Market Overview

SM Energy Upgraded On Midland Basin Purchase

SM Energy Upgraded On Midland Basin Purchase
Related SM
Benzinga's Top Upgrades, Downgrades For July 12, 2018
40 Biggest Movers From Friday
FPA Capital Fund, Inc. Q3 2018 Commentary (Seeking Alpha)

MUFG’s Michael McAllister believes the pending purchase by SM Energy Co (NYSE: SM) of Midland Basin acreage in Howard County provides a re-rate catalyst.

McAllister upgraded the rating on the company from Underweight to Neutral, while raising the price target from $16 to $36.

“In our opinion, the company’s historically low multiple reflected the scarcity of upside potential that its portfolio of assets offered to the investment community,” the analyst mentioned.

The Midland Basin Purchase

McAllister believes that SM Energy has been a “good operator,” although its acreage has been more Tier 2 than that of most of its peers.

However, this has changed with the announcement of its intention on August 8 to purchase 24,783 acres in Howard County, Texas.

Related Link: Piper Jaffray Upgrades SM Energy To Overweight

The analyst pointed out that this was one of the more active areas in the Midland Basin, with the industry having “delineated the inventory of the Wolfcamp A, Lower Spraberry, and Wolfcamp B as formations worthy of development in a sub-$50/Bbl environment.”

Adds To The Scale

When this purchase is added to the 16,000 net acres that the company already has on the Midland/Upton border, it gives SM Energy the scale that it had so far been lacking.

“The company's plan is to operate one rig through this year, then to dedicate two rigs to the new acreage in 2017. Based on that, and combined with the two rigs operating on the Upton/Midland County acreage, we expect strong oily production growth from SM Energy in 2017,” McAllister added.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for SM

Oct 2018Wells FargoUpgradesMarket PerformOutperform
Aug 2018KLR GroupTerminatesBuy
Aug 2018Stifel NicolausMaintainsBuyBuy

View More Analyst Ratings for SM
View the Latest Analyst Ratings

Posted-In: Michael McAllister MUFG SecuritiesAnalyst Color Upgrades Price Target Commodities Markets Analyst Ratings Best of Benzinga


Related Articles (SM)

View Comments and Join the Discussion!

Latest Ratings

AMTDMorgan StanleyUpgrades65.0
APOMorgan StanleyDowngrades34.0
CGMorgan StanleyDowngrades23.0
EIXEdward JonesDowngrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

20 Stocks Moving In Tuesday's Pre-Market Session

Before Summer Ends, Score An Extra Crispy Tan With KFC's New Chicken-Scented Sunscreen