J.P. Morgan analyst Zach Parham reiterated a Neutral rating on Wednesday on the shares of SM Energy Co ( SM ) with a price forecast of $41.00.

Following its January 1 operational takeover, SM continues to integrate its recently acquired Uinta assets. The company has reported no significant impact from prior rail delays or refinery downtime that affected Uinta’s fourth-quarter performance.

For the first-quarter, oil volumes are expected to slightly exceed the midpoint of SM’s guidance, with estimates at 103.0 MBo/d, closely aligning with consensus expectations of 103.1 MBo/d, said the analyst.

SM anticipates delivering 45 net Turn-In-Lines (TILs) in first-quarter, which represents 30% of its full-year target of 150 net TILs.

These TILs are weighted toward the later part of the quarter, indicating a greater impact on second-quarter production.

Also Read: Why Is EV Maker Rivian Automotive Stock Plunging Today?

As a result, second-quarter oil volumes are projected to rise by 6% quarter-over-quarter to 106.9 MBo/d, aligning with the company’s full-year 2025 production goal of approximately 107 MBo/d.

With updated commodity prices factored in, SM’s first-quarter cash flow per share (CFPS) is estimated at $4.37, slightly ahead of the consensus estimate of $4.28.

EBITDA is also projected at $570 million, surpassing the consensus of $559 million. Capital expenditures for the quarter are expected to total $430 million, falling within the company’s guidance, while free cash flow (FCF) is estimated at $72 million.

Although SM’s stock buyback program remains in place, no repurchases are expected for first-quarter, with activity likely resuming in the second half of 2025 once leverage approaches 1x.

For the full year, the company projects 107.7 MBo/d of oil production, supported by $1.31 billion in capital spending, resulting in $740 million of free cash flow and a 22% FCF yield, noted the analyst.

In October 2024, SM completed its $2.0 billion all-cash acquisition of XCL Resources, expanding into the Uinta Basin and establishing a third core operational area.

Due to the cash-financed deal, the company is prioritizing debt reduction over share buybacks, aiming to bring leverage below 1x by mid-2025. As a result, SM’s cash return yield currently lags behind the peer median, the analyst opined.

Price Action: SM shares traded higher by 2.55% at $30.53 at last check Wednesday.

Read Next:

• What’s Going On With Powersports Retailer RumbleOn Stock Today?

Photo via Shutterstock.