DENVER - SM Energy Company (NYSE: NYSE:SM), an independent energy firm, announced its intention to offer a total of $1.3 billion in senior notes, divided equally between notes due in 2029 and 2032. The company aims to use the proceeds, along with existing cash and credit facilities, to finance the acquisition of oil and gas assets in the Uinta Basin and to redeem its outstanding 2025 notes.
The offering, subject to market conditions, includes $650 million aggregate principal amount of senior notes due 2029 and an equal amount for notes maturing in 2032. These notes are to be offered to qualified institutional buyers and non-U.S. persons in compliance with the Securities Act's Rule 144A and Regulation S, respectively.
A unique feature of the 2029 notes is a "special mandatory redemption" clause. If the acquisition from XCL Resources, LLC is not completed by July 1, 2025, or if SM Energy decides not to proceed with the purchase, the 2029 notes will be subject to redemption.
The acquisition in question involves properties, interests, and related assets in the Uinta Basin, which SM Energy is in the process of purchasing. The acquisition is a strategic move for the company, which is actively engaged in the exploration, development, and production of oil, gas, and natural gas liquids primarily in Texas.
SM Energy has made it clear that the securities will not be registered under the Securities Act of 1933 or any state securities laws and will be issued pursuant to an exemption from such registration requirements. Consequently, the notes may not be offered or sold within the United States without registration or an applicable exemption.
The press release emphasizes that it does not constitute an offer to sell or a solicitation of an offer to buy any securities. Moreover, it is not a notice of redemption for the 2025 notes.
The company's forward-looking statements indicate plans for the use of proceeds, the acquisition's completion, and the contingent redemption of the 2029 notes. However, these statements are subject to various risks, including market conditions and the ability to close customary offering conditions.
Investors are reminded that this news is based on a press release statement and that forward-looking statements are not guarantees of future performance and involve risks and uncertainties. SM Energy's actual results could differ materially from those projected in any forward-looking statements due to various factors, including those described in the company's filings with the Securities and Exchange Commission.
In other recent news, SM Energy Co has revised its credit agreement to facilitate the acquisition of oil and gas assets in the Uinta Basin. The amendment allows the company to incur certain debts to fund the purchase from XCL AssetCo. Wells Fargo (NYSE:WFC) Bank, National Association, and other lenders are involved in this agreement, which also allows SM Energy to maintain higher cash balances for the acquisition.
Analyst firms have been closely monitoring these developments. Truist Securities adjusted its price target for SM Energy to $49.00, maintaining a Hold rating, while RBC (TSX:RY) Capital Markets raised SM Energy's price target from $50.00 to $54.00. Both firms suggest higher earnings and free cash flow estimates for SM Energy.
Meanwhile, BMO (TSX:BMO) Capital maintained its Market Perform rating, projecting significant enhancements to Free Cash Flow Per Share, Earnings Per Share, and Cash Flow Per Share due to SM Energy's venture into the Uinta Basin. Roth/MKM kept its Buy rating, suggesting the company's estimated production of approximately 195,000 barrels of oil equivalent per day may be conservative.
These are among the recent developments that reflect SM Energy's ongoing efforts to maintain stable production levels and implement operational efficiencies. As the company continues its strategic expansion, the analyst firms' projections provide valuable insights for investors.
InvestingPro Insights
In light of SM Energy Company's recent announcement regarding their strategic acquisition and offering of senior notes, investors might be curious about the company's financial health and market performance. According to InvestingPro data, SM Energy has a market capitalization of $5.39 billion and operates with a moderate level of debt, which is a positive sign for stakeholders considering the company's plans for expansion and debt management.
The company's P/E ratio stands at 7.34, with a slight adjustment to 7.18 for the last twelve months as of Q1 2024, suggesting that the stock could be undervalued relative to its earnings. Additionally, SM Energy has demonstrated a robust gross profit margin of 81.55% in the same period, indicating efficient operations and cost control.
From an investment perspective, SM Energy has maintained dividend payments for 32 consecutive years, which could appeal to income-focused investors. Moreover, the company has experienced a significant price uptick of 31.56% over the last six months, reflecting investor confidence and market momentum.
For those looking for more in-depth analysis, InvestingPro offers additional insights, including a total of 9 InvestingPro Tips that can further guide investment decisions. To explore these tips and gain a more comprehensive understanding of SM Energy's financials and market position, visit https://www.investing.com/pro/SM. Don't forget to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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