SM Energy Company’s (SM - Free Report) , second-quarter 2018 adjusted earnings of 15 cents per share beat the Zacks Consensus Estimate of 6 cents. Meanwhile, the figure declined from the year-ago quarter’s earnings of 32 cents.
Total revenues surged 55.8% to $444 million from $285 million in the prior-year quarter and beat the Zacks Consensus Estimate of $371 million.
Higher oil production and liquids price realizations aided growth, offset by increased operating expenses.
The company’s second-quarter production was 115.2 thousand barrels of oil equivalent per day (MBoe/d), down 8% from the year-ago quarter’s level of 124.6 MMBoe/d. The decline was mainly caused by the divestment of producing properties.
SM Energy produced 278.3 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 26% year over year. Oil production increased 50% year over year to 47.9 thousand barrels per day (MBbls/d). Natural gas liquids contributed 20.9 MBbls/d to the total volume, down 31% from second-quarter 2017 level.
Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $34.91 compared with $26.57 in the year-ago quarter. Including hedging activities, average realized price of natural gas fell 9% year over year to $3.29 per thousand cubic feet (Mcf). Average realized prices of oil rose 28% to $55.42 per barrel and average realized prices of natural gas liquid grew 15% to $21.51 per barrel.
On the cost front, unit lease operating expenses (LOE) increased 13% year over year to $4.66 per Boe. Transportation expenses fell to $4.47 per Boe from $5.71 per Boe in the year-ago quarter. General and administrative expenses rose 11% to $2.76 per Boe from the prior-year quarter’s level of $2.49. Depletion, depreciation and amortization (DD&A) expenses were up 7% to $14.48 per Boe from the year-ago quarter’s level of $13.52.
Net cash from operating activities increased to $171.4 million during the quarter from $107.1 million in the year-ago quarter. As of Jun 30, SM Energy had a cash balance of $615.9 million and long-term debt of $2,660.703 million. The company had a debt-to-capitalization ratio of 49.3%.
Operating expenses amounted to $387.8 million in the second quarter, up from $268 million in the year-ago quarter by more than 44.7%. Exploration expenses increased to $14.1 million from $13 million in the year-ago quarter.
Q2 Price Performance
The company has outperformed the industry during the second quarter. The company’s shares returned 42.5% compared with the industry's 12.5% rise.
SM Energy raised 2018 production estimate to 43.5-45 MMBoe from the previous range of 40.9-44.9 MMBoe. Production for the third quarter is projected between 11.2-11.7 MMBoe. The company also increased 2018 capital expenditure budget by $40 million to $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 Canadian Natural Resources Limited (CNQ - Free Report) , China Petroleum and Chemical Corporation (SNP - Free Report) , also known as Sinopec, and Sunrun Inc (RUN - Free Report) . All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Canadian Natural Resources, based in Calgary, Alberta, is an exploration and production (E&P) company. It pulled off an average positive earnings surprise of 4.7% in the last four quarters.
Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the trailing four quarters.
Sunrun is engaged in offering solar services through various channels. The company delivered an average positive earnings surprise of 16.3% in the last four quarters.
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