SM Energy Company ( SM ) has announced its revised 2014 production and capital guidance. The company has raised its 2014 production guidance to 53.5-54.9 million barrels of oil equivalent (MMBOE), up around 3% from its earlier guidance. Production for the third quarter is expected in the range of 13.1-13.8 MMBOE.
The company has also increased its expected annual 2015 production growth target to about 20%, up from its earlier announced target of 15%. Moreover, annual production growth for 2016 is estimated at about 15%.
The company has also increased its 2014 capital expenditure budget. This is primarily attributable to about $430 million of un-budgeted acquisitions in the Powder River and Williston Basins as well as additional activity associated with those acquisitions in the second half of 2014.
SM Energy's capital expenditure for 2014 is up by nearly 30% to $2,485 million from the earlier guidance of $1,925 million. The higher-than-expected level of activity in the non-operated Eagle Ford program as well as drilling and completion activity in the fourth quarter related to the company's earlier announced pending acquisition in the Gooseneck area in North Dakota led to the increased capital expenditure. The acquisition in North Dakota will expectedly close in the second half of 2014.
The company has invested more capital in the Powder River Basin to support ramped-up activity in the second half of 2014, based on robust results from its Frontier program. The increase in New Ventures and non-drilling mainly reflects the construction of a gathering system in its East Texas program.
The increase in capital expenditure in 2014 will likely be financed through cash on hand and its revolving credit facility.
At present, SM Energy carries a Zacks Rank #2 (Buy). Other stocks in the oil and gas sector like Weatherford International plc ( WFT ), Sanchez Energy Corporation ( SN ) and Sunoco Logistics Partners L.P ( SXL ), all sporting a Zacks Rank #1 (Strong Buy), are expected to perform better.