-digit-percentage oil production growth rate over the next two years, with the hope of living within its operating cash flow by the end of 2019, which is similar to Pioneer's plan. While Laredo has a cash-rich balance sheet to fuel that growth, many rivals are starting to return their excess cash to investors instead of investing it in more wells that would produce excess oil, which is what has kept a lid on crude prices over the past few years.
Laredo wants to continue being a growth-focused oil company at a time when investors see crude production growth as the enemy of higher oil prices. The company's decision to stay on this path could put additional weight on its stock, especially if more drillers choose to focus on increasing shareholder returns instead of production.