On Monday, KeyBanc reiterated its Overweight rating on SM Energy (NYSE:SM) stock, maintaining a $60.00 price target for the company. The firm's analyst highlighted the extensive details provided by SM Energy's CEO, Herb Vogel, during a series of meetings last week with long-only investors.
The discussions centered around the company's development plans for the Uinta Basin, which include strategies for drilling, completion, pad setup, and optimizing crude prices.
According to InvestingPro data, SM Energy currently trades at an attractive P/E ratio of 5.56 and shows strong financial health with a "GREAT" overall score, suggesting alignment with KeyBanc's positive outlook.
Despite inquiries, SM Energy's management did not provide specifics on the 2025 production outlook, indicating that further details would be shared in February next year.
However, the ongoing conversations suggest that production volumes could surpass the current modeling projections of 207 thousand barrels of oil equivalent per day (mboe/d) and the consensus estimate of 208 mboe/d.
The analyst noted that the Uinta Basin is expected to grow in 2024 with a three-rig program but may experience a near-term decline. With last twelve months revenue of $2.3 billion and a healthy current ratio of 3.52, InvestingPro analysis indicates the company has strong fundamentals to support its operational plans.
The analyst also referred to informal comments made in June, suggesting that the anticipated 195 mboe/d in 2025 might be a conservative estimate. The broader market consensus aligns with this conservative stance.
Additionally, the company's management has hinted at a potential reduction in the number of operational rigs, decreasing from nine to six throughout 2025. This could mean that one rig might be removed from each of the company's three basins.
KeyBanc's position remains firm on SM Energy's prospects, with the Overweight rating and $60.00 price target reflecting confidence in the company's strategic operations and potential for growth. The next update on the company's production outlook is eagerly awaited by investors and will be provided in the upcoming February announcement.
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