Energy Prospectus

NEW YORK (TheStreet) -- Analysts at Barclays (BCS_) raised the price target on SM Energy (SM_) shares to $106 from $96 on Tuesday while maintaining its "overweight" rating. Analysts at the firm believe that enhanced completion designs in the company's Eagle Ford shale operations are leading to better well returns. The company itself raised 2014 production guidance 3% to 53.5 - 54.9 MMBOE, ahead of Barclays' own 53.5% MMBOE estimates.

My Fair Value Estimate is $160/share. It may take Wall Street awhile to figure this one out, but they will eventually.

You pay me the Big Bucks to find under-appreciated stocks like SM. On August 2nd I sent you an updated profile on the company with my valuation of $160 per share. Last week I said SM made one of the most impressive presentations at EnerCom. A few days after EnerCom Barclays raised their price target by $10/share.

Take a look at the 30-day stock chart. The stock price is up $12/share since August 14th.

Now I am telling you that SM has the potential to go up 30% (or more) in the next six months. Analysts will be upgrading this one BIG TIME after they see Q3 results at the same time gas prices are ramping up.

This Sweet 16 company is GROSSLY UNDERVALUED by this market and the next two quarters will prove it. Read our profile and you will see why.

One of the reasons that I am so high on SM is because I doubt Wall Street appreciates (yet) the significant upside SM has in the Powder River Basin. I am working on Devon Energy (DVN) today. Here is what they had to say about the Powder River Basin.

"Devon’s Powder River Basin oil program continued to deliver encouraging results in Q2 2014. Devon’s drilling activity was highlighted by two wells targeting the Parkman formation in Campbell County, Wyoming. Initial 30-day production from these wells averaged 950 Boe per day, of which 95% was light oil, at an average well cost of roughly $5 million per well. To date, Devon has identified approximately 1,000 risked oil locations across its Powder River Basin position, with the Parkman formation accounting for nearly 75% of this inventory. Devon expects this drilling inventory to increase over time as the company continues to appraise its 150,000 net acres across the Powder River Basin that is prospective for the Parkman, Turner and Frontier intervals."

At today's oil price, these PRB wells should generate over 100% IRRs. DVN and SM have a lot of running room in this new horizontal play.

DVN is also grossly undervalued by the market because they are in the process of repositioning to a liquids company. Devon is already there, but Wall Street hasn't figured it our yet. < This is why you guys pay me the Big Bucks.

Tuesday, September comments from Zacks Equity Research team:

SM Energy Co. (SM) has been on the move lately as the stock has risen by 13.9% in the past four weeks, and it is currently trading well above its 20-Day SMA. This is a pretty solid move higher, but the question that has to be on investors’ minds right now is; can this trend continue?

While there can be no telling for sure, it is certainly encouraging that earnings estimates have risen in the past few weeks on the company, suggesting that sentiment on SM is moving in the right direction. In fact, the stock currently has a Zacks Rank #2 (Buy), suggesting that the recent run could certainly continue for this in-focus company.