SM beat my forecast: http://finance.yahoo.com/news/sm-energy ... 00198.html
Production beat my forecast. Adjusted net income crushed my forecast because of higher realizes oil and natural gas prices.
The company has increased production guidance.
Stifel confirmed price target of $77.. Raymond James upgrades it to Outperform.
SM Energy
Re: SM Energy
Stifel Report:
https://stifel2.bluematrix.com/sellside ... ource=mail
https://stifel2.bluematrix.com/sellside ... ource=mail
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SM Energy
SM's Cash Flow From Operations for the 2nd quarter were $4.20/share compared to my forecast of $3.40/share.
For companies that have a high percentage of their production hedged, you must ignore reported earnings per share. During periods of wildly moving commodity prices, the GAAP accounting rules for derivatives generate very distortive net income. For example, SM's "reported" loss of $0.85 included an unrealized loss on derivatives of $212.4 million or $3.15/share. This unrealized lose was the result of oil and gas prices being higher on 6/30 than they were on 3/31. If the quarter had ended on 7/31, SM would have reported an unrealized gain on their hedges.
I have almost four decades of experience looking at E&P company financials and although I understand why GAAP requires these adjustments each quarter (thanks to Enron), I still think they are very confusing to investors. I assure you that most CEOs and their CPA firms agree with me that the SEC needs to reconsider these rules.
My advice is to ignore reported earnings, pay a little bit of attention to "Adjusted EPS" and pay a lot of attention to cash flow from operations. Remember, cash pays the bills. [BTW if oil prices stay where they are now until 9/30, SM will have HUGE reported earnings for the 3rd quarter thanks to an unrealized GAIN on derivatives, the Adjusted Earnings will be a small loss. See how confusing this crap is?]
During the first two quarters of 2015, SM has received cash payments on their hedged volumes of $291.6 million. < This is REAL MONEY.
For the remainder of 2015, SM has 46% of their forecast oil production hedged at $88/bbl and 41% of their natural gas hedged at $4.05/mcf. They also have a lot of production hedged at good prices in 2016. See Hedge Table in their press release.
SM has a strong balance sheet, over $2 Billion of liquidity and cash flows from operations should cover all of their capital expenditures for the next two quarters, EVEN IF OIL PRICES STAY WHERE THEY ARE TODAY.
An updated forecast model for SM has been posted to the EPG website.
My Fair Value Estimate has increased $2.80 to $82.80/share. Stifel issued a new report on SM yesterday with a BUY rating and a $77 Price Target. Raymond James upgraded it to Outperform.
For companies that have a high percentage of their production hedged, you must ignore reported earnings per share. During periods of wildly moving commodity prices, the GAAP accounting rules for derivatives generate very distortive net income. For example, SM's "reported" loss of $0.85 included an unrealized loss on derivatives of $212.4 million or $3.15/share. This unrealized lose was the result of oil and gas prices being higher on 6/30 than they were on 3/31. If the quarter had ended on 7/31, SM would have reported an unrealized gain on their hedges.
I have almost four decades of experience looking at E&P company financials and although I understand why GAAP requires these adjustments each quarter (thanks to Enron), I still think they are very confusing to investors. I assure you that most CEOs and their CPA firms agree with me that the SEC needs to reconsider these rules.
My advice is to ignore reported earnings, pay a little bit of attention to "Adjusted EPS" and pay a lot of attention to cash flow from operations. Remember, cash pays the bills. [BTW if oil prices stay where they are now until 9/30, SM will have HUGE reported earnings for the 3rd quarter thanks to an unrealized GAIN on derivatives, the Adjusted Earnings will be a small loss. See how confusing this crap is?]
During the first two quarters of 2015, SM has received cash payments on their hedged volumes of $291.6 million. < This is REAL MONEY.
For the remainder of 2015, SM has 46% of their forecast oil production hedged at $88/bbl and 41% of their natural gas hedged at $4.05/mcf. They also have a lot of production hedged at good prices in 2016. See Hedge Table in their press release.
SM has a strong balance sheet, over $2 Billion of liquidity and cash flows from operations should cover all of their capital expenditures for the next two quarters, EVEN IF OIL PRICES STAY WHERE THEY ARE TODAY.
An updated forecast model for SM has been posted to the EPG website.
My Fair Value Estimate has increased $2.80 to $82.80/share. Stifel issued a new report on SM yesterday with a BUY rating and a $77 Price Target. Raymond James upgraded it to Outperform.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SM Energy
To say there is a wide range of opinions among Wall Street analysts as to where oil & gas prices are heading is a GROSS UNDERSTATEMENT. I just took a look at the earnings per share forecasts submitted to Reuters (First Call) for SM. EPS estimates have been sent to Reuters by 23 analysts. They range from $-2.02 to $4.56. Most of them are in the $0.50 to $1.00 range. Stifel just submitted a new forecast for SM and they predict $1.06 EPS in 2016.
My forecast of "Adjusted EPS" for 2016 is $0.55 with CFPS of $14.23. Stifel now thinks CFPS will be $15.54 in 2016.
One thing to keep in mind with SM is that they have a very balanced production base, approximately 30% crude oil, 23% NGLs and 47% natural gas.
I believe we could see much higher natural gas prices six months from now.
My forecast of "Adjusted EPS" for 2016 is $0.55 with CFPS of $14.23. Stifel now thinks CFPS will be $15.54 in 2016.
One thing to keep in mind with SM is that they have a very balanced production base, approximately 30% crude oil, 23% NGLs and 47% natural gas.
I believe we could see much higher natural gas prices six months from now.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group