It seems to me that most of us Fools spend our time canvassing the market for companies that are either unusually good or unusually bad. After all, it can be hard to work up a lot of enthusiasm for a company that comes out as "basically average." But that's where St. Mary Land & Exploration (NYSE:SM) would seem to fit. This is a good company with some high-potential assets, but overall it seems to be trading more or less as it should.
Like most energy companies, particularly the land-based producers with no hurricane exposure, St. Mary enjoyed a strong quarter. Revenue was up more than 80%, one of the better results among the companies I watch. In my opinion, only Ultra Petroleum (AMEX:UPL) bested St. Mary in revenue growth.
There are two components to solid revenue growth at energy companies: production and price realizations. St. Mary hit the mark on both. Production was up about 10% on average, and realized gas prices were 75% higher this quarter. Like other operators, St. Mary managed to stay ahead of rising costs, growing operating income by 89%.
Looking at the company's most valuable assets, we see that proven reserves rose 21%, the reserve replacement was 256%, and the average finding and development cost came out at about $1.88/mcfe. That doesn't compare too badly to the likes of Anadarko (NYSE:APC) and Chesapeake (NYSE:CHK), though it's higher than similar costs at XTO (NYSE:XTO) or Ultra.
In my mind, one of the prime attractions here is the company's Hanging Woman coalbed methane project. As St. Mary further develops this asset, it could become a major contributor to production and reserves for several years to come.
Overall, St. Mary seems to be trading at a fair price relative to other similarly sized energy companies. The Hanging Woman asset could be an ace in the hole, though. These shares may be worth a further look by more aggressive investors willing to bet that better-than-expected reserve development leads to higher stock prices.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
