CXO, XEC and SM
Posted: Sat Feb 15, 2014 11:45 am
These three are scheduled to report 4th quarter results next week. There should be a steady stream of strong 2013 results for the Sweet 16. Double digit production growth in 2014 is being forecast for every S-16 company.
These three all have Permian Basin operations. An ice storm late in November shut down power to the pump jacks in a large portion of the Permian for a week, but all is back to normal now.
Concho Resources (CXO) is a pure play on the Permian. My focus will be on how the acceleration of their drilling program in coming along.
SM Energy (SM) is primarily an Eagle Ford play. They are now focused on increasing their liquids production, but they still produce a lot of natural gas. 2014 production should be ~145,000 boepd (47% natural gas, 32% crude oil and 21% NGLs). Less than 5% of their NGLs are hedged going into 2014, so the recent spike in NGL prices is going to give SM a nice revenue boost. 44% of their natural gas is hedged with SWAPS at $4.06/mcf. My Fair Value Estimate for SM is $150/share with upside if they report strong Eagle Ford results. SM's cash flow from operations was over $20/share in 2013 and now has a shot at $24/share in 2014. A company of this quality should be trading at a much higher multiple than 4X CFPS.
Cimarex (XEC) will report a slight dip in production from Q3 to Q4 because they had production curtailments of approximately 2 Bcfe in Q4 related to pipeline disruptions and weather. Everything is back on-line and production should be up more than 13% year-over-year in 2014.
> 2014 Capex budget raised to $1.8 Billion (78% Permian and 19% Mid-Continent)
> 2014 Production Mix: 48% natural gas, 33% crude oil and 19% NGLs
> XEC has over a decade of low risk drilling inventory. Stacked horizontals in the Wolfcamp play are going to significantly increase the recoverable reserves per section.
These three all have Permian Basin operations. An ice storm late in November shut down power to the pump jacks in a large portion of the Permian for a week, but all is back to normal now.
Concho Resources (CXO) is a pure play on the Permian. My focus will be on how the acceleration of their drilling program in coming along.
SM Energy (SM) is primarily an Eagle Ford play. They are now focused on increasing their liquids production, but they still produce a lot of natural gas. 2014 production should be ~145,000 boepd (47% natural gas, 32% crude oil and 21% NGLs). Less than 5% of their NGLs are hedged going into 2014, so the recent spike in NGL prices is going to give SM a nice revenue boost. 44% of their natural gas is hedged with SWAPS at $4.06/mcf. My Fair Value Estimate for SM is $150/share with upside if they report strong Eagle Ford results. SM's cash flow from operations was over $20/share in 2013 and now has a shot at $24/share in 2014. A company of this quality should be trading at a much higher multiple than 4X CFPS.
Cimarex (XEC) will report a slight dip in production from Q3 to Q4 because they had production curtailments of approximately 2 Bcfe in Q4 related to pipeline disruptions and weather. Everything is back on-line and production should be up more than 13% year-over-year in 2014.
> 2014 Capex budget raised to $1.8 Billion (78% Permian and 19% Mid-Continent)
> 2014 Production Mix: 48% natural gas, 33% crude oil and 19% NGLs
> XEC has over a decade of low risk drilling inventory. Stacked horizontals in the Wolfcamp play are going to significantly increase the recoverable reserves per section.