SM Energy (SM) Valuation Update - June 9
Posted: Thu Jun 09, 2022 10:41 am
SM Energy will officially be moved from our Small-Cap Growth Portfolio to the Sweet 16 on June 20. CTRA and FANG are being moved to our High Yield Income Portfolio. SilverBow Resources (SBOW) will also be promoted to the Sweet 16.
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At the time of this post SM was trading for $52.09, up 64.5% YTD.
First Call's Price Target is $60.17 and TipRanks' average price target is $59.00.
TipRanks: "On June 3, 2022 Michael Scialla from Stifel Nicolaus maintained a Buy rating on SM Energy (SM), with a price target of $81.00."
I have updated my forecast/valuation model for SM using my current oil & gas price deck and the Company's detailed guidance for 2022.
> My current valuation is $82.00 based on just 5.5 X annualized operating cash flow per share. It is a "conservative" multiple for a company of this quality.
> Q1 production was 153,288 Boepd. SM's full-year guidance is 140,000 to 148,000 Boepd, which IMO is them just "under-promising so they can over-deliver".
> Production will be down a bit in Q2 and then ramp back up in 2H 2020, which is why I think the timing for adding it to the Sweet-16 is good.
> Production mix is 45% crude oil, 15% NGLs and 40% natural gas.
> ~50% of their crude oil is hedged for 2022. Full year realized oil prices net of cash settlements on their hedges s/b ~$78/bbl.
> ~40% of their natural gas is hedged for 2022. Full year realized ngas prices net of cash settlements on their hedges s/b ~$5.60/mcf
> Realized NGL prices s/b be ~$35/bbl for 2022.
> Adjusted operating cash flow was $480 million in Q1 and s/b $1,950 to $2,000 million for the year.
> SM's Capex Budget is $750 million for the year, so FCF s/b ~$1.2 billion.
> The balance sheet was in good shape at the end of Q1 and s/b in GREAT SHAPE by year-end; one of the reasons that I think SM has a lot of upside for us.
My updated forecast/valuation model has been posted to the EPG website home page and we will publish an updated profile on SM on Monday.
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At the time of this post SM was trading for $52.09, up 64.5% YTD.
First Call's Price Target is $60.17 and TipRanks' average price target is $59.00.
TipRanks: "On June 3, 2022 Michael Scialla from Stifel Nicolaus maintained a Buy rating on SM Energy (SM), with a price target of $81.00."
I have updated my forecast/valuation model for SM using my current oil & gas price deck and the Company's detailed guidance for 2022.
> My current valuation is $82.00 based on just 5.5 X annualized operating cash flow per share. It is a "conservative" multiple for a company of this quality.
> Q1 production was 153,288 Boepd. SM's full-year guidance is 140,000 to 148,000 Boepd, which IMO is them just "under-promising so they can over-deliver".
> Production will be down a bit in Q2 and then ramp back up in 2H 2020, which is why I think the timing for adding it to the Sweet-16 is good.
> Production mix is 45% crude oil, 15% NGLs and 40% natural gas.
> ~50% of their crude oil is hedged for 2022. Full year realized oil prices net of cash settlements on their hedges s/b ~$78/bbl.
> ~40% of their natural gas is hedged for 2022. Full year realized ngas prices net of cash settlements on their hedges s/b ~$5.60/mcf
> Realized NGL prices s/b be ~$35/bbl for 2022.
> Adjusted operating cash flow was $480 million in Q1 and s/b $1,950 to $2,000 million for the year.
> SM's Capex Budget is $750 million for the year, so FCF s/b ~$1.2 billion.
> The balance sheet was in good shape at the end of Q1 and s/b in GREAT SHAPE by year-end; one of the reasons that I think SM has a lot of upside for us.
My updated forecast/valuation model has been posted to the EPG website home page and we will publish an updated profile on SM on Monday.