SM Energy Dives Despite Bullish Uinta Basin Acquisition: Details
Portfolio Pulse from Lekha Gupta
SM Energy Company (NYSE:SM) shares are down 10.2% after announcing a $2.55 billion acquisition of Uinta Basin oil and gas assets from XCL Resources, LLC. Northern Oil and Gas, Inc. (NYSE:NOG) will purchase a 20% share for $510 million. SM Energy plans to fund the acquisition through debt and cash reserves. The acquisition is expected to boost key financial metrics in 2025, including a 35% rise in Adjusted EBITDAX and a 45% increase in Adjusted free cash flow. The company also announced an 11% dividend increase and a new $500 million share repurchase program.
June 27, 2024 | 5:35 pm
News sentiment analysis
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NEGATIVE IMPACT
Investors can gain exposure to SM Energy through the Texas Capital Funds Trust Texas Capital Texas Oil Index ETF (NYSE:OILT). The ETF may experience short-term volatility due to the significant drop in SM Energy's share price.
The Texas Capital Texas Oil Index ETF (OILT) includes SM Energy, which saw a significant drop in share price. This could lead to short-term volatility in the ETF's performance.
CONFIDENCE 70
IMPORTANCE 50
RELEVANCE 50
NEGATIVE IMPACT
Investors can gain exposure to SM Energy through the Invesco S&P SmallCap Energy ETF (NASDAQ:PSCE). The ETF may experience short-term volatility due to the significant drop in SM Energy's share price.
The Invesco S&P SmallCap Energy ETF (PSCE) includes SM Energy, which saw a significant drop in share price. This could lead to short-term volatility in the ETF's performance.
CONFIDENCE 70
IMPORTANCE 50
RELEVANCE 50
NEGATIVE IMPACT
SM Energy shares fell 10.2% following the announcement of a $2.55 billion acquisition of Uinta Basin assets. Despite the initial negative reaction, the acquisition is expected to significantly improve financial metrics by 2025, including a 35% rise in Adjusted EBITDAX and a 45% increase in Adjusted free cash flow. The company also announced an 11% dividend increase and a new $500 million share repurchase program.
The immediate market reaction to the acquisition announcement was negative, causing a 10.2% drop in SM Energy's share price. However, the acquisition is expected to improve key financial metrics significantly by 2025, which could positively impact the stock in the long term. The dividend increase and share repurchase program are also positive signals for investors.
CONFIDENCE 90
IMPORTANCE 90
RELEVANCE 100
POSITIVE IMPACT
Northern Oil and Gas, Inc. (NYSE:NOG) will purchase a 20% share of XCL’s oil and gas assets for $510 million. This strategic investment allows NOG to gain exposure to the Uinta Basin's higher oil content and lower operating costs.
NOG's acquisition of a 20% share in XCL’s Uinta Basin assets for $510 million is a strategic move that could benefit the company due to the higher oil content and lower operating costs of the Uinta Basin. This could positively impact NOG's financial performance and stock price in the short term.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 70