SM Energy (SM) Posts Loss In Q3, Beats Revenue Estimates

SM Energy Company (NYSE:SM) reported a loss of a cent in third-quarter 2018, missing the Zacks Consensus Estimate of earnings of 15 cents. Meanwhile, the company incurred a loss of 25 cents in the year-ago quarter.

Total revenues surged 55.6% to $459 million from $295 million in the prior-year quarter and beat the Zacks Consensus Estimate of $428 million.

Higher oil production and liquids price realizations aided growth, offset by increased operating expenses.

Operational Performance

The company’s third-quarter production was 130.2 thousand barrels of oil equivalent per day (MBoe/d), up 12% from the year-ago quarter’s level of 116 MMBoe/d. The upside can be mainly attributed to strong well performance and higher processed NGL volumes.

SM Energy produced 295.3 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 7% year over year. Oil production increased 48% year over year to 54.9 thousand barrels per day (MBbls/d). Natural gas liquids contributed 26.2 MBbls/d to the total volume unchanged from third-quarter 2017 level.

Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $34.86 compared with $28.82 in the year-ago quarter. Including hedging activities, average realized price of natural gas fell 7% year over year to $3.53 per thousand cubic feet (Mcf). Average realized prices of oil rose 21% to $53.64 per barrel and average realized prices of natural gas liquid grew 12% to $21.16 per barrel.

On the cost front, unit lease operating expenses (LOE) declined 8% year over year to $4.41 per Boe. Transportation expenses fell to $4.20 per Boe from $5.24 per Boe in the year-ago quarter. General and administrative expenses declined 5% to $2.46 per Boe from the prior-year quarter’s level of $2.58. Depletion, depreciation and amortization (DD&A) expenses were up 33% to $16.78 per Boe from the year-ago quarter’s level of $12.61.

Liquidity

Net cash from operating activities increased to $229.7 million during the quarter from $128.5 million in the year-ago quarter. As of Sep 30, SM Energy had a cash balance of $176.8 million and long-term debt of $2,592.952 million. The company had a debt-to-capitalization ratio of 49.9%.

Operating Expenses

Operating expenses amounted to $568 million in the third quarter, up from $380.5 million in the year-ago quarter by more than 49.3%. Exploration expenses fell to $13.1 million from $14.1 million in the year-ago quarter.

Guidance

SM Energy narrowed its 2018 production range to 43.9-44.3 MMBoe from the previous range of 43.5-45 MMBoe. Production for the fourth quarter is projected between 11.3-11.7 MMBoe. The company reiterated its 2018 capital expenditure budget of $1.31 billion.

Zacks Rank & Key Picks

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

A few better-ranked players in the same sector are Hess Corporation (NYSE:E) , Enbridge Inc (NYSE:E) and Eni SpA (NYSE:E) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

New York-based Hess is a global integrated energy company. It delivered an average positive earnings surprise of 230.5% in the last four quarters.

Headquartered in Calgary, Alberta, Enbridge is a leading energy infrastructure company. In the trailing four quarters, the company delivered an average positive earnings surprise of 33.2%.

Based in Rome, Italy, Eni is among the leading integrated energy players in the world. The partnership witnessed a negative earnings surprise of 0.3% in the preceding four quarters.

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