Independent oil and gas company, SM Energy Company (SM) has recently announced the pricing of senior unsecured notes aggregating $500 million. These notes with a coupon rate of 5% are to be issued at par and would be due in 2024.
Proceeds generated from the issue would be utilized to repay outstanding borrowings under its credit facility and for general corporate purposes. SM Energy expects to close the offering by May 20, 2013.
In its recently reported first quarter, SM Energy posted $282.3 million of net cash from operating activities versus $188.1 million in the year-ago quarter. As of Mar 31, 2013, SM Energy had a cash balance of $0.087 million and long-term debt of $1,530.0 million, with a debt-to-capitalization ratio of 51.6%.
SM Energy also experienced a solid 2012 with new highs for proved reserves and annual production. It also finished the year with record quarterly production. These were mainly driven by its high rate of return for oil and liquid-rich ventures in the Eagle Ford shale and Bakken/Three Forks, which will likely continue to aid growth in 2013.
The company has changed its strategy of growing through niche acquisitions by focusing on greater acreage in potential resource plays. Its exposure to several emerging plays, including the Eagle Ford, Bakken, Haynesville, Marcellus, Granite Wash and Woodford shales, will likely be the primary growth driver moving forward. Particularly, the acreage in Eagle Ford gives SM Energy considerable growth potential. The company’s move to increase liquids composition in its portfolio is also noteworthy.
Going forward, 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. The company reported increased proved reserves in the first quarter, while driving down finding and development costs.
SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in onshore North America.
SM Energy currently retains a Zacks Rank #1 (Strong Buy). However, there are other Zacks Ranked #1 (Strong Buy) stocks in the oil and gas industry like Enerplus Corporation (ERF), Hydrogenics Corporation (HYGS), and Pembina Pipeline Corporation (PBA) that also appear attractive in the short term.
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