What happened

Shares of energy company Kosmos Energy (KOS 0.35%) fell as much as 10.5% on Monday. By roughly 2:30 p.m. EST today, the stock was still holding on to most of that loss, down roughly 9.5%. With oil and natural gas prices roughly flat, the big news was really the exploration and production company's third-quarter earnings update.

So what

As you might expect from the market reaction, Kosmos' third-quarter earnings weren't exactly what investors were hoping for. On the top line, revenue came in at $200.5 million, down from roughly $225 million in the same period of 2020. That's after a rather notable run-up in energy prices, with the company's average sales price per barrel of oil equivalent jumping from $41.05 last year to $66.10 this year. Only when you include hedging, the average sales price fell to $47.68. Sometimes hedging works against a company.

An offshore drilling rig.

Image source: Getty Images.

That said, there was an even bigger negative in the update. Volumes sold in the third quarter of 2021 fell to roughly 3 million barrels of oil equivalent from nearly 5.5 million in the same quarter last year. So, as oil prices have been on the rise, Kosmos appears to be missing out on the improvement, in both price and volume. That's not great news. On the bottom line, meanwhile, the company posted an adjusted loss per share of $0.11. That was a penny better than the $0.12 loss a year earlier, but certainly not the improvement that some might have been expecting given the run-up in energy prices.

Now what

Kosmos is a fairly small energy company, with a $1.5 billion market cap, and it doesn't have the diversification of its larger brethren, like an integrated giant such as Chevron or ExxonMobil. It tends to be more volatile overall. And over the past year, the stock is up more than 240%, even after the drop today. So there's a lot of good news priced into the stock right now, but the third-quarter earnings weren't really great news. It makes sense that investors weren't in a buying mood today. Most investors, meanwhile, would probably be better off with a larger energy company.