SM Energy (SM) Q3 Earnings Beat Estimates, Revenues Miss
Independent oil and gas firm, SM Energy Company’s SM third-quarter 2017 adjusted loss of 25 cents per share beat the Zacks Consensus Estimate of a loss of 32 cents. The figure also improved from the year-ago quarter loss of 37 cents. The improvement in the bottom line can be attributed to an increase in oil equivalent price for the third quarter.
Total revenue (Oil, gas, and NGL production sales) decreased to $294.5 million from $329.2 million in the prior-year quarter. Revenues also missed the Zacks Consensus Estimate of $297 million. The disappointing revenue performance was due to a decline in production and increase in operating expenses.
The company’s third-quarter production was 116 thousand barrels of oil equivalent per day (MBoe/d), down 24.6% from the year-ago level of 153.9 MMBoe/d. The decrease is mainly attributed to the fall in production from the Eagle Ford assets due to storms like Hurricane Harvey.
SM Energy produced 316.1 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 21.6% year over year. Oil production decreased 21.4% year over year to 37.1 thousand barrels per day (MBbls/d). Natural gas liquids contributed 26.2 MBbls/d to total volume, down 34% from the third-quarter 2016.
Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $28.82, compared with $27.31 in the year-ago quarter. Including hedging activities, average realized price of natural gas increased 27.2% year over year to $3.79 per thousand cubic feet (Mcf). Average realized prices of oil fell 11.3% to $44.47 per barrel, whereas average realized prices of natural gas liquid grew 17.3% to $18.86 per barrel.
On the cost front, unit lease operating expenses (LOE) increased 46.2% year over year to $4.81 per Boe. Transportation expenses decreased to $5.24 per Boe from $6.24 per Boe in the year-ago period. General and administrative expenses rose 10% to $2.16 per Boe from the prior-year level of $1.96. Depletion, depreciation and amortization (DD&A) expenses were down 8% to $12.61 per Boe from the year-ago level of $13.70.
Net cash from operating activities decreased to $128.5 million during the quarter from $158.1 million in the year-ago quarter. As of Sep 30, SM Energy had cash balance of $441.4 million and long-term debt of $2,905.358 million. The company had a debt-to-capitalization ratio of 54.6% in the third quarter.
Operating expenses amounted to $381 million in the third quarter compared with $370.3 million in the year-ago quarter. Exploration expenses increased to $14.2 million from $13.5 million in the year-ago quarter.
SM Energy has decreased its 2017 production estimate to 44.2-44.6 MMBoe from the earlier range of 44.5-46.5 MMBoe due to the storms in the Eagle Ford in the third quarter. Production for the fourth quarter is projected between 10.1 and 10.5 MMBoe. The company however maintained its 2017 capital expenditure budget at $875 million.
About the Company
Denver, Colorado-based SM Energy, previously known as St. Mary Land & Exploration Company, is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition and production of natural gas and crude oil in North America. The company’s operations are focused in five core operating areas in the United States — the ArkLaTex region, the Mid-Continent region, the Gulf Coast region, the Permian Basin region and the Rocky Mountain region.
Q3 Price Performance
SM Energy has gained 7.3% in the third quarter compared with 5.1% growth of its industry.
Zacks Rank and Stocks to Consider
SM Energy currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the oil and energy sector are Braskem S.A. BAK, Par Pacific Holdings, Inc. PARR and Northern Oil and Gas, Inc. NOG. Braskem and Par Pacific sport a Zacks Rank #1 (Strong Buy), while Northern Oil and Gas has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Braskem’s 2017 earnings are expected to grow 12.1% year over year. The company delivered a positive earnings surprise of 68.5% in the second quarter of 2017.
Par Pacific’s sales for the third quarter of 2017 are expected to increase 28.5% year over year. The company delivered an average positive earnings surprise of 195.3% in the last four quarters.
Northern Oil and Gas’s sales for the third quarter of 2017 are expected to increase 9.6% year over year. The company delivered an average positive earnings surprise of 66.7% in the last four quarters.
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