SM Energy Forecasts Stronger Production From Permian Basin

SM Energy Company SM has provided its production and capital spending updates.

Permian Production Strong

The upstream energy player expects oil equivalent production for the January-to-March quarter of 2018 to be almost at the top end of the initial projection of 9.5 million barrels of oil equivalent (MMBoE) to 10 MMBoE. The optimism is backed by SM Energy’s impressive performance in the Permian Basin during the first two months of 2018.

The company anticipates crude proportion in the first quarter to be 40% or more. SM Energy maintains its capital budget expectations for the first quarter at $350 million. The company added that a major portion of the 2018 capital budget of roughly $1.27 billion will likely be allotted for the January-to-June period.

SM Energy expects significant well completion activities in the Permian Basin and the Eagle Ford shale in May and June. In other words, all the competed wells will likely commence operations in the months. Although well completions will be higher during the second quarter as compared to first, the company will likely start witnessing growth in production during the July-to-September quarter.

Most importantly, the firm expects production in 2019 to be strong although capital allocation for the year will likely be 15% lower. It is to be noted that the well completion numbers through 2019 will be same as last year. 

Powder River Acres Divestment

Along with operational updates, the company announced the conclusion of divestment of almost 112,200 net acres in Powder River Basin. The value of the transaction stands at roughly $500 million, which will likely be utilized by the upstream player for reducing debt loads and normal corporate activities. 

Price Performance

Headquartered in Denver, CO, SM Energy is a leading oil and gas explorer with strong focus on North America’s onshore resources.

However, the company’s pricing chart is not impressive. Over the past year, the stock has lost 22.8%, underperforming the industry’s12.6% decline.

Zacks Rank & Key Picks

SM Energy has a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are W&T Offshore, Inc. WTI, Pioneer Natural Resources Company PXD and Concho Resources Inc. CXO. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Houston, TX, W&T Offshore is primarily an upstream energy player. It is expected to witness year-over-year earnings growth of 3.6% in 2018.

Headquartered in Irving, TX, Pioneer Natural Resources is an upstream energy firm. It has an average positive earnings surprise of 66.9% for the last four quarters.

Headquartered in Midland, TX, Concho is also an upstream energy company. It will likely see a year-over-year rise of 73.2% in 2018 earnings.

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Pioneer Natural Resources Company (PXD): Free Stock Analysis Report
 
SM Energy Company (SM): Free Stock Analysis Report
 
Concho Resources Inc. (CXO): Free Stock Analysis Report
 
W&T Offshore, Inc. (WTI): Free Stock Analysis Report
 
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