Shares of natural gas driller Range Resources (NYSE:RRC) fell 13% at one point in midday trading on July 27. The stock managed to claw back some of the drop, however, and was sitting at a roughly 10% decline at 2 p.m. EDT. A company update on its second-quarter performance was the main driver of the decline.
The energy producer reported its second-quarter 2020 capital expenditure, production, and pricing ahead of its official earnings release. The news wasn't uniformly bad, but some very important numbers were pretty weak. On the positive side, natural gas equivalent production was up nearly 3% year over year in the quarter and about 2% sequentially from the first quarter of 2020. Both are positives. Further, the company was able to reduce its capital expenditures by around 20% sequentially, another positive.
However, the natural gas equivalent sales price Range Resources was able to achieve came in at $2.19 per thousand cubic feet. That was down from $2.55 in the first quarter and $2.87 in the second quarter of 2019. The second-quarter natural gas equivalent sales price represents a sharp decline from both earlier periods. That in turn suggests that, despite the positives, second-quarter earnings are likely to be hard reading. Investors reacted accordingly.
To be fair, this update isn't exactly shocking news. The U.S. energy market has been in disarray for some time, with COVID-19-related economic shutdowns punishing the prices of oil and natural gas. It has been so bad that, for a brief moment, oil drillers were effectively paying customers to take their oil. The supply-demand equation is deeply out of balance, and that will take time to fix. Until supply and demand are back in balance, or at least notably better balanced, Range Resources and all its peers will be treading a difficult path.