Energy Prospectus

SM Energy Announces Public Offering Of Common Stock
PR NEWSWIRE 3:11 PM ET 12/1/2016

DENVER , Dec. 1, 2016 /PRNewswire/ -- SM Energy Company ("SM Energy(SM)") announced today that it has commenced an underwritten public offering of 8,000,000 shares of its common stock. SM Energy(SM) expects to grant the underwriters in the offering a 30-day option to purchase up to 1,200,000 additional shares of common stock. SM Energy intends to use the net proceeds from the offering to acquire approximately 4,100 net acres of additional oil and gas assets in the Midland Basin, to reduce indebtedness, and for general corporate purposes.

J.P. Morgan, BofA Merrill Lynch, and Wells Fargo Securities are acting as joint book-running managers for the offering. The shares of common stock are being offered and will be sold pursuant to an effective shelf registration statement that was previously filed with the Securities and Exchange Commission. Before you invest, you should read the preliminary prospectus supplement and accompanying base prospectus in that registration statement for more complete information about this offering. When available, a copy of the preliminary prospectus supplement and accompanying base prospectus relating to this offering may be obtained from any of the underwriters by contacting:

J.P. Morgan Securities LLC
c/o Broadridge Financial Solutions
1155 Long Island Avenue
Edgewood, NY 11717
Attn: Post-Sale Fulfillment
E-mail: prospectus-eq_fi@jpmchase.com

BofA Merrill Lynch
NC1-004-03-43
200 North College Street, 3rd floor
Charlotte, NC 28255-0001
Attn: Prospectus Department
E-mail: dg.prospectus_requests@baml.com

Wells Fargo Securities
Attention: Equity Syndicate Department
375 Park Avenue
New York, New York, 10152
Email: cmclientsupport@wellsfargo.com
Telephone: 1 (800) 326-5897

You may also obtain these documents free of charge when they are available by visiting the Securities and Exchange Commission's website at www.sec.gov.

Dan, how does this change your evaluation?

No impact. Cash shores up the balance sheet and lowers interest expense. Big news in Q1 will be sale of Eagle Ford package being marketed by Anadarko.

I'm sorry, but could you please explain your sm/anadarko comment? thx.

Anadarko is the operator of a large Eagle Ford area of mutual agreement ("AMI") that is covered by a joint venture agreement. The AMI is for sale. It is being actively marketed by Anadarko. They've had a data room open for several months. I'm sure bids are due soon.

My "back of the envelop" SWAG is that the AMI will sell for over $1 Billion. SM will get ~40% of the proceeds.

If you go to SM's presentation they call it the Non-OP Eagle Ford area.

Is the offering finished? SM is breaking down today and I'm wondering what the problem is. I guess I need to move on to a different company. Any comments would be appreciated. Thanks.

Dan,
Your recent forecast of SM reflects average production going from 152.5 m boed to 157 m bored in 2017.

Yet their recent divestures appear to remove 14.4 m in Williston, 3.3 m in NM, ND, and Montana and 27.5 m in non operated Eagleford, nearly 30% of their production. Their recent presentation reflects expected production ramp in the Permian of 16 m boed. Where are the rest of the 2017 barrels coming from?

I don't remove production just because it is for sale. They may not sell it.

Download the SM forecast model to Excel and you can change the production in 2017 to whatever you wish. If you make the assumption that they are going to sell the Eagle Ford AMI then be sure to reduce interest expense in 2017 by a big chunk. Plus, a stronger balance sheet deserves a higher multiple for valuing the stock.

If they are successful in selling the Eagle Ford AMI then I think they will use the cash to add more rigs in the Permian Basin to ramp up production.

2017 is a SWAG for most of the Sweet 16 because they have not provided production guidance yet.