SM Energy (SM) Posts Q1 Loss As Expected, Revenues Miss

Independent oil and gas company SM Energy Company’s (NYSE:SM) first-quarter 2016 adjusted loss of 83 cents per share came in line with the Zacks Consensus Estimate. The company had posted earnings of 21 cents in the year-ago quarter.

Total revenue was $143.1 million in the quarter, down 60.9% from $365.9 million in the prior-year quarter. Revenues also failed to meet the Zacks Consensus Estimate of $280.0 million.

Operational Performance

The company’s first-quarter production came in at 147.5 thousand barrels of oil equivalent per day (MBoe/d), down 20.8% from the year-ago level of 186.4 MBoe/d. The decline was mainly attributable to termination of completion activity in the Eagle Ford shale.

SM Energy produced 392.2 million cubic feet per day (MMcf/d) of natural gas in the quarter, up 23.1% year over year. Oil production also decreased 22% year over year to 45.3 thousand barrels per day (MBbls/d). Natural gas liquids contributed 36.8MBbls/d to the total volume, down 15% from the first quarter of 2015.

Including the effect of hedging, the average equivalent price per barrel of oil equivalent (Boe) was $26.74 compared with $33.05 in the year-ago quarter. Including hedging activities, the average realized price of natural gas decreased 14% year over year to $3.02 per thousand cubic feet (Mcf); average realized prices of oil declined 15.2% to $49.94 per barrel; and average realized prices of natural gas liquid plunged 38.4% to $13.54 per barrel.

On the cost front, unit lease operating expenses (LOE) decreased 4.3% year over year to $3.79 per Boe in the quarter. Transportation expenses decreased marginally to 6.06 cents per Boe from $6.08 per Boe in the year-ago period. General and administrative expenses were down 7.7% to $2.40 per Boe from the prior-year level of $2.60 Boe, while depletion, depreciation and amortization (DD&A) expenses increased 23.1% to $15.96 per Boe from the year-ago level of $12.96 per Boe.

Liquidity

Net cash from operating activities decreased to $118.3 million during the quarter. The company had generated $283.9 million in the year-ago quarter. As of Mar 31, 2016, SM Energy had a cash balance of $0.05 million and long-term debt of $2,703.7 million, with a debt-to-capitalization ratio of 64.2% as against 53.9% in the prior-year quarter.

Guidance

SM Energy estimates production for 2016 in the range of 51–55 MMBoe/d. Production for the second quarter is projected between 13.1 MMBoe/d and 13.5 MMBoe/d.

The estimated LOE per Boe is within $4.10–$4.50, while LOE is projected in the $4.10–$4.50 range.

The company has set its capital expenditure budget for 2016 at $705 million.

Zacks Rank

SM Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include ReneSola Ltd. (NYSE:SOL) , Seadrill Partners LLC (NYSE:SDLP) and Braskem S.A. (NYSE:BAK) . All these sport a Zacks Rank #1 (Strong Buy).


BRASKEM SA (BAK): Free Stock Analysis Report

SM ENERGY CO (SM): Free Stock Analysis Report

RENESOLA LT-ADR (SOL): Free Stock Analysis Report

SEADRILL PTNRS (SDLP): Free Stock Analysis Report

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