Independent oil and gas company
SM Energy Company
) third-quarter 2013 adjusted earnings of $1.54 per share
comfortably surpassed the Zacks Consensus Estimate of $1.09 per
share. The results also increased tenfold from the year-ago
earnings of 14 cents on the back of strong production.
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Total revenue was $613.1 million in the quarter, showing an
improvement of 61.8% from $379.0 million in the prior-year
quarter. The revenues also beat the Zacks Consensus Estimate of
The company's third-quarter production came in at 138.8 thousand
barrels of oil equivalent per day (MBoe/d). It also showed an
improvement of 34.4% from the year-ago level of 103.3 MBoe/d. The
growth was mainly attributable to the leasehold expansion in New
Ventures along with acreage addition in its Midland Basin and the
Powder River Basin.
The company intends to increase the liquids composition in its
portfolio, like its peer
Chesapeake Energy Corp.
). During the quarter, the company achieved its targeted liquids
composition of 50% of its total production.
SM Energy produced 418.1 million cubic feet per day (MMcf/d) of
natural gas in the quarter, up 22.9% year over year. Oil
production also grew 45.5% year over year to 41.6 thousand
barrels per day (MBbls/d). Natural gas liquids contributed 27.5
MBbls/d to the total volume, up 52.8% from the third quarter of
Including the effect of hedging, the average equivalent price per
barrel of oil equivalent (Boe) was $46.99 compared with $40.56 in
the year-ago quarter. Average realized prices (inclusive of
hedging activities) were $4.10 per thousand cubic feet (Mcf) of
natural gas (up 19.2% from the comparable quarter last year),
$92.78 per barrel of oil (up 12.9%), and $34.50 per barrel of
natural gas liquid (down 7.7%).
On the cost front, unit lease operating expense (LOE) decreased
2.5% year over year to $4.77 per Boe in the quarter.
Transportation expenses increased to $5.38 per Boe (from $3.90
per Boe in the year-ago period); general and administrative
expenses were $2.66 per Boe (down 21.5%); while depletion,
depreciation and amortization (DD&A) expenses decreased 24.3%
to $15.33 per Boe from the year-earlier level of $20.25 per Boe.
Net cash provided by operating activities increased to $404.5
million during the quarter from $243.3 million in the year-ago
quarter. As of Sep 30, 2013, SM Energy had a cash balance of
$0.176 million and long-term debt of $1,628.0 million, with a
debt-to-capitalization ratio of 50.6% (versus 51.6% in the
For the fourth quarter of 2013, SM Energy's production forecast
is 12.8 MMBoe/d to 13.5 MMBoe/d. The estimated LOE per Boe is
$4.65 to $4.90 while DD&A is projected in the $15.00-$16.00
SM Energy has increased its 2013 production forecast in the band
of 47.9-48.6 MMBoe/d from its earlier guidance of 47.3-48.6
With regard to its liquids focus, the company remains upbeat on
its New Ventures plan. Its acreage in the Permian Basin and in
East Texas have significant potential to boost its oil-weighted
SM Energy currently carries a Zacks Rank #2 (Buy). However, there
are other Zacks Ranked #1 (Strong Buy) stocks in the oil and gas
industry such as
TransAtlantic Petroleum Ltd
Northern Oil and Gas, Inc.
) that appear more attractive in the short term.