SM Energy (SM) Q2 Preview - AUG 4
Posted: Fri Aug 04, 2023 8:33 am
My To Do List is overflowing, but I will get all of the forecast/valuation models updated this weekend. New reports and models are posted to the EPG website home page each day, so check it out. So, if you are looking for the most current profiles or forecast models always check the website first.
Each quarter my top priority is the Sweet 16.
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SM Energy Q2 Highlights include:
Solid profitability. In the second quarter 2023, net income was $149.9 million, or $1.25 per diluted common share, down from $2.60 per diluted common share in the prior year period, predominantly due to lower commodity prices. Adjusted net income was $1.28 per diluted common share. < Beat my forecast of $1.15 per share.
Net cash provided by operating activities was $383.3 million and Adjusted EBITDAX(1) was $390.2 million. < Compares to my Adjusted Operating Cash Flow forecast of $336.7 million.
Operational execution and well performance. Production for the second quarter 2023 was 14.1 MMBoe, or 154.4 MBoe/d, at 42% oil, exceeding guidance. As previously reported, production exceeded expectations driven by higher oil, natural gas and NGL volumes from both new and existing wells in the Company's South Texas program. < My Q2 production forecast was 148,500 Boepd (42.7% oil). Note that most of the companies are reporting more natural gas production than my forecasts.
Increased capital returns to stockholders. The Company repurchased and retired 2,550,706 shares of its common stock during the second quarter. In combination with the $0.15 per share quarterly dividend paid May 5, 2023, return of capital to stockholders totaled $86.8 million in the quarter. Since announcing the return of capital program in September 2022, the Company has repurchased approximately 5.3 million shares and returned approximately $221 million to stockholders, inclusive of dividends and common stock repurchases.
Acreage acquisitions support growth in production and inventory. The Company acquired approximately 20,000 net acres located in Dawson and north Martin Counties, Texas for $90.6 million, net of purchase price adjustments and closing conditions. The acquisition was funded with cash and includes approximately 1,250 Boe/d net production that is approximately 90% oil, plus undeveloped acreage. The Company plans to add a rig to this location in the fourth quarter. The Company also leased an additional 2,800 net acres near its first quarter leasehold acquisition of 6,300 net acres in the Midland Basin, for which the location and purchase price are undisclosed.
Reduced expected 2023 capital expenditures. Second quarter capital expenditures of $309.3 million, adjusted for a decrease in capital accruals of $42.7 million, totaled $266.7 million.(1) As previously announced, cost deflation and lower facilities expenditures result in a $50 million reduction to the Company's expected full year capital expenditures, net of the cost of adding a fourth rig to the Midland Basin in the fourth quarter.
Each quarter my top priority is the Sweet 16.
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SM Energy Q2 Highlights include:
Solid profitability. In the second quarter 2023, net income was $149.9 million, or $1.25 per diluted common share, down from $2.60 per diluted common share in the prior year period, predominantly due to lower commodity prices. Adjusted net income was $1.28 per diluted common share. < Beat my forecast of $1.15 per share.
Net cash provided by operating activities was $383.3 million and Adjusted EBITDAX(1) was $390.2 million. < Compares to my Adjusted Operating Cash Flow forecast of $336.7 million.
Operational execution and well performance. Production for the second quarter 2023 was 14.1 MMBoe, or 154.4 MBoe/d, at 42% oil, exceeding guidance. As previously reported, production exceeded expectations driven by higher oil, natural gas and NGL volumes from both new and existing wells in the Company's South Texas program. < My Q2 production forecast was 148,500 Boepd (42.7% oil). Note that most of the companies are reporting more natural gas production than my forecasts.
Increased capital returns to stockholders. The Company repurchased and retired 2,550,706 shares of its common stock during the second quarter. In combination with the $0.15 per share quarterly dividend paid May 5, 2023, return of capital to stockholders totaled $86.8 million in the quarter. Since announcing the return of capital program in September 2022, the Company has repurchased approximately 5.3 million shares and returned approximately $221 million to stockholders, inclusive of dividends and common stock repurchases.
Acreage acquisitions support growth in production and inventory. The Company acquired approximately 20,000 net acres located in Dawson and north Martin Counties, Texas for $90.6 million, net of purchase price adjustments and closing conditions. The acquisition was funded with cash and includes approximately 1,250 Boe/d net production that is approximately 90% oil, plus undeveloped acreage. The Company plans to add a rig to this location in the fourth quarter. The Company also leased an additional 2,800 net acres near its first quarter leasehold acquisition of 6,300 net acres in the Midland Basin, for which the location and purchase price are undisclosed.
Reduced expected 2023 capital expenditures. Second quarter capital expenditures of $309.3 million, adjusted for a decrease in capital accruals of $42.7 million, totaled $266.7 million.(1) As previously announced, cost deflation and lower facilities expenditures result in a $50 million reduction to the Company's expected full year capital expenditures, net of the cost of adding a fourth rig to the Midland Basin in the fourth quarter.