We are initiating coverage on St. Mary Land & Exploration (SM) with an Underperform recommendation and a target price of $30.
Over the last few years, the company has been building a significant position in emerging shale plays in order to reposition it as more of a resource play focused company. To accelerate this initiative, it has recently sold its non-core Rocky Mountain properties. With an increasing spending on exploration and drilling program, the company is expecting 20% production growth this year.
Given our cautious outlook for natural gas prices in the near to medium term, we believe all these positives may be drowned out as the company’s production profile is fairly natural gas weighted.Zacks Investment Research
