UPDATE: Imperial Capital Downgrades SM Energy to In-Line, Raises PT
In a report published Monday, Imperial Capital downgraded its rating on SM Energy (NYSE: SM) from Outperform to In-Line, but raised its price target from $58.00 to $61.00.
Imperial Capital noted, “We are downgrading our rating on shares of SM Energy (SM) to In-Line from Outperform, as shares have achieved our previous price target of $58.00 per share. We are raising our price target from $58.00 to $61.00 per share; however, following the recent outperformance, we see negligible upside at the current valuation. The improving takeaway capacity in the Eagle Ford should drive strong production momentum into 2013 and 2014, with growth of 21.5% and 18.6%, respectively, based on our calculation. In the near term, based on our estimates, SM should be in good shape to achieve its 3Q12 production guidance of 565-603 Mmcfe/d. We are currently at the upper-end of guidance with 592.4 Mmcfe/d vs. the Bloomberg consensus of 591.6 Mmcfe/d. We think SM's initial wells in the horizontal Mississippian Limestone were encouraging; however, we view this as a reef play, which will likely turn out to have a limited inventory. We believe greater upside would come from the horizontal Cline and Wolfcamp in this area of the northern Midland Basin; however, in our view, it is too early to make a call on the play.”
SM Energy closed on Friday at $57.78.
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