sm

[mkarpoff]

I am surprised at the hit sm has taken during this downturn. Way more than most others with not so much bounce back. Have I missed something here?

[setliff]

its a high beta stock, so i was not surprised at the down part, but am puzzled about lack of bounce back.

[setliff]

btw, sm is not alone with this condition---others are dnr, bcei, & lpi. larger caps are bouncing back better.

a factor maybe overall mkt volume--it seems pretty low.

fwiw

[dan_s]

SM Energy does not have much going on in the "sexy" areas that Wall Street is in love with, like the Permian Basin or SCOOP/STACK. Also, their production mix is "gassy".

It will be reporting losses for several more quarter and many investors cannot look past that, despite the fact that the company generates very strong cash flow from operations (over $9/share this year).

SM's production will be down slightly from Q1 to Q2, but then it should ramp up production into year-end. A big plus for this one would be an improvement in NGL prices, which should be just ahead.

Look out six months:
> They should get a big increase in proven reserves at year-end, which will drop the DD&A rate and should result in positive earnings reports
> Natural gas and NGL prices should be a lot higher in 2017. That is 69% of their production in my 2017 forecast model.
> Good results in the Permian Basin drilling program should help.
> The Eagle Ford and Bakken will come back into favor when oil moves over $60/bbl.

[mkarpoff]

Dan, I appreciate your detailed reply. With all that, it had been trading very strongly prior to Brexit, but did not rebound (at least not yet) as the others have. Another mkt mystery as far as I am concerned.

[dan_s]

SM has been a "mystery" to me for quite awhile. This company produces over 145,000 Boe per day. That is not a small amount. Compare to FANG, which produced 38,300 Boe per day in Q1.

SM has over $1 Billion in liquidity, solid cash flow from operations and it trades for approximately 3X CFPS. FANG trades for more than 20X CFPS.

SM has a lot of debt, but zero near-term debt repayment obligations.

FEAR and GREED drive investors. This is the kind of stock that can really take off when oil & gas come back into favor with investors. That day is not far off if Raymond James' oil price forecast is anywhere close to right.