Independent oil and gas company
SM Energy Company
) fourth-quarter 2012 adjusted earnings of 45 cents per share
comfortably beat the Zacks Consensus Estimate of 23 cents on
record production. However, the quarterly figure decreased 25.0%
from the year-ago earnings of 60 cents due to lower price
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Total revenue was $444.3 million in the quarter, showing an
improvement of 17.1% from $379.5 million in the prior-year
quarter. The revenue, however, also surpassed the Zacks Consensus
Estimate of $414.0 million.
Full-year 2012 adjusted earnings of $1.17 per share beat our
expectation of 95 cents by 23.2%. However, the reported figure
dropped fell 54.3% from the year-earlier profit level of $2.56
Total revenue in 2012 was $1,505.1 million, representing a 6.1%
decrease from 2011. However, it surpassed our projection of
The company's fourth-quarter production came in at 659.6 million
cubic feet equivalent per day (MMcfe/d), exceeding the company's
guidance range of 625-658 MMcfe/d. It also showed an improvement
of 18.2% from the year-ago level of 557.9 MMcfe/d. The
outperformance was mainly attributable to its Eagle Ford and
Bakken/Three Forks program.
SM Energy produced 347.1 million cubic feet per day (MMcf/d) of
natural gas in the quarter, up almost 11% year over year. Oil
production also grew 17.2% year over year to 31.3 thousand
barrels per day (MBbls/d). Natural gas liquids contributed 20.8
MBbls/d to the total volume, up 47.5% from the fourth quarter of
Full-year 2012 total production was 218.9 MMcfe/d versus the
year-ago level of 169.7 MMcfe/d. The almost 30% increment came on
the back of a high rate of return on oil and liquid-rich programs
in the Eagle Ford shale and Bakken/Three Forks. The reported
figure also exceeded the company's guided range of 215.5-218.5
Including the effect of hedging, the average equivalent price per
thousand cubic feet equivalent (Mcfe) was $7.21 compared with
$7.58 in the year-ago period. Average realized prices (inclusive
of hedging activities) were $3.83 per Mcf of natural gas (down
12.2% from the comparable quarter last year), $84.76 per barrel
of oil (up 5% approximately), and $37.32 per barrel of natural
gas liquid (down 25.9%).
On the cost front, unit lease operating expense (LOE) decreased
7.1% year over year to 79 cents per Mcfe in the quarter.
Transportation expenses increased to 71 cents per Mcfe (from 60
cents in the year-ago period); general and administrative
expenses were 47 cents per Mcfe (down 32%); while depletion,
depreciation and amortization (DD&A) expenses increased 3.4%
to $3.37 per Mcfe from the year-earlier level of $3.26 per Mcfe.
Net cash provided by operating activities decreased to $268.4
million during the quarter from $270.8 million in the year-ago
quarter. As of Dec 31, 2012, SM Energy had a cash balance of
$5,926.0 million and long-term debt of $1,440.0 million, with a
debt-to-capitalization ratio being 49.4%.
For the first quarter of 2013, SM Energy's production forecast is
661 MMcfe/d to 695 MMcfe/d. The estimated LOE per Mcfe is 78
cents to 82 cents while DD&A is projected in the $3.20-$3.40
SM Energy reaffirmed its 2013 production forecast in the band of
699-732 MMcfe/d. Given the current tepid gas price scenario, the
company intends to increase the liquids composition in its
portfolio, like its peer
Chesapeake Energy Corp.
). As such, liquids are expected to comprise 50% of production by
the end of 2013.
The company also remains upbeat on its New Ventures plan. The
program has already taken additional acreage in the Permian Basin
and in East Texas. These resources have significant potential to
boost its oil-weighted inventory.
SM Energy currently retains a Zacks Rank #3 (Hold). There are
other stocks in the oil and gas industry like
Range Resources Corporation
Memorial Production Partners L.P.
) that appear more attractive. Both hold a Zacks Rank #2 (Buy).