SM's 237,000 Permian acres powered 49% of Q1 volumes as shares climbed 34% and valuation sits below peers.
The Permian is the most prolific basin in the United States, and companies with a strong footprint in the region are generally considered to have a strong production outlook. This is a low-cost basin, with the cost of conducting operations in the basin relatively low. Recently, energy companies have bolstered their positions in the Permian by acquiring undeveloped acres. Thus, companies like SM Energy SM that have a presence in the Permian are well poised to gain.
To gain a glimpse of its upstream assets, SM Energy has a strong footprint in shale basins in the United States, including the Permian, the most prolific basin, the DJ Basin and others. The company mentioned that its operations are spread across roughly 237,000 net acres in the Permian. Of the total production for the March quarter of this year, the Permian was responsible for roughly 49% of total volumes.
With the strong Permian presence and the ongoing high crude pricing environment, as reflected by the West Texas Intermediate (“WTI”) crude trading at more than $90 per barrel, the overall business outlook for SM looks encouraging.
Devon Energy $DVN Corporation DVN and Matador Resources Company MTDR are now on investors’ radar following the recent announcements of acquisitions of undeveloped acres in the Delaware, a sub-basin of the broader Permian. While DVN bought 16,300 net undeveloped acres, Matador Resources acquired 5,154 net acres.
Both Devon Energy and Matador Resources are also benefiting from the strong crude prices.
Shares of SM have jumped 34.4% over the past year compared with the 20.7% improvement of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, SM trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 5.80X. This is below the broader industry average of 11.98X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SM’s 2026 earnings has seen upward earnings estimate revisions over the past seven days.
Image Source: Zacks Investment Research
SM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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