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SM Energy Company, Company Intelligence Report

SM Energy Company, Company Intelligence Report

Table of Contents

Market Study
Published: January 2013
Pages: 102
Tables: For full details, please email keithw@cmsinfo.com
From: GBP 657.89  Buy Now!
Research from: GlobalData
Sector: Energy

SM Energy Company, Company Intelligence Report


SM Energy Company (SM) is an independent energy company primarily engaged in the exploration, development and production of crude oil and natural gas in the US. The company?s major operations are located in four regions: the South Texas and Gulf Coast, Mid-Continent, Rocky Mountain, and the Permian basin. The company?s Exploration and Production (E&P) activities in the South Texas and Gulf Coast region are mainly located in the Eagle Ford shale, which made the biggest contribution towards its total production in 2011 and is expected to remain the major driver of its production growth in the future. SM?s major operating activities in the Gulf Coast region are spread across the Bakken/Three Fork section and several other exploratory prospects. The company?s operations in the Mid-Continent region are located in the Granite-Wash formation and the Woodford shale. Its E&P activities in the Rocky Mountains region are spread across the Haynesville shale while its activities in the Permian basin mainly target the Wolfberry light oil play. SM has established a strong presence in shale plays in the US, which represent a major part of its upstream portfolio.

SM held total proved reserves of 209.9 million barrels of oil equivalent (mmboe) as of December 2011, comprising 47.3% from crude oil and 52.7% from natural gas. The company?s reserves increased at a Compounded Annual Growth Rate (CAGR) of 27.7% during the 2009?2011 period. Production in 2011 stood at 28.3 mmboe, comprising 41% crude oil and 59% natural gas.


- Key Highlights: This section provides detailed analysis on the company?s overall oil and gas value chain, new projects, growth opportunities, new ventures, assets performance, hedging strategies, Capex funding, geographical results of oil and gas operations.
- Goals and Strategies: This section provides the upcoming goals and strategies of the company. The section mainly goals and strategies followed by the company in order to meet its upcoming goals.
- SWOT: The report?s SWOT section provides the internal strength, weakness, opportunities and threats of company to reflect its strategic positions in the market.
- Production and Development Overview: This section highlights the company?s crude oil and natural gas production forecast from its legacy and upcoming assets by region and commodity mix for next five years. The report also covers the detailed information and analysis on the company?s producing and development assets.
- Exploration: This section includes detailed explanation and analysis on the company?s exploration assets resulted due to new discoveries, new drilling and other activities.
- M&A trends: This section mainly provides information and analysis on the company?s recent assets transactions, joint ventures, acquisition, and divestment activities during the last one year. This section highlights the company?s status as a buyer or seller during the analyzed period.
- Financial Forecast and Valuation: This section highlights the detailed financial statement forecast for next five years. With the financial statement forecast, this section also provides intrinsic value of the company by using Valuation method.
- Financial and Operational Metrics: This section covers the company?s historical performance on several financial and operational parameters such as Production and Reserves, Reserves Replacement, Costs Incurred, Acreage, Wells, F&D Costs, Oil and Gas Revenue and Expenses etc.

Reasons to buy

The report will enhance the decision-making capability in a more rapid and time sensitive manner. It will allow you to -
- Provide detailed analysis to those who are interested in knowing the companies? existing and future business strategies.
- Provide in-depth analysis on the companies E&P profiles along with the exploration and M&A updates.
- Provide valuable insights to those who are tracking oil and gas markets and wants to know the intrinsic value of the companies.
- Use the analysis for strategy and planning, M&A identifications, and competitor analysis. Shifting Focus towards the Development of Oil Resources

SM?s crude oil production declined at a negative CAGR of 0.9% during the 2007?2010 period, although it increased in 2011. This decline has affected its operational metrics in a scenario of high imparity between crude oil and natural gas prices. As a result, the company increased the weight of crude oil in its production mix and is now involved in the development of oil-rich resources. In line with this, SM has been increasing its investments in the Permian and Rocky Mountains regions in the US since 2010.

The company?s oil-rich resources are mainly located in the Bakken/Three Fork formation, Mississippian Lime play and the Permian basin. It also has several other prospects such as the Niobrara formation and other in the Powder River basin and DJ basin. Its major focus is currently on the development of the Bakken/Three Fork formations. SM has proved reserves of around 50.6 mmboe in the Rocky Mountain region (including Bakken/Three Forks and other oil-rich formations), of which nearly 86.3% is crude oil while the remaining 13.7% is natural gas. The company?s drilling activities in the Bakken/Three Fork formations are in the initial development phase. Its drilling activities in Q3 2012 mainly targeted the delineation of the company?s acreage in these formations, in which it operated four rigs. SM expects to focus more on in-fill drilling and multi-well pad drilling in these formations the future.

Other major prospects include the Gooseneck, Raven and Borden prospects. The company also expects promising results from the Mississippian Limestone play, in which it operated two rigs in the Mississippian Limestone play at the end of Q3 2012. These prospects have not yet seen any significant drilling activities by the company so far but form part of its strategic drilling inventory, which will drive its transition towards oil-weighted resources in the long term. It held a total reserve base of 17.9 mmboe in the Permian basin in 2011, comprising 70.4% crude oil and 29.6% natural gas. The company plans to accelerate its development activities in these regions, thereby growing its oil-rich production in the long term.

Until 2010, SM largely invested its capex in the Eagle Ford shale with a very small portion allocated to other areas. However, the company?s JV with Mitsui on its acreage in this shale has reduced its capex requirement, which it can direct towards the development of oil-rich prospects. Therefore, the company?s capital investment in other areas is expected to increase in the future, thereby allowing it to accelerate the development of its oil-rich resources and drive the shift towards oil.

GlobalData expects SM?s production to grow by 27.7% to 36.2 mmboe in 2012 compared to 28.3 mmboe in 2011, and at a CAGR of 13.7% during the 2012?2016 period. Moreover, the share of oil is expected to grow from 41% in 2011 to 45% in 2012 and to continue to increase in the future. Increasing production coupled with an increasing bias towards oil volumes is expected to favor SM?s financial margins and boost its cash flows in the future, thereby improving its valuation statistics.

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