SM Energy Company Valuation Report, June 2010 Available through Bharatbook

June 24, 2010 - PRLog -- SM Energy Company Valuation Report, June 2010 - Strategic and Operational Analysis

Focusing On Exploration and Development of Resource Plays to Map Long Term Growth

Sharpening Unconventional Resource Opportunities:
SM Energy Company (SM Energy) has been focusing on unconventional resources to grow its reserves and production base in the long run. In line with this, the company is planning aggressive exploration and development activities in the Eagle Ford, Haynesville, Marcellus, and Bakken shales in the coming year. It plans to invest around $561m in exploration and drilling activities, of which around 40% will be directed towards the development of the Eagle ford shale in 2010. Moreover, it also plans to accelerate its Haynesville and Marcellus shale development activities in 2010 and beyond. The company’s current exposure in these shales is expected to add around 5 Tcfe of resource potential in the long run. Apart from these shale exposures, it is also focused on the Granite Wash resource play where it participated as a non-operating partner with Apache Corporation in 2009. The company’s aggressive exploration and development plans in these shales, coupled with its Granite Wash exposure, are expected to provide significant opportunities for long-term growth in the coming years. ( http://www.bharatbook.com/detail.asp?id=142366&rt=SM-Ener... )

Substantial Results from Eagle Ford Shale:
SM Energy successfully added around 24.6 bcfe of reserves through its drill bit programs in the Eagle Ford shale in 2009. These reserve additions accounted for around 56% of the total undeveloped reserve additions in 2009. SM Energy held around 250,000 net acres in 2009, which shows an increase of around 19% from its 2008 acreage position in this shale. Moreover, of the 250,000 acres it held in 2009, the company held a 100% working interest in and operated 168,000 acres, and the rest were operated in a joint venture with Txco and Anadarko Petroleum. It expects improving performance and fast additions of reserves from this shale in 2010.

Higher Dependency on Operating Cash Flows and Divestures to Fund 2010 Capital Expenditure:
With its increased exposure to the shales projects, it is evident that the company’s future development will be heavily dependent on its capital expenditure (capex) program in the coming years. Aligned with its dependence on future capex for development, the company plans to increase its capex from $450m in 2009 to $750m in 2010. In line with its future capex requirements, it is expected that the company will largely fund this requirement through its internal cash flows and possible non-core asset divestures in the coming years. SM Energy Company divested some of its non-core assets in late 2009 and early 2010 for around $307m to support its development plans in the shales. Moreover, because of its strong cash flow generation capability along with its future divesture plans with an available debt capacity of around $467m under its revolving credit facility, It expects that the company will mainly rely on internal funds to support its upcoming shale development programs.

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