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SM Energy Company has reported its financial results for the second quarter of 2013 and provides an operations update.
Operations Update
The company's operational update its divided up by play and can be accessed below:
- SM's Eagle Ford Production Jumps 28% to 66.1 MBOE
- SM Switches Up Rig Strategy in Bakken/Three Forks
- SM Talks Q2 Multi-Target Permian Progress, Plans
- SM Energy to Start Up Powder River Basin Ops
- SM Ups Ante in East Texas; Eyes Eagle Ford, Woodbine
Second Quarter 2013 Financial Results
SM Energy reported net income for the second quarter of 2013 of $76.5 million, or $1.13 per diluted share. This compares to net income of $24.9 million, or $0.37 per diluted share, for the same period of 2012.
Adjusted net income for the second quarter of 2013 was $51.8 million, or $0.76 per diluted share, compared to adjusted net income of $5.9 million, or $0.09 per diluted share, for the same period of 2012. Adjusted net income excludes certain items that the Company believes affect the comparability of operating results and are generally items whose timing and/or amount cannot be reasonably estimated.
Earnings before interest, taxes, depreciation, depletion, amortization, accretion, and exploration expense (EBITDAX) was $342.5 million for the second quarter of 2013, a record level, and an increase of 60% from $213.7 million for the same period of 2012.
Adjusted net income and EBITDAX are non-GAAP financial measures. Please refer to the respective reconciliations in the Financial Highlights section at the end of this release for additional information about these measures.
Total operating revenues for the second quarter of 2013 were $559.4 million compared to $304.4 million for the same period of 2012, an 84% increase from period to period.
For the second quarter of 2013, SM Energy reported quarterly production of 11.99 MMBOE, resulting in average daily production of 131.8 MBOE per day, which is 12% above the midpoint of the Company's guidance range of 115 to 121 MBOE per day. Reported average daily production increased by 15% from quarterly production of 115.0 MBOE per day in the first quarter of 2013. Reported production in the second quarter was comprised of 27% oil/condensate, 19% NGLs, and 54% natural gas. The increase in the quarterly natural gas percentage reflects a backlog of wells in oilier portions of the Eagle Ford shale play that the Company expects to be placed on production in the third quarter of 2013.
In the second quarter of 2013, the Company reported total per unit cash costs at the lower end of its guidance range. The Company reported quarterly LOE per unit costs below its guidance range due to lower workover expense in the quarter, in addition to higher than anticipated production growth in the Company's Eagle Ford shale program, which has lower LOE per BOE than the Company's blended overall LOE rate. Greater than anticipated production growth in the Eagle Ford shale program also drove transportation expense higher than guidance for the quarter. Additionally, Eagle Ford transportation expense per BOE was impacted in the quarter by increased compression charges and increased fuel charges resulting from higher natural gas prices in the quarter.
Financial Position and Liquidity
At the end of the second quarter of 2013, SM Energy had total long-term debt outstanding of approximately $1.6 billion, comprised of $28.0 million drawn on its revolving credit facility and an aggregate amount of $1.6 billion of senior notes. As of June 30, 2013, the Company's debt to twelve month trailing EBITDAX decreased to 1.3 times and its debt-to-book capitalization ratio was 52%.
Updated Production, Capital and Performance Guidance
SM Energy has increased its full-year 2013 production guidance by 10% with only a 3% increase in associated development capital.
The Company's full-year 2013 updated production guidance range is now 47.3 - 48.6 MMBOE, an increase from the previously provided full-year range of 42.8 - 44.5 MMBOE, and represents production growth of approximately 30% year-over-year. The increase in production guidance is due primarily to efficiencies achieved in the Company's Eagle Ford shale program, where the Company will make an additional 20 flowing completions in 2013. The Company expects its 2013 exit rate production mix to be comprised of 50% liquids and 50% natural gas.
SM Energy is also reiterating its 15% annual production growth rates for 2014 and 2015 on retained assets, resulting in an expected 10% increase in implied volumes for those years, adjusted for divestitures.
The Company's current forecast for 2013 capital investment is expected to be approximately $1.65 billion, an increase of 10% from its previously announced capital program of $1.5 billion. Development capital is expected to be 3% higher than originally budgeted. The remainder of the increase relates primarily to increased New Ventures investment in the Powder River Basin and in East Texas and the previously announced approximately $65 million acquisition of Powder River Basin acreage. Based on the updated capital plan, production guidance, and current expectations of commodity prices, the Company expects projected year-end debt to trailing twelve-month EBITDAX to be less than the previously guided 1.6 times.
The following table summarizes the updated capital allocations for 2013:
New Ventures capital includes allocations to test and delineate its emerging resource plays in East Texas and the Powder River Basin. The Other non-drilling capital portion of the updated capital program includes amounts for facilities, land, and exploration-related items.