Sm Energy Company · NYSE:SM
Sm Energy — FY2022 Earnings Presentation
35 slides from Sm Energy's earnings presentation, Feb 22, 2023
Slide 1: 2022 Results and 2023 Operating Plan
2022 Results and 2023 Operating Plan FEBRUARY 22, 2023 NYSE: SM SM-ENERGY.COM
Slide 2: Disclaimers
DISCLAIMERS Forward-looking statements This presentation contains forward-looking statements within the meaning of securities laws. The words “demonstrate,” “estimate,” “expect,” "goal," "generate," “plan,” “target,” “believes,” “objectives,” “priorities,” and similar expressions are intended to ide
Slide 3: Premier Operator of Top-Tier Assets: 2022 Results Exceeded Plan Goals
PREMIER OPERATOR OF TOP-TIER ASSETS 2022 RESULTS SIGNIFICANTLY EXCEEDED PLAN GOALS 2022 Plan Goals & Results Generate increased Reduce leverage ratio(1) to Demonstrate measurable Adjusted free cash flow(1) ~1.0x, Net debt(1) to ~$1B ESG stewardship $849 million 0.59x Met leverage ratio(1) target in
Slide 4: 2023 Strategic Objectives
PREMIER OPERATOR OF TOP-TIER ASSETS VALUE CREATION 2023 Strategic Objectives 1. Deliver increased return of capital to stockholders: First full year of our sustainable capital return program while maintaining a strong balance sheet 2. Focus on operational execution: Optimize capital efficiency, demo
Slide 5: Sustainable and Repeatable Business Model
SUSTAINABLE AND REPEATABLE BUSINESS MODEL Sustainable Premier Operator of Top Tier Assets Return of Capital SUSTAINABLE Strong Balance Sheet Repeatable World Class Technical Team REPEATABLE REPEATA Organically Add Inventory Strategic Inventory Capture and BLE Growth 5
Slide 6: Record 2022 FCF at $849MM | 20% Yield to YE Market Cap
RECORD 2022 FCF(1) AT $849MM | 20% YIELD TO YE MARKET CAP(1) 2022 DEBT REDUCTION PIVOTS TO 2023 RETURN OF CAPITAL Leverage Target Met = Increased Optionality in Future Use of Adjusted Free Cash Flow(1) $849 (1) (1) (1) Note | Amounts shown in millions. Amounts may not recalculate due to rounding. 6
Slide 7: Plan Overview & Guidance
Plan Overview & Guidance SMIENERGY
Slide 8: 2023 Plan Guidance
2023 PLAN GUIDANCE(1) OPTIMIZING FREE CASH FLOW OVER A MULTI-YEAR PLAN Guidance Key Metrics FY 2023 Capital Expenditures(2) ($B) $1.1 2023 Total Production (MMBoe) Total Production (MBoe/d) 52.5 – 54.5 144 – 150 Oil percentage ~43% Capital Expenditures(2) LOE (per Boe) $5.75 – $6.00 ~$1.1 billion Tr
Slide 9: Balance Sheet
BALANCE SHEET LEVERAGE OBJECTIVES MET As of December 31, 2022: As of December 31, 2022: Net debt-to-Adjusted EBITDAX(1) Debt Maturities 0.59x in millions $1,500 $1.7 billion $1,250 • Liquidity $2.5B • Cash balance $445 million Borrowing Base $1,000 $1.25B • Net Debt(1) $1.1 billion(2) Aggregate Lend
Slide 10: Hedging Summary
HEDGING SUMMARY HEDGE VOLUMES LOWER – ALIGNED WITH LOWER LEVERAGE 2023 Hedge Program Oil ~6,800 MBbls(2), or slightly less than 30% of expected 2023 oil production, is hedged to contract prices in the Midland Basin at a weighted-average price of $74.10/Bbl (weighted-average of collar ~25 % ceiling
Slide 11: Year-End 2022 Proved Reserves
YEAR-END 2022 PROVED RESERVES PROVED RESERVES UP 9% COMPARED TO PRIOR YEAR Proved Reserves 537MMBoe 492 Pre-tax PV-10(1) $ 12B 405 Reserves life index (proved reserves / 2022 production) 10 years 59% Proved Developed Production Replacement(2) 205% 38% oil 44% natural gas 18% NGLs Note | Calculated i
Slide 12: Year-End 2022 Inventory
YEAR-END 2022 INVENTORY ORGANICALLY REPLACING AND MAINTAINING HIGHLY ECONOMIC INVENTORY Total Company expected economic _ 10 13 + inventory(1) Organically maintaining inventory years Nearly 80 % of inventory is >60 % Total Company classified as 3P reserves having inventory expected economic and ge
Slide 13: Regional Update
Regional Update SMIENERGY
Slide 14: Midland Basin
MIDLAND BASIN FOCUSED ON EXECUTION, WELL PERFORMANCE AND CAPITAL EFFICIENCY 2023 OPERATING PLAN 2023 PLAN DETAILS 2023 net wells planned: drill 40 – 45; complete ~50 RockStar ~11,135’ expected average lateral feet per well, including 15 wells at ≥15,000 ft lateral length(1) ~33% Boe PDP declin
Slide 15: Midland Basin: Inventory Upside on Existing Acreage
MIDLAND BASIN INVENTORY UPSIDE ON EXISTING ACREAGE – UP TO 8 PRODUCING INTERVALS Midland Basin Inventory Upside LEONARD LEONARD 6,500’ • First test ~ 800 days on production, 288 MBoe produced MIDDLE to date from 9,900’ lateral 7,100’ SPRABERRY • Six Leonard tests planned for 1H23 DEAN JO MILL 7,700’
Slide 16: Midland Basin – Production Outperformance
MIDLAND BASIN – PRODUCTION OUTPERFORMANCE SM OUTPERFORMS PEERS & CONTINUES OPTIMIZATION SM Wells v. Peers(1) SM 2020-2022 Wells(2) Howard County 300 300 250 250 Avg. Cumulative Oil Production(3) (MBbl/10,000 ft) Avg. Cumulative Oil Production(3) (MBbl/10,000 ft) Significant 200 Outperformance 31% 20
Slide 17: Midland Basin – EUR Outperformance
MIDLAND BASIN – EUR OUTPERFORMANCE TECHNICAL EXPERTISE YIELDS EXCEPTIONAL RETURNS SM Operated Wells v. Peers Howard County 150 Third-party Evaluation Oil EUR, WH (MBbl/1,000 ft) 100 indicates XX Best EUR Performance 50 52 44 31 0 (1) Enverus Intelligent Research data | Wells completed in Howard Coun
Slide 18: South Texas
SOUTH TEXAS FOCUSED ON EXECUTION AND RETURNS ENHANCEMENT 2023 OPERATING PLAN 2023 PLAN DETAILS 2023 net wells planned: drill 40 – 45; complete ~40 DIMMIT COUNTY ~9,770’ expected average lateral feet per well(1) WEBB COUNTY ~37% Boe PDP decline expected (YE22 - YE23) ENHANCING INVENTORY VALUE M
Slide 19: South Texas: Austin Chalk Success Continues
SOUTH TEXAS: AUSTIN CHALK SUCCESS CONTINUES AUSTIN CHALK SUPPORTS RAPID GROWTH IN OIL/LIQUIDS PRODUCTION Austin Chalk Wells Currently Producing New Wells that Reached IP30 (1) 68 Wells Producing ~50-90% Liquids(2) 90 14 80 WELLS Average 70 Production(3) (MBoe per 1,000’ / 3-stream) Cumulative Produc
Slide 20: South Texas: Austin Chalk Success Continues
SOUTH TEXAS: AUSTIN CHALK SUCCESS CONTINUES PRODUCTION CURVES VARY BY COMMODITY MIX COMPARISON OF O I L & L I Q U I D S - R I C H G A S A R E A S (1) 2 0 2 2 A u s t i n C h a l k W e l l s (1) 2023 Planned Completions 40 Oil 2022 Completions Completed through 2021 Liquids-rich Gas (Mboe per 1,000'
Slide 21: South Texas: Confidence in the Austin Chalk
SOUTH TEXAS CONFIDENCE IN THE AUSTIN CHALK: REPEATABLE & PREDICTABLE Not Your “Old” Austin Chalk: Austin Chalk P10:P90 is Indicative of an Outstanding Resource Play EUR P10:P90 Ratio(1) 50 1988 – 2010 Wells 41 400 40 Well Count = ~ 3,644 30 1981 – 2011 Wells Expected 20 Austin Chalk 17 Locations Wel
Slide 22: Sustainable and Repeatable Business Model
SUSTAINABLE AND REPEATABLE BUSINESS MODEL Sustainable Premier Operator of Top Tier Assets Return of Capital SUSTAINABLE Strong Balance Sheet Repeatable World Class Technical Team REPEATABLE REPEATA Organically Add Inventory Strategic Inventory Capture and BLE Growth 22
Slide 23: Appendix
Appendix SMIENERGY
Slide 24: 2022 Proved Reserves
2022 PROVED RESERVES PROVED RESERVES AT YEAR-END WERE 537 MMBOE, UP 9% COMPARED WITH PRIOR YEAR Proved Reserves by Region YE 2021 (MMBoe) 251.6 240.4 492.0 YE 2022 Midland Basin South Texas Total Proved 537 Reserves Oil (MMBbl) 153.1 52.7 205.8 9% Gas (Bcf) 625.1 777.8 1,402.9 NGL (MMBbl) 0.2 97.6 9
Slide 25: Fourth Quarter and Full Year 2022 Performance
FOURTH QUARTER AND FULL YEAR 2022 PERFORMANCE Key Metrics 4Q22 2022 2022 Production Production and Pricing Total Production (MMBoe) 13.1 53.0 145.1 Total Production (MBoe/d) 142.9 145.1 Oil percentage / Liquids 43% / 59% 45% / 60% Pre-Hedge Realized Price ($/Boe) $50.92 $63.18 Post-Hedge Realized Pr
Slide 26: 4Q 2022 Realizations by Region
4Q 2022 REALIZATIONS BY REGION TWO TOP-TIER AREAS OF OPERATION Benchmark Pricing NYMEX WTI Oil ($/Bbl) $ 82.64 Midland South NYMEX Henry Hub Gas ($/MMBtu) $ 6.26 Hart Composite NGL ($/Bbl) $ 33.03 Basin Texas Total Production Volumes Oil (MBbls) 4,416 1,289 5,705 Gas (MMcf) 15,928 16,174 32,102 NGL
Slide 27: Oil, Gas, and NGL Derivative Positions
OIL, GAS, AND NGL DERIVATIVE POSITIONS (1) BY QUARTER Midland - Cushing MEH – WTI NYMEX WTI Roll ICE Brent Oil Oil Swaps Oil Collars Oil Basis Swaps Price Oil Basis Swaps Price Basis Swaps Price Oil Swaps Price Volume Volume Ceiling Floor Volume Volume Volume Volume Period $/Bbl(2) Differential Diff
Slide 28: Activity by Region
ACTIVITY BY REGION WELLS DRILLED, FLOWING COMPLETIONS, AND DUC COUNT Wells Drilled(1) Flowing Completions(1) DUC Count(2)(3) 4Q22 2022 4Q22 2022 As of December 31, 2022 Gross Net Gross Net Gross Net Gross Net Gross Net Midland Basin RockStar 6 4 37 33 10 8 35 30 29 26 Sweetie Peck 13 9 26 17 6 2 9 6
Slide 29: Leasehold Summary
LEASEHOLD SUMMARY NO LEASEHOLD ON FEDERAL LANDS IN THE MIDLAND BASIN OR SOUTH TEXAS MIDLAND BASIN Net Acres (1) NET ACRES ~82,000 Midland Basin Sweetie Peck(2) 18,500 RockStar 63,500 Midland Basin total 82,000 South Texas 154,800 Rocky Mountain Other 10,300 Other Areas / Exploration 25,500 SOUTH TEX
Slide 30: NGL Realizations
NGL REALIZATIONS 2023 PLAN ASSUMES ETHANE PROCESSING ALL YEAR Realizations by Quarter 4Q 2021 1Q 2022(1) 2Q 2022 3Q 2022 4Q 2022 Mont Belvieu Benchmark Price ($/Bbl) $44.21 $48.36 $50.05 $42.47 $33.03 SM NGL Realization ($/Bbl) $39.63 $38.56 $42.08 $36.36 $26.10 NGL price realizations tied to % Diff
Slide 31: Non-GAAP Reconciliations and Disclosures
Fourth Quarter & Full Year 2022 Non-GAAP Reconciliations and Disclosures 31
Slide 32: Definitions of Non-GAAP Measures and Metrics
DEFINITIONS OF NON-GAAP MEASURES AND METRICS AS CALCULATED BY THE COMPANY To supplement the presentation of its financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides certain non-GAAP measures and metrics, which are used by management
Slide 33: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended Twelve Months Adjusted EBITDAX(1) Three Months Ended December 31, Twelve Months Ended December 31, Adjusted Net Income(1) December 31, Ended December 31, (in thousands) (in thousands) 2022 2022 2022 2022 Net income (GAAP) $ 258,463 $ 1,111,952 Net income (
Slide 34: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Adjusted Free Cash Flow(1) Three Months Ended December 31, Twelve Months Ended December 31, (in thousands) 2022 2022 Net cash provided by operating activities (GAAP) $ 288,375 $ 1,686,406 Net change in working capital 58,833 72,063 Cash flow from operations before net change
Slide 35: SM Energy Contacts
SM ENERGY CONTACTS Jennifer Martin Samuels Vice President - Investor Relations 303.864.2507 jsamuels@sm-energy.com 35