Independent oil and gas company, SM Energy Company (SM) has recently announced the pricing of senior unsecured notes aggregating $600 million. These notes with a coupon rate of 6.125% are to be issued on par and due in 2022.
The company intends to use the net proceeds from the offering to repay outstanding borrowings under its credit facility and for general corporate purposes. The offering is expected to close on Nov 17, 2014.
SM Energy is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition and production of natural gas and crude oil in North America.
We expect the company’s attractive oil and gas investments, balanced and diverse portfolio of proved reserves and development drilling opportunities to create long-term value for shareholders. We view SM Energy as one of the most attractive players in the exploration and production space.
Given the company’s increasing focus on oil, specifically in the Permian and Rocky Mountain regions, we believe that SM Energy will be able to boost its oil-weighted activity. Additionally, SM has meaningful leasehold positions in the leading U.S. shale plays, including the Bakken, Niobrara, Haynesville and Granite Wash, which we believe will provide with many years of profitable drilling inventory. Growth drivers include the South Texas Eagle Ford Shale and Rockies Williston Basin Bakken/Three Forks shales.
On the flip side, though the company holds considerable acreage in the Williston Basin, most of its holdings are in low-yielding regions. Thus, its results will likely lag its peers which have acreage in the core region of the Bakken.
At present, SM Energy carries a Zacks Rank #3 (Hold). Meanwhile, one can look at better-ranked players in the energy sector like Magellan Midstream Partners LP (MMP), Murphy USA Inc. (MUSA) and Sandridge Mississippian Trust II (SDR). All these stocks sport a Zacks Rank #1 (Strong Buy).
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