I just got an updated report from Stifel on SM Energy (SM) and I was very pleased to see that their valuation is much closer to mine than the current First Call Target Price.
Raising NAV, Reiterate Buy
"We are raising our NAV estimate 7% to $133 (Figure 21) based on redefined
boundaries for Area 3A/3B, the strongest of SM's EF acreage. We continue to
believe the company is well positioned to grow production 15-20% per year over
the next five years while generating strong returns and improving its balance sheet."
Here's what's happened to SM Energy. They reported some rather poor test well results in the northern portion of their Eagle Ford leasehold and the market over-reacted (as it tends to do), making the assumption that all of their Eagle Ford acreage was poor quality. The southern half of SM's Eagle Ford acreage is very good stuff and they have over five years of low risk drilling inventory there. Plus, the acreage up north isn't worthless. The company can hold the acreage with current production and as technology improves, oil prices go up and/or well costs come down, that area may prove to be very economic.
IMO SM is a Strong Buy at today's share price. They are going to report very strong Q1 results. You can find my forecast for each quarter in 2014 under the Sweet 16 Tab.