SM Energy
Posted: Fri Dec 23, 2016 1:57 pm
DENVER, Dec. 21, 2016 /PRNewswire/ -- SM Energy Company (SM) announced today that the Company closed the previously announced acquisition of oil and natural gas assets in Howard and Martin Counties, Texas, from QStar LLC and a related entity for $1.6 billion, before customary purchase price adjustments.
The Company estimates its Midland Basin footprint to approximate 87,600 net acres, including the pending acquisition of additional leasehold interests announced in early December 2016. The acquisition was funded predominantly with cash proceeds from recent asset divestitures and the issuance to the sellers of 13.4 million shares of SM Energy common stock. The effective date of the transaction is September 1, 2016. The Company intends to operate two rigs on this leasehold position during 2017, starting in the first quarter.
SM is currently trading for less than 6X 2016 operating cash flow per share. FANG, PXD and RSPP are all trading for close to 20X operating cash flow per share.
Cash flow from operations
2016 = $6.91 < this is my forecast
2017 = $6.72 < First Call's forecasts for 2017 to 2019 (mine is slightly lower for 2017)
2018 = $9.75
2019 = $14.12
Open questions:
1. Will they sell their Eagle Ford non-operated package, when and for how much? ~27,000 Boepd
2. Guidance for 2017? I am now assuming 153,000 Boepd with Permian grow offset by Eagle Ford production being sold
After viewing SM's latest presentation, I think my forecast/valuation model errs on the conservative side. My valuation is now $60.00/share for SM.
My SWAG is that the non-operated Eagle Ford sale (being marketed by Anadarko) will clear things up for Wall Street.
The Company estimates its Midland Basin footprint to approximate 87,600 net acres, including the pending acquisition of additional leasehold interests announced in early December 2016. The acquisition was funded predominantly with cash proceeds from recent asset divestitures and the issuance to the sellers of 13.4 million shares of SM Energy common stock. The effective date of the transaction is September 1, 2016. The Company intends to operate two rigs on this leasehold position during 2017, starting in the first quarter.
SM is currently trading for less than 6X 2016 operating cash flow per share. FANG, PXD and RSPP are all trading for close to 20X operating cash flow per share.
Cash flow from operations
2016 = $6.91 < this is my forecast
2017 = $6.72 < First Call's forecasts for 2017 to 2019 (mine is slightly lower for 2017)
2018 = $9.75
2019 = $14.12
Open questions:
1. Will they sell their Eagle Ford non-operated package, when and for how much? ~27,000 Boepd
2. Guidance for 2017? I am now assuming 153,000 Boepd with Permian grow offset by Eagle Ford production being sold
After viewing SM's latest presentation, I think my forecast/valuation model errs on the conservative side. My valuation is now $60.00/share for SM.
My SWAG is that the non-operated Eagle Ford sale (being marketed by Anadarko) will clear things up for Wall Street.