SM Energy Co. (SM) reported stellar second-quarter 2011 results, buoyed by higher production, divestitures and higher price realization. The company also experienced a considerable 58% jump in production volume during the quarter, exceeding its target range.
Furthermore, SM Energy remains upbeat regarding production for this year and the next, given impressive performances by three Galvan Ranch Eagle Ford wells and additional capacity coming online through 2012. We believe that the company's emerging core portfolio is a catalyst for visible organic growth over the next several years.
Considering these factors, we are upgrading our recommendation to Outperform from Neutral. Our $92 price objective reflects a multiple of 13.0x the trailing the 12-month cash flow.
SM ENERGY CO (SM): Free Stock Analysis Report
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