SM Energy (SM)

[dan_s]

SM is getting some serious love today. Nice to see the Wall Street gang wake-up to the value of SM.

My valuation is $43.80/share and there is a lot more upside from there.

[ddlopata084]

Dan - thanks, you get a kudos for this one, and SM had one of the biggest price deltas to your valuation. I have been sitting on shares in a number of accounts, since the $14 level. Nice to see the market starting to go our way.

[dan_s]

This is why you pay me the BIG BUCKS.

SM's sharp rise is drawing a lot of Wall Street attention. The stock price is up again today on high trading volume.

SM's production mix on a BOE basis: 46% natural gas, 30% crude oil and 24% NGLs

Hedges:
< 55% of 2016 gas hedged at ~$3.61
< 30% of 2016 oil hedged at ~$88.01
< 60% of 2016 NGL hedged at ~$15
< 50% of 2017 gas hedge at $4.26

[dan_s]

After the markets closed on April 13 SM Energy Company (SM) announced that the Company and its lenders have amended the senior secured credit facility, which matures in 2019. Key components of the amendment include:
• As part of the regular semi-annual redetermination process, the lenders determined the borrowing base and aggregate commitment amount to be $1.25 billion, consistent with the Company’s expectations and previous public statements
• The financial covenant of a maximum 4.0 times total debt-to-trailing 12 months EBITDAX ratio is removed
• New financial covenants added include (1) a maximum senior secured debt-to-trailing 12 months EBITDAX ratio of 2.75 times and (2) a minimum trailing 12 months EBITDAX-to-interest ratio of at least 2.0 times
• The interest rate on the debt is increased 50 basis points to LIBOR plus 175-275 basis points

Chief Financial Officer Wade Pursell comments, “The redetermination process went as expected. We are pleased to report that we currently have approximately $1.0 billion in liquidity and have removed the 4.0 times total debt-to-trailing 12 months EBITDAX ratio covenant for the duration of the agreement. While our leverage projections through 2017 do not indicate that we would exceed the 4.0 times ratio, the new covenant arrangement gives us significant additional flexibility if product prices stay at or below current levels for longer than we expect.”

Bottom Line: SM has more than enough liquidity to fund a small out-spend this year.

[bigtex]

ok we need a dictionary what is an outspend?? an acquisition ????

[dan_s]

When Capital Expenditure exceed cash flow from operations it is called an Outspend.

An Acquisition is when they buy something. A producing property acquisition or a takeover of another company. This is something not included in the approved capital expenditure budget.