SM Energy Company
) fourth-quarter 2011 adjusted earnings of 60 cents per share
increased by over 30% from the year-ago earnings of 46 cents. The
results also beat the Zacks Consensus Estimate of 56 cents.
Full-year 2011 adjusted earnings increased nearly 87% to $2.56
per share from last year's profit level of $1.37.
Fourth quarter earnings recorded a jump on the back of greater
production. Production growth was driven by robust results in the
company's Eagle Ford shale and Bakken/Three Forks programs.
Total revenue of $379.5 million leaped 29% from $294.1 million
in the prior-year quarter and surpassed the Zacks Consensus
Estimate of $347 million. Oil, gas and natural gas liquid (
) production revenues contributed $396.9 million (up almost 59%
year over year) to the total revenue. Total revenues decreased
compared to oil, gas and natural gas liquid (
) production revenues, due to hedging losses and loss on
Full-year 2011 total revenue increased nearly 47% to $1,603.3
million from the year-earlier level of $1,092.8 million.
The company's fourth-quarter production came in at 557.9 million
cubic feet equivalent per day (MMcfe/d), up 62% year over year, and
13% above the midpoint of management's target range of 479-509
SM Energy produced 313.0 million cubic feet per day (MMcf/d) of
natural gas in the quarter, reflecting a 39% year-over-year growth.
Oil production also climbed 34% year over year to 26.7 thousand
barrels per day (MBbls/d). Natural gas liquids contributed 14.1
MBbls/d to the total volume.
Including the effect of hedging, average equivalent price per
thousand cubic feet (Mcf) was $7.58 compared with $7.98 in the
year-ago period. Average realized prices (inclusive of hedging
activities) were $4.36 per Mcf of natural gas and $80.63 per barrel
of oil, down 27% and up nearly 15%, respectively, from the
comparable quarter last year.
On the cost front, unit lease operating expense (LOE) decreased
20% year over year to 85 cents per Mcfe in the quarter.
Transportation expenses increased substantially to 60 cents per
Mcfe (from 22 cents in the year-ago period); general and
administrative expenses were 69 cents per Mcfe (down 31%); while
depletion, depreciation and amortization (DD&A) expenses
increased 9% to $3.26 per Mcfe from the year-earlier level of $2.99
Operating cash flow improved to $275.1 million during the
quarter from $176.4 million in the year-ago quarter. At the end of
the quarter, SM Energy had a cash balance of $119.2 million and
long-term debt of $985.1 million, with a debt-to-capitalization
ratio of 40.2%.
For the first quarter of 2012, SM Energy's production forecast
is in the range of 48.5 Bcfe to 52.0 Bcfe. The company's LOE per
Mcfe will likely be in the range of 90 cents to 96 cents while,
DD&A will remain in the $3.35-$3.55 range.
For 2012, SM Energy has slightly reduced its forecast to a range
of 220-227 Bcfe from 225-232 Bcfe, to reflect the reduction of
activity in the Haynesville shale program.
SM Energy's 2012 capital spending is expected to remain within
$1,400 million to $1,500 million.
Denver, Colorado-based oil and gas company, SM Energy remains
proactive in its attempt to hold a significant position in emerging
shale plays and focus more on resource, with an inventory of
repeatable drilling prospects and a high rate of return. We believe
that the company's emerging core portfolio is a positive catalyst
for visible organic growth over the next several years.
During the year, SM Energy had set a production growth target of
50% which it achieved by leveraging off the considerable ground
work set up in the preceding years in the Eagle Ford as well as
Bakken Three Forks programs. The company holds an equally positive
outlook for 2012 as it has the financial strength and asset base in
liquid rich plays which will facilitate growth.
However, our long-term Outperform recommendation stems from SM
Energy's natural gas-weighted reserves. The company derives a
significant portion of its operating revenues from natural gas.
SM Energy's competitor,
Range Resources Corporation
) also reported stellar fourth-quarter 2011 earnings piggybacking
on higher production level, realized prices and lower unit
We currently maintain a long-term Outperform recommendation on
SM Energy. However, the company holds a Zacks #3 Rank, which is
equivalent to a short-term Hold rating.
RANGE RESOURCES (
): Free Stock Analysis Report
SM ENERGY CO (
): Free Stock Analysis Report
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