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SM Energy (SM) Q2 Earnings Meet Estimates, Revenues Fall

Zacks

Independent oil and gas firm, SM Energy Company’s SM, second-quarter 2017 adjusted earnings of 32 cents per share were in line with the Zacks Consensus Estimate. Meanwhile, the figure improved from the year-ago comparable quarter loss of 44 cents.

Total revenue decreased 64.7% to $120.7 million from $341.8 million in the prior-year quarter.

Significantly low operating expenses were partially offset by lower oil and gas equivalent realized prices as well as lower production.

SM Energy Company Price, Consensus and EPS Surprise

SM Energy Company Price, Consensus and EPS Surprise | SM Energy Company Quote


Operational Performance

The company’s second-quarter production was at 124.6 thousand barrels of oil equivalent per day (MBoe/d), down 21% from the year-ago level of 157.2 MMBoe/d. The decrease is mainly attributed to the divestment of producing properties.

SM Energy produced 374.1 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 13% year over year. Oil production decreased 29% year over year to 32 thousand barrels per day (MBbls/d). Natural gas liquids contributed 30.3 MBbls/d to the total volume, down 26% from the second-quarter 2016.

Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $26.57 compared with $27.45 in the year-ago quarter. Including hedging activities, average realized price of natural gas increased 40% year over year to $3.63 per thousand cubic feet (Mcf). Average realized prices of oil fell 24% to $43.36 per barrel, whereas average realized prices of natural gas liquid grew 20% to $18.73 per barrel.

On the cost front, unit lease operating expenses (LOE) increased 24% year over year to $4.11 per Boe. Transportation expenses decreased to $5.71 per Boe from $5.95 per Boe in the year-ago period. General and administrative expenses rose 38% to $2.21 per Boe from the prior-year level of $1.60. Depletion, depreciation and amortization (DD&A) expenses were down 8% to $13.52 per Boe from the year-ago level of $14.75.

Liquidity

Net cash from operating activities decreased to $107.1 million during the quarter from $138.6 million in the year-ago quarter. As of Jun 30, SM Energy had a cash balance of $559.5 million and long-term debt of $2,901.948 million. The company had a debt-to-capitalization ratio of 53.7% compared with 52.6% in the preceding quarter.

Operating Expenses

Operating expenses amounted to $268.4 million in the second quarter as against $572.4 million in the year-ago quarter, down over 53%. Exploration expenses declined to $13.1 million from $13.2 million in the year-ago quarter.

Q2 Price Performance

The company has underperformed the industry during the second quarter, losing 31.2% compared to the industry's 15.1% decline.

Guidance

SM Energy has raised its 2017 production estimate to 44.5-46.5 MMBoe from the earlier range of 41.5–44.5 MMBoe. Production for the third quarter is projected between 10.8–11.2 MMBoe. The company has maintained its 2017 capital expenditure budget at $875 million.

Zacks Rank

SM Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Global Partners LP GLP, Braskem S.A. BAK and TransCanada Corp. TRP. All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Global Partners delivered a positive earnings surprise of 1200.00% in the preceding quarter. The company beat estimates in three of the trailing four quarters with an average positive earnings surprise of 415.30%.

Braskem delivered a positive earnings surprise of 107.79% in the quarter ending September 2016.

TransCanada delivered a positive earnings surprise of 12.00% in the preceding quarter. It surpassed estimates in two of the trailing four quarters with an average positive earnings surprise of 4.06%.

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