SM Energy Co.'s third-quarter production surpassed the high end of the company's guidance, driven by improved well performance in the Midland Basin and NGL volume growth in the Eagle Ford Shale.

The oil and gas producer posted total production of 12.0 million barrels of oil equivalent, or 130.2 Mboe/d in the third quarter, including 42% oil and 62% liquids, according to an Oct. 18 news release. SM Energy expected third-quarter production at 11.2 MMboe to 11.7 MMboe, or 122 Mboe/d to 127 Mboe/d.

SM Energy's Midland Basin production grew 108% year over year and 26% compared to the previous quarter. Permian volumes rose 26% over the second quarter, while Eagle Ford volumes increased 12%. SM Energy's decision to process ethane in the Eagle Ford due to increased pricing contributed to the 27% growth in NGL volumes, the company said.

The company's realized prices for the quarter were $38.26/boe before hedges, or $34.86/boe after hedges. Higher NGL prices also contributed to an improvement in Eagle Ford realized pricing, which exceeded SM Energy's 2018 plan by 16%.

Costs incurred for the third quarter amounted to $276 million, and total capital spend was $272 million. SM Energy's expected capital spend for the second half of the year is about $514 million, with the bulk having been spent in the third quarter as the company accelerates fourth-quarter completions.

SM Energy completed 28 net wells in the Permian, missing the guidance of 37 net wells. The company attributed the miss to regional weather affecting the timing of completions.

SM Energy's quarterly performance drew a positive response from Williams Capital Group Senior Equity Analyst Gabriele Sorbara, who said the company is trading at a 40% discount from its $44 per share price target.

"We reaffirm our Top Pick status, as we view SM as a continued beat-and-raise story driven by the Midland Basin. In addition, SM shares remain at a discount valuation to peers despite the year-to-date outperformance," he said.