Shares of Antero Resources (NYSE:AR) fell 14.5% in July, according to data provided by S&P Global Market Intelligence. Weighing on the natural gas driller's stock was weaker pricing and its somewhat disappointing second-quarter results.
Natural gas prices tumbled last month, falling to a three-year low. Driving down the fuel's price is persistent oversupply because drillers continue to produce more gas than the market needs. The glut came in spite of robust gas consumption from the power industry last month. The sector generated record amounts of electricity to meet demand from air conditioners used to battle this summer's heatwave.
The weaker natural gas prices this year are having an impact on Antero Resources. That was evident during the second quarter, when the company reported a much larger loss than analysts had anticipated.
Antero has been working hard to battle against those headwinds by continuing to drive down costs. Those efforts are paying off, as the company reached its full-year cost reduction targets by midyear. That enabled it to incur its lowest level of capital spending since its initial public offering in 2013. Furthermore, Antero expects its costs to improve by another 10% to 14% next year. That should put the company in an even better position to navigate through what continues to be a challenging commodity price environment.
Antero continues to cut costs so that it can improve its profitability. However, the company is also part of the problem given that its gas output soared 28% year over year during the second quarter, which added to the U.S.A.'s gas glut. Unless Antero and its peers reduce their growth rates, they're going to keep putting downward pressure on the price of natural gas.