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

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SM Energy Company (SM - Free Report) 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.
 

SM Energy Company Price, Consensus and EPS Surprise

 

SM Energy Company Price, Consensus and EPS Surprise | SM Energy Company Quote

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 (HES - Free Report) , Enbridge Inc (ENB - Free Report) and Eni SpA (E - Free Report) , 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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