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SM Energy (SM) Stock Surges 126.2% in a Year: Here's Why
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SM Energy Company’s (SM - Free Report) shares have jumped 126.2% in the past year compared with the 80.3% surge of the composite stocks belonging to the industry.
The Zacks Rank #1 (Strong Buy) company, with a market cap of $4.8 billion, has witnessed upward estimate revisions in the past 60 days.
Image Source: Zacks Investment Research
Let’s delve into the factors behind the stock’s price appreciation.
What’s Favoring the Stock?
The price of West Texas Intermediate crude, trading at more than the $100-per-barrel mark, has improved drastically over the past year. Owing to the easing of the coronavirus restrictions, the ongoing recovery in demand will continue to support the strong momentum in oil prices. Also, Russia’s violent invasion of Ukraine is likely to have hiked oil prices.
Rising oil prices are boons for SM Energy’s operations due to its increasing focus on crude, specifically in the Permian Basin and Eagle Ford areas. The company has around 155,000 net acres in South Texas, running two rigs and one completion crew. In the Midland Basin, it has 81,500 net acres, which will provide long-term oil production growth with high operating margins.
The upstream player’s lucrative hydrocarbon investments, balanced and diverse portfolio of proved reserves, and development drilling opportunities are expected to create long-term value for shareholders. SM Energy added 143 million barrels of oil equivalent (MBoe) reserves last year.
In 2021, SM Energy’s total production was 140.7 MBoe/d, of which 54.4% was crude oil. SM Energy has presented encouraging results from the Austin Chalk due to the additional wells drilled in the region.
The wells in the Austin Chalk region are producing around 50-80% liquids, which will boost investor value. Also, it projects its total production for the year at 140-148 MBoe/d, the mid-point of which is higher than the 140.7 MBoe/d reported last year. Coupled with high oil prices, the increased output will boost the company's bottom line.
In 2021, SM Energy generated a free cash flow of $378.3 million, which is significantly higher than the year-ago reported figure of $239.5 million. Significant growth in the free cash flow was driven by higher production volumes and realized prices. This makes it well-positioned to pay dividends, reduce debt and contribute to growth.
Overall, SM Energy, one of the most attractive players in the exploration and production space, is poised for further upside in the coming days.
Equinor ASA (EQNR - Free Report) is one of the premier integrated energy companies in the world, with operations spreading across 30 countries. At 2021-end, EQNR had estimated proved reserves of 5.356 billion BOE.
Equinor’s earnings for 2022 are expected to increase 56.8% year over year. For 2022, Equinor announced the increase of the share buy-back program of up to $5 billion. The energy major increased its quarterly dividend to 20 cents per share from the prior dividend of 18 cents.
Cactus Inc. (WHD - Free Report) is involved in manufacturing, designing and selling wellhead and pressure-control equipment. At the end of the fourth quarter, Cactus had cash and cash equivalents of $301.7 million, which can provide it with immense financial flexibility. The company has a strong balance sheet. It revealed that it has no bank debt outstanding as of Dec 31, 2021.
Cactus’ earnings for 2022 are expected to increase 129.2% year over year. WHD’s board declared a quarterly cash dividend of 11 cents per share. This reflects an increment of 10% from the prior dividend payout.
Centennial Resource Development, Inc. is an independent oil and gas exploration and production company. At 2021-end, Centennial announced its proved reserves at 305 MMBoe, representing growth from 299 MMBoe at the end of the prior year.
Centennial’s earnings for 2022 are expected to increase 191.3% year over year. CDEV recently announced the launch of its stock repurchase program worth $350 million. The authorization of the plan is for two years.
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SM Energy (SM) Stock Surges 126.2% in a Year: Here's Why
SM Energy Company’s (SM - Free Report) shares have jumped 126.2% in the past year compared with the 80.3% surge of the composite stocks belonging to the industry.
The Zacks Rank #1 (Strong Buy) company, with a market cap of $4.8 billion, has witnessed upward estimate revisions in the past 60 days.
Image Source: Zacks Investment Research
Let’s delve into the factors behind the stock’s price appreciation.
What’s Favoring the Stock?
The price of West Texas Intermediate crude, trading at more than the $100-per-barrel mark, has improved drastically over the past year. Owing to the easing of the coronavirus restrictions, the ongoing recovery in demand will continue to support the strong momentum in oil prices. Also, Russia’s violent invasion of Ukraine is likely to have hiked oil prices.
Rising oil prices are boons for SM Energy’s operations due to its increasing focus on crude, specifically in the Permian Basin and Eagle Ford areas. The company has around 155,000 net acres in South Texas, running two rigs and one completion crew. In the Midland Basin, it has 81,500 net acres, which will provide long-term oil production growth with high operating margins.
The upstream player’s lucrative hydrocarbon investments, balanced and diverse portfolio of proved reserves, and development drilling opportunities are expected to create long-term value for shareholders. SM Energy added 143 million barrels of oil equivalent (MBoe) reserves last year.
In 2021, SM Energy’s total production was 140.7 MBoe/d, of which 54.4% was crude oil. SM Energy has presented encouraging results from the Austin Chalk due to the additional wells drilled in the region.
The wells in the Austin Chalk region are producing around 50-80% liquids, which will boost investor value. Also, it projects its total production for the year at 140-148 MBoe/d, the mid-point of which is higher than the 140.7 MBoe/d reported last year. Coupled with high oil prices, the increased output will boost the company's bottom line.
In 2021, SM Energy generated a free cash flow of $378.3 million, which is significantly higher than the year-ago reported figure of $239.5 million. Significant growth in the free cash flow was driven by higher production volumes and realized prices. This makes it well-positioned to pay dividends, reduce debt and contribute to growth.
Overall, SM Energy, one of the most attractive players in the exploration and production space, is poised for further upside in the coming days.
Other Stocks to Consider
Investors interested in the energy sector might look at the following companies that also presently sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Equinor ASA (EQNR - Free Report) is one of the premier integrated energy companies in the world, with operations spreading across 30 countries. At 2021-end, EQNR had estimated proved reserves of 5.356 billion BOE.
Equinor’s earnings for 2022 are expected to increase 56.8% year over year. For 2022, Equinor announced the increase of the share buy-back program of up to $5 billion. The energy major increased its quarterly dividend to 20 cents per share from the prior dividend of 18 cents.
Cactus Inc. (WHD - Free Report) is involved in manufacturing, designing and selling wellhead and pressure-control equipment. At the end of the fourth quarter, Cactus had cash and cash equivalents of $301.7 million, which can provide it with immense financial flexibility. The company has a strong balance sheet. It revealed that it has no bank debt outstanding as of Dec 31, 2021.
Cactus’ earnings for 2022 are expected to increase 129.2% year over year. WHD’s board declared a quarterly cash dividend of 11 cents per share. This reflects an increment of 10% from the prior dividend payout.
Centennial Resource Development, Inc. is an independent oil and gas exploration and production company. At 2021-end, Centennial announced its proved reserves at 305 MMBoe, representing growth from 299 MMBoe at the end of the prior year.
Centennial’s earnings for 2022 are expected to increase 191.3% year over year. CDEV recently announced the launch of its stock repurchase program worth $350 million. The authorization of the plan is for two years.