SM Energy Releases Operational Updates for First-Quarter 2019

Zacks Equity Research
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SM Energy Company SM released operational updates for the first quarter of 2019.

The company stated that the 25-well Merlin Maximus development commenced production successfully, on budget and as planned. Located in the RockStar area, the wells are spread across a 1.1-by-2 mile development area. The project includes the co-development of three intervals. While it is too early to conduct analysis based on the collected data, all wells have met or exceeded production expectations.

The 25-well development comprises nine Lower Spraberry, 11 Wolfcamp A and five Wolfcamp B wells. Water production from the wells, with an average lateral length of 10,300 feet, is channeled into the recently-constructed water management system. The produced water is transferred either to company-operated disposal wells or are recycled for new well completions.

Also, a third-party gas processing facility commenced operation at the end of February. The facility, wherein operations were suspended due to a major event, is soon expected to reach normal capacity.

SM Energy reiterated first-quarter 2019 production guidance in the range of 10.5-10.9 million barrels of oil equivalent (MMBoe). However, the company witnessed certain temporary and unanticipated impacts of 0.2MMBoe to sales volume in March.

Oil differentials to Cushing WTI in Permian Basin reflect significant recovery since the beginning of 2019. In February, the company’s pre-hedge net differential improved to about $6 per barrel from around $9 per barrel in January. The same is expected to improve further in March. Also, SM Energy stated that about half of the expected first-quarter oil volumes from Permian have been hedged.

SM Energy is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition and production of natural gas as well as crude oil in North America. The company’s operations are focused on five core operating regions in the United States — the ArkLaTex, the Mid-Continent, the Gulf Coast, the Permian Basin and the Rocky Mountain.

Its balanced and diverse portfolio of proved reserves as well as development drilling opportunities boosts long-term value for shareholders. SM Energy’s focus on operations in the Permian and Eagle Ford regions bodes well.

Zacks Rank & Key Picks

Currently, SM Energy carries a Zacks Rank #3 (Hold).

A few better-ranked players in the energy space are Antero Resources Corporation AR, CrossAmerica Partners L.P. CAPL and SEACOR Holdings, Inc CKH. While Antero Resources and CrossAmerica Partners sport a Zacks Rank #1 (Strong Buy), SEACOR Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources is an independent explorer, primarily engaged in the acquisition and development of natural gas, natural gas liquids as well asoil resources in the Appalachian Basin. The company’s earnings beat the Zacks Consensus Estimate in two of the last four quarters.

CrossAmerica Partners is involved in the wholesale distribution of motor fuels, comprising gasoline and diesel fuel. The partnership delivered an average positive earnings surprise of 452.2% in the last four quarters.

SEACOR Holdings is a diversified holding company, mainly focused on domestic and international transportation, logistics as well as risk management consultancy. The bottom line for 2019 is expected to increase 1.7% year over year. The company delivered an average positive earnings surprise of 20.5% in the trailing four quarters.

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