S&P upgrades SM Energy

S&P said it raised SM Energy Co.’s issuer rating to BB- from B+ and affirmed the BB- rating on its unsecured debt. The agency also revised the recovery rating to 3 from 2, indicating meaningful (50%-70%; rounded estimate: capped at 65%) recovery in default. A 2 rating means substantial recovery of 70%-90%.

“Our upgrade reflects the company's recent debt repayment and our expectation of significant free cash flow and strong credit measures over the next two years.

“SM Energy repaid about $551 million of its long-term debt in 2022, bringing total debt to about $1.6 billion. Based on the debt reduction and incorporating our current oil and natural gas price deck assumptions, we now expect FFO to debt of well above 100%, with debt to EBITDA below 1x over the next two years. At the same time, we expect the company to generate positive DCF over the next two years,” the agency said in a press release.

The outlook is stable.

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