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1. Company Snapshot

1.a. Company Description

SM Energy Company, an independent energy company, engages in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in the state of Texas.As of February 24, 2022, it had 492.0 million barrels of oil equivalent of estimated proved reserves.It also has working interests in 825 gross productive oil wells and 483 gross productive gas wells in the Midland Basin and South Texas.


The company was formerly known as St. Mary Land & Exploration Company and changed its name to SM Energy Company in May 2010.SM Energy Company was founded in 1908 and is headquartered in Denver, Colorado.

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1.b. Last Insights on SM

SM Energy's recent performance has been impacted by several factors. The company's planned merger with Civitas Resources, Inc. has raised concerns among shareholders, with Halper Sadeh LLC investigating whether the deal is fair to SM Energy shareholders. Additionally, institutional investors such as US Bancorp DE and Ethic Inc. have decreased their positions in the company, while Creative Planning has increased its stake. SM Energy has also announced additional details on the planned merger and participation in upcoming investor conferences. The company's presentation at the Bank of America Leveraged Finance Conference may provide further insights.

1.c. Company Highlights

2. SM Energy's Standout Q2: Record Production and Strong Financials

SM Energy delivered a robust second quarter, with record production volumes driving a strong financial beat across many metrics. The company reported earnings per share (EPS) of $1.5, surpassing analyst estimates of $1.23. Adjusted net income, adjusted EBITDAX, and adjusted free cash flow also exceeded consensus estimates. As Herbert S. Vogel, CEO, noted, "We had a truly standout second quarter... progressing nicely towards our 1x leverage target, which we expect to achieve near year-end in the current commodity price environment."

Publication Date: Aug -09

📋 Highlights
  • Record Production & Financial Beats:: Achieved record production volumes, driving strong financial performance with over $100M cash balance and progress toward 1x leverage target.
  • Uinta Basin Growth:: Acquisition boosted net reserves and production by over 60% since 2020, enhancing scale and oil mix for higher margins.
  • Financial Outperformance:: Exceeded consensus estimates, with adjusted free cash flow and $2.1B liquidity, maintaining net debt/EBITDAX at 1.2x.
  • Updated Guidance:: Raised 2025 production growth outlook from 20% to 38% due to operational efficiency and accelerated drilling activity.
  • Hedging Strategy:: 46% of 2025 oil and 45% of natural gas production hedged to mitigate commodity price volatility risks.

Production Outperformance

The company's production outperformance was driven by several factors, including the successful pulling forward of activity into the second quarter due to more efficient drilling and completion operations in the Midland and Uinta Basins. This led to a 38% increase in oil production, exceeding the initial guidance of 30%. Elizabeth Anne McDonald, CFO, highlighted the company's growth, stating, "Our growth has been intentional and strategic with the Uinta Basin acquisition serving a pivotal milestone, delivering a step change in scale and positioning us for even greater impact."

Balance Sheet and Hedging

SM Energy's balance sheet continues to be in good shape, with cash on hand and an undrawn revolver, resulting in substantial available liquidity of $2.1 billion. The company's net debt to adjusted EBITDAX ratio stands at 1.2x, with a priority to reduce leverage to the 1x level by year-end. The company has also continued to layer on hedges for a portion of its expected oil and gas production in 2025 and 2026, and a portion of its expected gas production in 2027.

Valuation

With a forward P/E ratio of 3.7, SM Energy's stock appears reasonably priced. The company's P/B ratio of 0.65 and EV/EBITDA ratio of 2.75 also suggest that the stock is trading at a discount to its peers. However, the company's Free Cash Flow Yield of -36.1% and ROIC of -764.0% are concerning. Despite these metrics, the company's strong financial performance and growth prospects may justify a higher valuation.

3. NewsRoom

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137,975 Shares in SM Energy Company $SM Acquired by Edgestream Partners L.P.

Dec -04

Source: defenseworld.net

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SM Energy Company (SM) Presents at Bank of America Leveraged Finance Conference Transcript

Dec -02

Source: seekingalpha.com

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Creative Planning Purchases 20,497 Shares of SM Energy Company $SM

Nov -26

Source: defenseworld.net

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SM Energy Company $SM Stock Position Increased by Creative Planning

Nov -26

Source: defenseworld.net

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Critical Review: SM Energy (NYSE:SM) vs. HKN (OTCMKTS:HKNI)

Nov -23

Source: defenseworld.net

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SM ENERGY ANNOUNCES ADDITIONAL DETAILS ON PLANNED MERGER WITH CIVITAS AND PARTICIPATION IN UPCOMING INVESTOR CONFERENCES

Nov -17

Source: prnewswire.com

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Civitas Resources Reports Strong Third Quarter 2025 Financial and Operating Results

Nov -06

Source: businesswire.com

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$HAREHOLDER ALERT: The M&A Class Action Firm Announces An Investigation of Civitas Resources, Inc. (NYSE: CIVI)

Nov -04

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.41%)

6. Segments

Retail

Expected Growth: 7.5%

SM Energy Company's 7.5% retail growth is driven by increasing demand for convenience stores, expansion into new markets, and strategic partnerships. Additionally, investments in digital transformation, loyalty programs, and private label offerings have enhanced customer experience, contributing to the segment's growth.

Property

Expected Growth: 7.0%

SM Energy Company's 7.0% growth is driven by increasing oil prices, successful drilling programs in the Permian Basin, and strategic acquisitions. Additionally, the company's focus on cost reduction and operational efficiencies has led to improved margins. Furthermore, SM Energy's diversified asset base and strong balance sheet have enabled it to capitalize on growth opportunities.

Portfolio Investments

Expected Growth: 8.5%

SM Energy Company's 8.5% portfolio investment growth is driven by increasing oil prices, strategic acquisitions, and efficient operations. The company's focus on high-return assets, such as the Permian Basin, and its ability to reduce costs through technology and process improvements have also contributed to this growth.

Banking

Expected Growth: 6.5%

SM Energy Company's 6.5% growth in the banking segment is driven by increasing demand for energy loans, strategic acquisitions, and expansion into new markets. Additionally, the company's focus on digital transformation, cost savings initiatives, and strong risk management practices have contributed to its growth. Furthermore, the rising oil prices and increasing exploration activities have also boosted the company's banking business.

Other

Expected Growth: 7.8%

SM Energy Company's 7.8% growth is driven by increased production in the Permian Basin, successful drilling programs, and strategic acquisitions. Additionally, improved operational efficiencies, cost savings initiatives, and a favorable commodity price environment have contributed to the company's growth.

7. Detailed Products

Crude Oil

SM Energy Company is a leading producer of crude oil, with operations focused in the Permian Basin and Eagle Ford Shale.

Natural Gas

SM Energy Company is a significant producer of natural gas, with operations focused in the Permian Basin and Eagle Ford Shale.

Natural Gas Liquids (NGLs)

SM Energy Company produces NGLs as a byproduct of natural gas production, which are used as a feedstock for petrochemicals and as a fuel.

Condensate

SM Energy Company produces condensate, a type of light oil, as a byproduct of natural gas production.

8. SM Energy Company's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for SM Energy Company is medium due to the availability of alternative energy sources such as wind and solar power.

Bargaining Power Of Customers

The bargaining power of customers for SM Energy Company is low due to the lack of negotiating power of individual customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers for SM Energy Company is medium due to the presence of multiple suppliers of oil and gas equipment and services.

Threat Of New Entrants

The threat of new entrants for SM Energy Company is high due to the relatively low barriers to entry in the oil and gas industry.

Intensity Of Rivalry

The intensity of rivalry for SM Energy Company is high due to the presence of several established players in the oil and gas industry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 30.55%
Debt Cost 6.50%
Equity Weight 69.45%
Equity Cost 24.95%
WACC 19.32%
Leverage 43.99%

11. Quality Control: SM Energy Company passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Matador Resources

A-Score: 6.0/10

Value: 8.4

Growth: 8.8

Quality: 7.4

Yield: 4.0

Momentum: 3.0

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
Permian Resources

A-Score: 6.0/10

Value: 6.6

Growth: 7.8

Quality: 6.6

Yield: 6.0

Momentum: 3.5

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
SM Energy

A-Score: 5.3/10

Value: 9.4

Growth: 5.7

Quality: 6.8

Yield: 5.0

Momentum: 1.5

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
Marathon Oil

A-Score: 5.3/10

Value: 5.8

Growth: 6.3

Quality: 6.6

Yield: 1.0

Momentum: 5.5

Volatility: 6.3

1-Year Total Return ->

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Chesapeake Energy

A-Score: 4.9/10

Value: 5.1

Growth: 1.6

Quality: 6.1

Yield: 8.0

Momentum: 5.0

Volatility: 3.3

1-Year Total Return ->

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Crescent Energy

A-Score: 4.7/10

Value: 6.9

Growth: 4.3

Quality: 4.2

Yield: 8.0

Momentum: 1.0

Volatility: 3.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

20.57$

Current Price

20.57$

Potential

-0.00%

Expected Cash-Flows