We have upgraded our long-term recommendation on
SM Energy Company
) to Neutral from Underperform.
STONE ENERGY CP (SGY): Free Stock Analysis
SM ENERGY CO (SM): Free Stock Analysis Report
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SM Energy boasts attractive oil and gas investments, balanced and
diverse portfolio of proved reserves and development drilling
opportunities, which we expect to create long-term value for
shareholders. We view the company as one of the most attractive
players in the exploration and production (E&P) space.
Given the significant liquids content and favorable economics,
Eagle Ford represents an attractive resource potential and SM
Energy has built a premier position there. Development of the
Eagle Ford Shale is an important part of the company's goal to
increase stockholder value. We also believe that the company's
emerging core portfolio will support visible organic growth for
the next several years.
SM Energy also remains proactive in its Permian play. The
additional acreage on its Permian play along with the increase in
the rig count validates the potential of the basin. The initial
production rates of the Mississippian Limestone development has
been promising and mainly reflects continued drilling activities
in its Permian shale position.
With the company's increasing focus on oil, specifically in the
Permian and Rocky Mountain regions, we believe that it will be
able to boost its oil-weighted activities. Additionally, it has
meaningful leasehold positions of the leading US shale plays,
including the Bakken, Niobrara, Haynesville, and Granite Wash,
which we believe will provide the company with several years of
profitable drilling inventory. Growth drivers include the South
Texas Eagle Ford Shale and Rockies Williston Basin Bakken/Three
SM Energy has been able to raise a significant amount of capital
from the sale of a number of assets, placing the firm well with
respect to capital for growth. It has transformed into a resource
play with a high-graded asset base.
However, in terms of geographic diversification, SM Energy's lack
of exposure to other refining regions in other countries weakens
its competitive positioning, in our view. With majority of its
capacity located in North America, the company's results are
heavily dependant on refining margins in a single market.
Though the company holds considerable acreage in the Williston
Basin, most of its holdings lie in the region having low yield.
Thus, its results will likely lag its peers who have acreage in
the core region of the Bakken.
SM Energy is an independent oil and gas company that competes
with the likes of
Stone Energy Corp.