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Independent oil and gas company SM Energy Company’s (SM - Analyst Report) second-quarter 2014 adjusted earnings of $1.56 per share missed the Zacks Consensus Estimate of $1.59. However, earnings surged 105.3% from 76 cents earned in the year-ago quarter on higher production.
 

Total revenue was approximately $675 million in the quarter, showing an improvement of 20.7% from $559.4 million in the prior-year quarter. Revenues also surpassed the Zacks Consensus Estimate of $620.0 million.

Operational Performance
 
The company’s second-quarter production came in at 147.0 thousand barrels of oil equivalent per day (MBoe/d), reflecting an improvement of 11.5% from the year-ago level of 131.8 MBoe/d.

SM Energy produced 417.2 million cubic feet per day (MMcf/d) of natural gas in the quarter, down almost 3% year over year. Oil production also grew 20.6% year over year to 42.8 thousand barrels per day (MBbls/d). Natural gas liquids contributed 32.1 MBbls/d to the total volume, up 41.1% from the second quarter of 2013.
 
Including the effect of hedging, the average equivalent price per barrel of oil equivalent (Boe) was $46.41 compared with $44.66 in the year-ago period. Average realized prices (inclusive of hedging activities) were $4.51 per thousand cubic feet (Mcf) of natural gas (up 6.6% from the comparable quarter last year), $86.60 per barrel of oil (down 3.4%), and $35.59 per barrel of natural gas liquid (down 1.1%).
 
On the cost front, unit lease operating expense (LOE) remained flat year over year at $4.69 per Boe. Transportation expenses increased to $6.20 per Boe (from $5.59 per Boe in the year-ago period); general and administrative expenses were $2.85 per Boe (down 12.5%); while depletion, depreciation and amortization (DD&A) expenses decreased 25.5% to $14.03 per Boe from the year-earlier level of $18.82 per Boe.
 
Liquidity
 
Net cash generated from operating activities increased to $415.4 million during the quarter from $314.1 million in the year-ago quarter. As of Jun 30, 2014, SM Energy had a cash balance of $163.8 million and long-term debt of $1,600.0 million, with a debt-to-capitalization ratio of 48%.
 
Zacks Rank
 
SM Energy currently carries a Zacks Rank #2 (Buy). Other stocks worth considering in the same sector include Newfield Exploration Co. (NFX - Analyst Report), Weatherford International plc (WFT - Analyst Report) and Cameron International Corp. (CAM - Analyst Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

 

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