SM Energy Company: Initiation Of Coverage – A Tale Of Strategic Capital Allocation And Optimization Post-Uinta Basin Acquisition!

SM Energy Company delivered a mixed set of results for the second quarter of 2024, showcasing both strengths and some areas that invite caution. Below is a holistic investment thesis and summary based on the company’s recent earnings call. Starting with the positives, SM Energy posted significant production growth, particularly in the Permian region. Notably, the Woodford-Barnett has shown promising results with initial production rates indicating a high oil
content of 56% to 58%, which is favorable for the company’s revenue mix. These wells, located in an overpressured play, began flowing naturally before transitioning to artificial lift, suggesting robust initial well performance. Similarly, the Eagle Ford assets continue to yield strong outputs, particularly from wells drilled in the western part, reinforcing the company’s established operational prowess in developing liquids-rich assets.