SM Energy
Re: SM Energy
oil price and general mkt conditions. sm trades almost in sync with crude.
Re: SM Energy
I took a very hard look at all of the Sweet 16 last week. You can find my forecast spreadsheet for SM on the website under the Sweet 16 tab. Down load it to Excel and take a hard look at cash flow from operations on row 48. Note that when you take their hedges into consideration, the commodity prices I am using for 2016 are conservative.
Note that my cash flow from operations forecast for 2016 is much lower than what First Call is currently forecasting (see the red box).
~44% of SM's 2016 production is hedged at fairly good prices (see hedges in place at the bottom of the forecast model).
SM is a bit of a "gasser". 4th quarter production mix is 45% natural gas, 28% NGLs and 27% crude oil. Production will be down in Q4 because they have put off completing most of their wells until oil prices improve.
My valuation for SM is $56.00/share, compared to First Call's price target of $40.17/share. On 10-28-2015 Stifel rated it a BUY with a $48/share price target. My valuation is based on 5X CFPS, which is a low multiple for a company of this quality.
SM is a bit off the radar screen and many analyst seem to think their Eagle Ford leasehold is "2nd Tier" even though they continue to get First Tier well results. Take a look at the first page of our recent profile and you will see that liquidity is not an issue. Plus, no significant debt maturities until 2021. I have actually talked to their IR people several times, telling them they need to do a much better job of telling the company's story. I have asked them to host EPG luncheons several times and I will call them again next week.
Note that my cash flow from operations forecast for 2016 is much lower than what First Call is currently forecasting (see the red box).
~44% of SM's 2016 production is hedged at fairly good prices (see hedges in place at the bottom of the forecast model).
SM is a bit of a "gasser". 4th quarter production mix is 45% natural gas, 28% NGLs and 27% crude oil. Production will be down in Q4 because they have put off completing most of their wells until oil prices improve.
My valuation for SM is $56.00/share, compared to First Call's price target of $40.17/share. On 10-28-2015 Stifel rated it a BUY with a $48/share price target. My valuation is based on 5X CFPS, which is a low multiple for a company of this quality.
SM is a bit off the radar screen and many analyst seem to think their Eagle Ford leasehold is "2nd Tier" even though they continue to get First Tier well results. Take a look at the first page of our recent profile and you will see that liquidity is not an issue. Plus, no significant debt maturities until 2021. I have actually talked to their IR people several times, telling them they need to do a much better job of telling the company's story. I have asked them to host EPG luncheons several times and I will call them again next week.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group