What happened

Shares of Noble Energy, Inc. (NYSE:NBL) slumped 15.4% in August after the oil driller reported disappointing second-quarter results.

So what

Noble Energy generated $81 million, or $0.17 per share, of adjusted net income during the second quarter, which came in $0.05 per share below analysts' expectations. While production increased 11% year over year and was in the upper half of the company's guidance range, it didn't keep as tight a lid on costs as analysts anticipated.

The silhouette of three oil rigs against a twilight sky.

Image source: Getty Images.

However, the most disappointing news was that Noble Energy "plan[s] to reallocate some near-term investment to our other U.S. onshore basins," according to CEO David Stover, due to pipeline constraints in the Permian Basin. In doing so, Noble Energy joined ConocoPhillips (NYSE:COP) in publicly announcing plans to shift spending from the fast-growing Permian to another region until new pipelines come online toward the end of next year. While ConocoPhillips is reallocating its activity to the Eagle Ford, Noble will shift to the DJ Basin.

Because of that change of plan, Noble Energy now sees its full-year production rate coming in near the low end of its forecast. Worse yet, the company is increasing its capital budget due to higher drilling costs, meaning it's spending more money but getting less production. Contrast that with ConocoPhillips, which while also investing more capital than initially planned this year, expects output to come in above its forecast due in part to better-than-expected well results.

Now what

While Noble Energy is doing the right thing by shifting activity out of the Permian during a time when the region is running out of pipeline space, it hasn't done enough to assure investors that it can achieve its full-year plan. Because of that, investors should keep an eye on whether the company makes any changes to its outlook. If not, then last month's sell-off might turn into a good buying opportunity given the growth it currently has coming down the pipeline.

Matthew DiLallo owns shares of ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.