What happened

Shares of RigNet (NASDAQ:RNET) plunged as much as 12% by 3:15 p.m. EDT on Wednesday. The main factor weighing on the offshore communications and software company's stock was sinking oil prices. It's the company's second big sell-off this week.

So what

Crude prices sold off Wednesday, with the global benchmark price, Brent, tumbling 4.6% to around $56 per barrel. The main issue was an unexpected rise in U.S. oil storage levels. That prompted fears that demand isn't growing fast enough to offset rising production in the country. That slump in the oil market weighed on shares of RigNet. The market is worried that oil companies might reduce their investments in offshore drilling projects, which would impact demand for its services.

An offshore drilling rig in a storm.

Image source: Getty Images.

Another factor putting pressure on RigNet's stock is its lackluster second-quarter results, which it reported Monday evening. Shares plunged after the company's results missed analysts' expectations. Not only did its revenue come in below their consensus, but it also reported a larger-than-expected loss than.

Meanwhile, on a more positive note, RigNet announced today that it secured a multiyear contract extension with offshore driller Valaris (NYSE:VAL). RigNet will continue providing managed communications services to Valaris' fleet, including its 5GE network in the Gulf of Mexico.

Now what

Shares of RigNet tend to be very volatile when crude prices make a big move. That's because the company continues to feel the impact of a weak offshore drilling market, which has yet to bounce back from the industry's last downturn. That volatility will likely continue, since neither crude oil nor the offshore drilling market appears to be on the cusp a sustained rebound.

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