SM Energy (SM) - Valuation increased
Posted: Mon Nov 28, 2016 7:07 pm
I took a HARD look at SM Energy today. I will be sending out an updated profile on Tuesday.
I am increasing my valuation by $8.00 to $57.00/share. This compares to First Call's price target of $46.22.
My higher valuation is based on my view that SM now compares to the other Permian Basin companies in the Sweet 16 (FANG, PE and RSPP), yet it trades at a much lower multiple of operating cash flow per share. I believe that when SM announces the sale of its non-operated stake in the Eagle Ford (operated and being marketed by Anadarko Petroleum), the transaction will draw a lot of attention to this stock. SM's share of production in the package that is for sale is approximately 27,000 Boepd, so the price tag is going to be quite high.
Proforma for the asset sale, SM is going to have a strong balance sheet and lots of running room in the Permian Basin. This combination is worth a lot more than were the stock is trading today.
Start you due diligence by going to the SM website and taking the time to go through their most recent presentation.
I am increasing my valuation by $8.00 to $57.00/share. This compares to First Call's price target of $46.22.
My higher valuation is based on my view that SM now compares to the other Permian Basin companies in the Sweet 16 (FANG, PE and RSPP), yet it trades at a much lower multiple of operating cash flow per share. I believe that when SM announces the sale of its non-operated stake in the Eagle Ford (operated and being marketed by Anadarko Petroleum), the transaction will draw a lot of attention to this stock. SM's share of production in the package that is for sale is approximately 27,000 Boepd, so the price tag is going to be quite high.
Proforma for the asset sale, SM is going to have a strong balance sheet and lots of running room in the Permian Basin. This combination is worth a lot more than were the stock is trading today.
Start you due diligence by going to the SM website and taking the time to go through their most recent presentation.