SM Energy (SM) Beats Earnings And Revenue Estimates In Q1

SM Energy Company’s (NYSE:SM) first-quarter 2018 adjusted earnings of 7 cents per share beat the Zacks Consensus Estimate of 3 cents. However, the figure fell from the year-ago quarter’s earnings of 18 cents. Higher realized prices contributed to the growth. This was offset by higher expenses.

Total revenues skyrocketed more than 106% to $769.6 million in the prior-year quarter from $372.7 million. The top line beat the Zacks Consensus Estimate of $366 million.

Operational Performance

In the first quarter, production came in at 112.7 thousand barrels of oil equivalent per day (MBoe/d), down 16% from the year-ago quarter’s level of 134.4 MMBoe/d. The decline was mainly caused by reduced production in the Eagle Ford related to third party pipeline downtime.

SM Energy produced 280.2 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 26% year over year. Oil production increased 21% year over year to 47.4 thousand barrels per day (MBbls/d). Natural gas liquids contributed 18.6 MBbls/d to the total volume, down 43% from the first quarter of 2017.

Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $35.34 compared with $27.55 in the year-ago quarter. Including hedging activities, average realized price of natural gas fell 3% year over year to $3.39 per thousand cubic feet (Mcf). Average realized prices of oil jumped 25% to $56.39 per barrel, whereas average realized prices of natural gas liquid inched up 1% to $19.44 per barrel.

On the cost front, unit lease operating expenses (LOE) increased 30% year over year to $4.95 per Boe. However, transportation expenses declined to $4.63 per Boe from $5.88 per Boe in the year-ago quarter. General and administrative expenses rose 15% to $2.73 per Boe from the prior-year quarter’s level of $2.38. Depletion, depreciation and amortization (DD&A) expenses were up 13% to $12.87 per Boe from the prior-year quarter’s level of $11.39.

Liquidity

Net cash from operating activities increased to $140.1 million during the quarter from $134.9 million in the year-ago quarter. As of Mar 31, 2018, SM Energy had a cash balance of $643.3 million and long-term debt of $2,912.2 million. The company had a debt-to-capitalization ratio of 51.8%.

Operating Expenses

Operating expenses amounted to $310.5 million in the first quarter against $206.6 million in the year-ago quarter, up 50.3%. Exploration expenses increased to $13.7 million from $11.8 million in the year-ago quarter.

Q1 Price Performance

During the January-to-March period, SM Energy’s shares lost 18.3% compared with the industry’s 5.9% decline.

Zacks Rank & Key Picks

SM Energy currently carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Nine Energy Service, Inc (NYSE:NINE) , BP plc (NYSE:BP) and Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nine Energy Service is engaged in delivering onshore completion and production services to unconventional oil and gas resource development. The company pulled off a positive earnings surprise of 6.25% in the preceding quarter.

BP is among the leading integrated energy players in the world. The company delivered an average positive earnings surprise of 29.6% in the trailing four quarters.

Solaris Oilfield Infrastructure manufactures as well as provides patented mobile proppant management systems which unload, store and deliver proppant at oil and natural gas well sites. The company delivered a positive earnings surprise of 5.26% in the preceding quarter.

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