Independent oil and gas firm SM Energy Company’s (NYSE:SM) first-quarter 2017 adjusted earnings of 18 cents per share compared favorably with the Zacks Consensus Estimate of a loss of 36 cents and the year-ago comparable quarter loss of 83 cents.
Total revenue skyrocketed 160% from $143.1 million in the prior-year quarter to $372.7 million. The top line also beat the Zacks Consensus Estimate of $314 million.
Significantly low operating expenses along with higher oil and gas equivalent realized prices supported the strong first-quarter results.
Operational Performance
The company’s first-quarter production came in at 134.4 thousand barrels of oil equivalent per day (MBoe/d), down 9% from the year-ago level of 147.5 MMBoe/d. The decline is mainly attributed to the divestment of producing properties during early March this year.
SM Energy produced 376.6 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 4% year over year. Oil production decreased 13% year over year to 39.2 thousand barrels per day (MBbls/d). Natural gas liquids contributed 32.5 MBbls/d to the total volume, down 12% from the first-quarter 2016.
Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $27.55 compared with $26.74 in the year-ago quarter. Including hedging activities, average realized price of natural gas increased 16% year over year to $3.50 per thousand cubic feet (Mcf). Average realized prices of oil fell 10% to $44.97 per barrel, whereas average realized prices of natural gas liquid grew 42% to $19.18 per barrel.
On the cost front, unit lease operating expenses (LOE) increased 1% year over year to $3.82 per Boe. Transportation expenses, however, decreased to $5.88 per Boe from $6.06 per Boe in the year-ago period. General and administrative expenses rose 3% to $2.08 per Boe from the prior-year level of $2.01. Depletion, depreciation and amortization (DD&A) expenses were down 29% to $11.39 per Boe from the year-ago level of $15.96.
Liquidity
Net cash from operating activities increased to $134.9 million during the quarter from $118.3 million in the year-ago quarter. As of Mar 31, 2017, SM Energy had a cash balance of $659.1 million and long-term debt of $2,898.6 million. The company had a debt-to-capitalization ratio of 52.6% compared with the 53.7% in the preceding quarter.
Operating Expenses
Operating expenses amounted to $207.1 million in the first quarter as against $669.8 million in the year-ago quarter, down approximately 69%. Exploration expenses declined to almost $12 million from $15.3 million in the year-ago quarter.
Q1 Price Performance
The company underperformed the Zacks categorized Oil & Gas-U.S Exploration & Production industry during the first quarter. During this period, SM Energy’s stock lost 30.3% compared with 11.1% decrease for the broader sector.
Guidance
SM Energy now estimates 2017 production in the range of 41.5–44.5 MMBoe as against 1.5 MMBoe from the prior guidance. Production for the second quarter is projected between 10.3–10.7 MMBoe. The company has maintained its 2017 capital expenditure budget at $875 million.
Zacks Rank and Key Stock Picks
SM Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector include McDermott International Inc. (NYSE:MDR) , China Petroleum and Chemical Corporation (NYSE:SNP) and Bellatrix Exploration Ltd. (TO:BXE) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
McDermott beat the Zacks Consensus Estimate in each of the trailing four quarters with an average positive surprise of 387.50%.
For 2017, China Petroleum is expected to witness 60.03% year-over-year earnings increase.
Bellatrix Exploration surpassed the Zacks Consensus Estimate in three of the prior four quarters with an average positive earnings surprise of 58.54%.
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SM Energy Company (SM): Free Stock Analysis Report
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