SM Energy 'A Value Name' In Oil & Gas, Williams Capital Says Buy

Williams Capital initiated coverage on SM Energy Co SM witha Buy rating and $57 price target, describing it as a value name (it remains one of the cheapest names in the sector) with a solid balance sheet and assets, as well as a conservative management team.

"The recent Midland Basin acquisition expands the company's footprint to nearly 47,000 net acres, providing significant running room across the stacked-pay Wolfcamp/Spraberry zones," wrote the analysts, forecasting the company's oil growth to be 20.4 percent and 23 percent in 2017 and 2018, respectively.

Shares are trading at 6.7x and 4.4x EV/EBITDA for 2017 and 2018 compared to its peers' average multiples of 8.2x and 5.9x, respectively. The $57 price target implies 2017 and 2018 EV/EBITDA metrics 8.5x and 5.5x, respectively.