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SM Energy's CEO Best to Retire, COO Ottoson to Take Charge

SM Energy Company (SM) announced that its chief executive officer (CEO) Anthony J. Best will retire from his post on Jan 31, 2015. In conjunction with this leadership transition, Javan D. Ottoson, currently president and chief operating officer (COO),was appointed to the board of directors effective Sep 26. Ottoson would also replace Best as the company’s CEO.

Best has been serving as the company's CEO and a member of its board since Feb 2007. He joined the company in Jun 2006 as its president and COO. Best will complete his current term as a member of the board.

SM Energy is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition and production of natural gas and crude oil in North America.

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 an impressive third quarter with increased proved reserves (while driving down finding and development costs), improved net resource potential in the Eagle Ford and Bakken, and better-than-expected production.

Given the significant liquids content and favorable economics, Eagle Ford represents an attractive resource potential where the company has built a premier position. Development of this shale is an important part of SM Energy’s goal to increase stockholder value. We also believe that SM Energy’s emerging core portfolio will support visible organic growth for the next several years.

Given the company’s increasing focus on oil, specifically in the Permian and Rocky Mountain regions, we believe that SM Energy will be able to boost its oil-weighted activity. Additionally, SM has meaningful leasehold positions in the leading U.S. shale plays, including the Bakken, Niobrara, Haynesville, and Granite Wash, which we believe will provide with many years of profitable drilling inventory. Growth drivers include the South Texas Eagle Ford Shale and Rockies Williston Basin Bakken/Three Forks shales.

On the flip side, though the company holds considerable acreage in the Williston Basin, most of its holdings lie in low-yielding regions. Thus, its results will likely lag its peers which have acreage in the core region of the Bakken.

At present, SM Energy carries a Zacks Rank #3 (Hold). Better-ranked stocks in the oil and gas sector include Delek Logistics Partners LP (DKL), Spectra Energy Partners LP (SEP) and Sunoco Logistics Partners LP (SXL). All these stocks sport a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on DKL


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