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SM Energy (SM) Incurs Narrower-than-Expected Loss in Q3

BAK ENB TRP SM

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Independent oil and gas company, SM Energy Company (SM - Free Report) posted third-quarter 2016 adjusted loss of 37 cents per share, significantly narrower than the Zacks Consensus Estimate of a loss of 63 cents. However, the quarterly loss was wider than a loss of 34 cents per share incurred in the year-ago quarter.


Total revenue was $352.7 million in the quarter, down 5% from $371.1 million in the prior-year quarter.

Operational Performance

The company’s third-quarter production came in at 153.9 thousand barrels of oil equivalent per day (MBoe/d), down 12% from the year-ago level of 174.5 MBoe/d. The decline was mainly attributable to termination of completion activity in the Eagle Ford shale.

SM Energy produced 403 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 14% year over year. Oil production also decreased 4% year over year to 47.2 thousand barrels per day (MBbls/d). Natural gas liquids contributed 39.5 MBbls/d to the total volume, down 16% from the third quarter of 2015.

Including the effect of hedging, the average equivalent price per barrel of oil equivalent (Boe) was $27.31 compared with $29.92 in the year-ago quarter. Including hedging activities, the average realized price of natural gas declined 7% year over year to $2.98 per thousand cubic feet (Mcf) and average realized prices of oil plunged 16% to $50.15 per barrel, whereas average realized prices of natural gas liquid remained unchanged at $16.07 per barrel.
 
On the cost front, unit lease operating expenses (LOE) decreased 15% year over year to $3.29 per Boe in the quarter. Transportation expenses decreased marginally to $6.24 per Boe from $6.27 per Boe in the year-ago period. General and administrative expenses were down 3% to $1.96 per Boe from the prior-year level of $2.02 Boe, while depletion, depreciation and amortization (DD&A) expenses were down 10% to $13.70 per Boe from the year-ago level of $15.19 per Boe.

Liquidity

Net cash from operating activities decreased to $158.1 million during the quarter from $235.3 million in the year-ago quarter. As of Sep 30, 2016, SM Energy had a cash balance of $980.7 million and long-term debt of $2,894.3 million, with a debt-to-capitalization ratio of 61% as against 71.4 % in the preceding quarter.

SM ENERGY CO Price, Consensus and EPS Surprise

 

SM ENERGY CO Price, Consensus and EPS Surprise | SM ENERGY CO Quote

Guidance

SM Energy estimates production for 2016 in the range of 55.3–56 MMBoe/d. Production for the fourth quarter is projected between 13.3 MMBoe/d and 14.0 MMBoe/d.

The estimated LOE per Boe is within $3.60–$3.65. The company has set its capital expenditure budget for 2016 at $700 million.

Zacks Rank

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

Some better-ranked players from the same sector are Enbridge Inc. (ENB - Free Report) , Braskem SA (BAK - Free Report) and TransCanada Corporation (TRP - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see tthe complete list of today’s Zacks #1 Rank stocks here.

Enbridge Inc. reported a negative earnings surprise of 10.00% in the prior-year quarter.
 
TransCanada posted a positive earnings surprise of 22.92% in the last reported quarter.

Enviva Partners has a mixed earnings surprise history. The partnership posted positive earnings surprises in two of the last four quarters. It reported a positive earnings surprise of 20.51% in the preceding quarter.

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