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SM Energy (SM) Q4 Earnings Beat Estimates, Stock Falls 9.3%
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Independent oil and gas firm SM Energy Company’s (SM - Free Report) fourth-quarter 2017 adjusted loss of 8 cents per share came narrower than the Zacks Consensus Estimate of a loss of 15 cents and the year-ago quarter’s loss of 31 cents. The improvement in bottom line can be attributed to an increase in oil-equivalent price and fall in operating expenses.
Although total revenues (Oil, gas and NGL production sales) decreased to $341 million from $380 million in the prior-year quarter, the figure beat the Zacks Consensus Estimate of $330 million. The year-over-year decline in revenue performance was due to a fall in production.
Even though SM Energy managed to beat the fourth-quarter estimates, investors seem concerned with the company’s 2018 outlook as the stock fell 9.3% following the earnings release. The company’s capital spending plan of $1.27 billion indicates a 36% rise from the prior-year figure of $936 million but the guidance for total production does not reflect much change, as shown below.
SM Energy Company Price, Consensus and EPS Surprise
In the fourth quarter, production was 112.6 thousand barrels of oil equivalent per day (MBoe/d), down 23% from the year-ago level of 145.6 MBoe/d. This stemmed from natural declines in Eagle Ford volumes and absence of new wells in the region.
Production in the fourth quarter reflects strong 21% sequential growth in Permian Basin volumes, which was more than offset by lower sequential Eagle Ford volumes as a result of the previously-announced joint venture as well as natural declines, as no new wells were completed in the Eagle Ford during the quarter.
SM Energy produced 282.5 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 26% year over year. Oil production decreased 5% from the prior-year quarter to 41.5 thousand barrels per day (MBbls/d). Natural gas liquids contributed 24 MBbls/d to total volume, down 37% from fourth-quarter 2016.
Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $32.16 compared with $27.59 in the year-ago quarter. Including hedging activities, average realized price of natural gas increased 26% year over year to $4.03 per thousand cubic feet (Mcf). Average realized prices of oil at $48.90 per barrel, came in line with the year-ago quarter, whereas average realized prices of natural gas liquid grew 11% year over year to $18.84 per barrel.
Costs
On the cost front, unit lease operating expenses (LOE) increased 39% year over year to $5.10 per Boe. Transportation expenses decreased to $5.01 per Boe from $6.39 per Boe in the year-ago period. General and administrative expenses flared up 36% to $3.38 per Boe from the prior-year level of $2.49. Depletion, depreciation and amortization (DD&A) expenses were down 1% to $12.69 per Boe from the year-ago level of $12.81.
Operating Expenses
Operating expenses amounted to $441.4 million in the fourth quarter compared with $664.3 million in the year-ago quarter. Exploration expenses decreased to $16.9 million from $23.7 million in the comparable quarter last year.
Liquidity
Net cash from operating activities increased to $144.8 million during the reported quarter from $137.8 million reported in the year-ago quarter. As of Dec 31, 2017, SM Energy had cash balance of $313.9 million and long-term debt of $2,908.770 million. The company had a debt-to-capitalization ratio of 54.9% in the quarter.
Proved Reserves
At the end of the year, the company had proved reserves of 468 million barrels of oil equivalent (MMBoe), which increased from 396 MMBoe reported at the end of 2016.
Guidance
SM Energy has set its 2018 production estimate to be within 42-46 MMBoe, of which 41% is expected to be oil. In comparison, the company’s production for full-year 2017 came in at 44.5 MMBoe. If the company’s 2018 production is at the lower limit of the guided range, it will be lower year over year, even though total capital spending for the full year is estimated to rise 36%.
Production for the first quarter of 2018 is projected between 9.5 and 10 MMBoe, of which 40% is expected to be oil.
Q4 Price Performance
SM Energy's shares declined 34.8% in the fourth quarter compared with the 14.4% fall of its industry.
Zacks Rank and Stocks to Consider
SM Energy carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the oil and energy sector are Cabot Oil & Gas Corporation , Continental Resources, Inc. and Pioneer Natural Resources Company (PXD - Free Report) . All these companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX-based Cabot is an independent energy company. Its sales for the fourth quarter of 2017 are expected to increase 34.7% year over year. For 2017, the bottom line is expected to be up a whopping 347.6%.
Based at Oklahoma City, OK, Continental Resources is an upstream energy company. Its revenues for first-quarter 2018 are anticipated to improve 54.1% from the prior-year quarter. The company witnessed a positive average earnings surprise of 64.9% in the trailing four quarters.
Irving, TX-based Pioneer Natural Resources is an independent oil and gas exploration and production company. Its revenues for first-quarter 2018 are expected to improve 22.8% from the year-ago quarter. For 2018, the bottom line is anticipated to be up a massive 163.4%.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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SM Energy (SM) Q4 Earnings Beat Estimates, Stock Falls 9.3%
Independent oil and gas firm SM Energy Company’s (SM - Free Report) fourth-quarter 2017 adjusted loss of 8 cents per share came narrower than the Zacks Consensus Estimate of a loss of 15 cents and the year-ago quarter’s loss of 31 cents. The improvement in bottom line can be attributed to an increase in oil-equivalent price and fall in operating expenses.
Although total revenues (Oil, gas and NGL production sales) decreased to $341 million from $380 million in the prior-year quarter, the figure beat the Zacks Consensus Estimate of $330 million. The year-over-year decline in revenue performance was due to a fall in production.
Even though SM Energy managed to beat the fourth-quarter estimates, investors seem concerned with the company’s 2018 outlook as the stock fell 9.3% following the earnings release. The company’s capital spending plan of $1.27 billion indicates a 36% rise from the prior-year figure of $936 million but the guidance for total production does not reflect much change, as shown below.
SM Energy Company Price, Consensus and EPS Surprise
SM Energy Company Price, Consensus and EPS Surprise | SM Energy Company Quote
Operational Performance
In the fourth quarter, production was 112.6 thousand barrels of oil equivalent per day (MBoe/d), down 23% from the year-ago level of 145.6 MBoe/d. This stemmed from natural declines in Eagle Ford volumes and absence of new wells in the region.
Production in the fourth quarter reflects strong 21% sequential growth in Permian Basin volumes, which was more than offset by lower sequential Eagle Ford volumes as a result of the previously-announced joint venture as well as natural declines, as no new wells were completed in the Eagle Ford during the quarter.
SM Energy produced 282.5 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 26% year over year. Oil production decreased 5% from the prior-year quarter to 41.5 thousand barrels per day (MBbls/d). Natural gas liquids contributed 24 MBbls/d to total volume, down 37% from fourth-quarter 2016.
Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $32.16 compared with $27.59 in the year-ago quarter. Including hedging activities, average realized price of natural gas increased 26% year over year to $4.03 per thousand cubic feet (Mcf). Average realized prices of oil at $48.90 per barrel, came in line with the year-ago quarter, whereas average realized prices of natural gas liquid grew 11% year over year to $18.84 per barrel.
Costs
On the cost front, unit lease operating expenses (LOE) increased 39% year over year to $5.10 per Boe. Transportation expenses decreased to $5.01 per Boe from $6.39 per Boe in the year-ago period. General and administrative expenses flared up 36% to $3.38 per Boe from the prior-year level of $2.49. Depletion, depreciation and amortization (DD&A) expenses were down 1% to $12.69 per Boe from the year-ago level of $12.81.
Operating Expenses
Operating expenses amounted to $441.4 million in the fourth quarter compared with $664.3 million in the year-ago quarter. Exploration expenses decreased to $16.9 million from $23.7 million in the comparable quarter last year.
Liquidity
Net cash from operating activities increased to $144.8 million during the reported quarter from $137.8 million reported in the year-ago quarter. As of Dec 31, 2017, SM Energy had cash balance of $313.9 million and long-term debt of $2,908.770 million. The company had a debt-to-capitalization ratio of 54.9% in the quarter.
Proved Reserves
At the end of the year, the company had proved reserves of 468 million barrels of oil equivalent (MMBoe), which increased from 396 MMBoe reported at the end of 2016.
Guidance
SM Energy has set its 2018 production estimate to be within 42-46 MMBoe, of which 41% is expected to be oil. In comparison, the company’s production for full-year 2017 came in at 44.5 MMBoe. If the company’s 2018 production is at the lower limit of the guided range, it will be lower year over year, even though total capital spending for the full year is estimated to rise 36%.
Production for the first quarter of 2018 is projected between 9.5 and 10 MMBoe, of which 40% is expected to be oil.
Q4 Price Performance
SM Energy's shares declined 34.8% in the fourth quarter compared with the 14.4% fall of its industry.
Zacks Rank and Stocks to Consider
SM Energy carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the oil and energy sector are Cabot Oil & Gas Corporation , Continental Resources, Inc. and Pioneer Natural Resources Company (PXD - Free Report) . All these companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX-based Cabot is an independent energy company. Its sales for the fourth quarter of 2017 are expected to increase 34.7% year over year. For 2017, the bottom line is expected to be up a whopping 347.6%.
Based at Oklahoma City, OK, Continental Resources is an upstream energy company. Its revenues for first-quarter 2018 are anticipated to improve 54.1% from the prior-year quarter. The company witnessed a positive average earnings surprise of 64.9% in the trailing four quarters.
Irving, TX-based Pioneer Natural Resources is an independent oil and gas exploration and production company. Its revenues for first-quarter 2018 are expected to improve 22.8% from the year-ago quarter. For 2018, the bottom line is anticipated to be up a massive 163.4%.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>