SM Energy Update - Feb 12

[dan_s]

Sorry for the delay. Our website software was updated last week and it took me awhile to figure out how to post a new forecast.

I have updated my forecast/valuation model for SM Energy to the EPG website. My new valuation of $38.00 compares to First Call's price target of $29.75. Williams Capital submitted a new forecast to Reuters yesterday and their valuation is $36.00/share. There are a lot of old reports included in the First Call numbers for this one.

A few things to keep in mind:
> SM's production will be down from Q3 to Q4 2018 because of weather and 3rd party facility issues.
> Production should stabilize in Q1 and rebound sharply starting in March.
> My forecast assumes 124,000 BOE per day in Q1 2019, ramping to an exit rate of more than 150,000 BOE per day by December.
> Oil production was up in Q4, which is encouraging and their production mix should be more liquids in 2019.
> Focus on operating cash flow per share, which should be approximately $6.30 in 2018, $7.00 in 2019 and $9.50 in 2020 (assuming WTI averages $60/bbl in 2020).
> First Call's forecast for 2019 is $0.38 EPS and $7.98 operating cash flow per share.