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SM Energy (SM) Posts Q1 Loss as Expected, Revenues Miss

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Independent oil and gas company SM Energy Company 's SM first-quarter 2016 adjusted loss of 83 cents per share came in line with the Zacks Consensus Estimate. The company had posted earnings of 21 cents in the year-ago quarter.

Total revenue was $143.1 million in the quarter, down 60.9% from $365.9 million in the prior-year quarter. Revenues also failed to meet the Zacks Consensus Estimate of $280.0 million.

Operational Performance

The company's first-quarter production came in at 147.5 thousand barrels of oil equivalent per day (MBoe/d), down 20.8% from the year-ago level of 186.4 MBoe/d. The decline was mainly attributable to termination of completion activity in the Eagle Ford shale.

SM Energy produced 392.2 million cubic feet per day (MMcf/d) of natural gas in the quarter, up 23.1% year over year. Oil production also decreased 22% year over year to 45.3 thousand barrels per day (MBbls/d). Natural gas liquids contributed 36.8MBbls/d to the total volume, down 15% from the first quarter of 2015.

Including the effect of hedging, the average equivalent price per barrel of oil equivalent (Boe) was $26.74 compared with $33.05 in the year-ago quarter. Including hedging activities, the average realized price of natural gas decreased 14% year over year to $3.02 per thousand cubic feet (Mcf); average realized prices of oil declined 15.2% to $49.94 per barrel; and average realized prices of natural gas liquid plunged 38.4% to $13.54 per barrel.

On the cost front, unit lease operating expenses (LOE) decreased 4.3% year over year to $3.79 per Boe in the quarter. Transportation expenses decreased marginally to 6.06 cents per Boe from $6.08 per Boe in the year-ago period. General and administrative expenses were down 7.7% to $2.40 per Boe from the prior-year level of $2.60 Boe, while depletion, depreciation and amortization (DD&A) expenses increased 23.1% to $15.96 per Boe from the year-ago level of $12.96 per Boe.

Liquidity

Net cash from operating activities decreased to $118.3 million during the quarter. The company had generated $283.9 million in the year-ago quarter. As of Mar 31, 2016, SM Energy had a cash balance of $0.05 million and long-term debt of $2,703.7 million, with a debt-to-capitalization ratio of 64.2% as against 53.9% in the prior-year quarter.

Guidance

SM Energy estimates production for 2016 in the range of 51-55 MMBoe/d. Production for the second quarter is projected between 13.1 MMBoe/d and 13.5 MMBoe/d.

The estimated LOE per Boe is within $4.10-$4.50, while LOE is projected in the $4.10-$4.50 range.

The company has set its capital expenditure budget for 2016 at $705 million.

Zacks Rank

SM Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include ReneSola Ltd. SOL , Seadrill Partners LLC SDLP and Braskem S.A. BAK . All these sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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