Sm Energy Company · NYSE:SM

Sm Energy — Q3 2022 Earnings Presentation

36 slides from Sm Energy's earnings presentation, November 2022

  1. Slide 1: Third Quarter 2022 Financial and Operating Results

    THIRD QUARTER 2022 F I N A N C I A L A N D O P E R AT I N G R E S U LT S NYSE: SM SM-ENERGY.COM

  2. 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

  3. Slide 3: Achieving 2022 Objectives

    ACHIEVING 2022 OBJECTIVES WE ARE ON OR AHEAD OF SCHEDULE IN MEETING PRIORITIES 2022 Strategic Priorities OBJECTIVES PROGRESS 1) Grow FCF(1) and reduce Return of capital program leverage ratio to ~1.0x initiated. Balance sheet in and net debt to ~$1B great shape 2) Build NAV through scaled Austin Cha

  4. Slide 4: 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 REPEATABLE  Organically Add Inventory  Strategic Inventory Capture and Growth 4

  5. Slide 5: Third Quarter 2022 Highlights

    THIRD QUARTER 2022 HIGHLIGHTS EXECUTING ON OUR PRIORITIES BALANCE SHEET WELL C A P I TA L E N V I R O N M E N TA L STRENGTH & CASH PERFORMANCE EFFICIENCY STEWAR D SH IP F L O W G E N E R AT I O N  Repurchased ~453,000 shares  Production was 12.7  Capital expenditures  Goal: to reduce greenhouse

  6. Slide 6: Return of Capital to Shareholders

    RETURN OF CAPITAL TO SHAREHOLDERS INITIATED SUSTAINABLE PROGRAM WITH UPSIDE Repurchased(1) ~453,000 shares for $20.2MM & Increased the Annual Fixed Dividend to $0.60 (1) During the third quarter of 2022. | All repurchased shares of common stock were retired. 6

  7. Slide 7: Third Quarter 2022 Performance

    THIRD QUARTER 2022 PERFORMANCE Key Metrics 3Q22 3Q22 Production 137.8 Production and Pricing Total Production (MMBoe) 12.7 Total Production (MBoe/d) 137.8 Oil percentage / Liquids 45% / 59% MBoe/d Pre-Hedge Realized Price ($/Boe) $ 65.27 Post-Hedge Realized Price ($/Boe) $ 50.58 Costs (per Boe) LOE

  8. Slide 8: Balance Sheet

    BALANCE SHEET $1.1 BILLION NET DEBT(1) As of September 30, 2022: As of September 30, 2022: (1) Net debt-to-Adjusted EBITDAX Debt Maturities 0.6x in millions $1,500 $1,250 • Liquidity ~$1.75 billion $2.5B Borrowing Base $1,000 • Cash balance ~$498 million $1.25B $750 Aggregate Lender Commitments ~$55

  9. Slide 9: 2022 Plan Guidance

    2022 PLAN GUIDANCE(1) REVISED FULL-YEAR GUIDANCE Guidance Key Metrics FY 2022 Capital Expenditures(2) ($MM) $870 – 900 2022 Total Production (MMBoe) Total Production (MBoe/d) 52.5 – 53.0 144 – 145 Capital Expenditures(2) Oil percentage ~46% $870-900 million LOE (per Boe) $5.10 – $5.15 Transportation

  10. Slide 10: Strategic Inventory Capture: Repeatable Performance

    STRATEGIC INVENTORY CAPTURE: REPEATABLE PERFORMANCE WORLD CLASS TECHNICAL TEAMS  TRANSFORMATIVE UNDERSTANDING  DISCOVERY Before SM Entry 2015(1) Post SM Entry 2022(1) Howard County Howard County • 79 horizontal wells • > 3200 industry horizontal wells • 3 main reservoirs tested • 8 reservoirs test

  11. Slide 11: Value Creation: Science, Technology & Innovation

    VALUE CREATION: SCIENCE, TECHNOLOGY & INNOVATION FULLY INTEGRATED DATA ANALYSIS  CLEAR RESULTS  FASTER LEARNING CYCLE Data talks, we listen through multi-discipline integration  Petro-technical staff specializes in unconventional Midland Basin data capture provided foundation for economic land tr

  12. Slide 12: Value Creation: Science, Technology & Innovation

    VALUE CREATION: SCIENCE, TECHNOLOGY & INNOVATION FULLY INTEGRATED DATA ANALYSIS  CLEAR RESULTS  FASTER LEARNING CYCLE Adding value through optimization and inventory additions: Midland Basin example  Aggressive acreage consolidation – Cored up Howard County position based on early data acquisitio

  13. Slide 13: Optimizing the Value of Every Completion

    VALUE CREATION: SCIENCE, TECHNOLOGY & INNOVATION MIDLAND BASIN EXAMPLE – OPTIMIZING THE VALUE OF EVERY COMPLETION 25,000 Unique designs analyzed • SM Energy well data analysis 2022 SM Base Design creates confidence in Midland Average multivariate model • 25,000 unique completion designs modelled in

  14. Slide 14: Premier Operator

    PREMIER OPERATOR SUPERIOR PERFORMANCE DRIVEN BY SCIENCE, TECHNOLOGY & INNOVATION Third-party data confirms top tier well performance CapitalOne Data Enverus Data Permian Basin Production(1) Overlayed with SM Actuals Howard County 2021 - 2022 Completions(2) 250 25 30 25 20 200 Cumulative Oil Producti

  15. Slide 15: Midland Basin

    MIDLAND BASIN FOCUSED ON EXECUTION, WELL PERFORMANCE AND CAPITAL EFFICIENCY 2 0 2 2 O P E R AT I N G P L A N 2 0 2 2 P L A N D E TA I L S  2022 net wells planned: drill 53 complete 38 | 3Q22: drilled 10 completed 14 | 4Q22 plan: drill ~16 complete ~12 RockStar  ~12,360’ expected average lateral fe

  16. Slide 16: Midland Basin: Inventory Upside on Existing Acreage

    MIDLAND BASIN INVENTORY UPSIDE ON EXISTING ACREAGE – UP TO 8 PROSPECTIVE INTERVALS MIDLAND BASIN I N V E N TO RY U P S I D E LEONARD LEONARD 6,500’ • First test ~ 700 days on production, 262 MBoe produced to MIDDLE date from 9,900’ lateral 7,100’ SPRABERRY • Six Leonard tests planned for 1H23 JO MIL

  17. Slide 17: Midland Basin: Testing New Zones

    MIDLAND BASIN TESTING NEW ZONES, INITIAL WOLFCAMP D WELLS SIGNIFICANTLY OUTPERFORM PEERS S M O P E R AT E D W O L F C A M P D W E L L S v. P E E R S Sarah Connor 1098WD WOLFCAMP D PRODUCTION (1) outperforms peer average by 200 40% Cumulative Oil Production (MBo) 40% at 12 months on production 100 Bl

  18. Slide 18: Midland Basin: Superior Well Results in the Dean

    MIDLAND BASIN SUPERIOR WELL RESULTS IN THE DEAN D E A N W E L L R E S U LT S E X C E E D I N G E X P E C TAT I O N S 3 DEAN WELLS • Average 30-day peak IP 500 rate 2,370 Boe/d per well at 88% oil Avg. Cumulative Oil Production 400 Per Well (MBo) • Average lateral 12,300’ 300 • Well performance 200 e

  19. Slide 19: South Texas

    SOUTH TEXAS FOCUSED ON EXECUTION AND RETURNS ENHANCEMENT 2 0 2 2 O P E R AT I N G P L A N 2 0 2 2 P L A N D E TA I L S  2022 net wells planned: drill 42 complete 43 | 3Q22: drilled 8 completed 17 | 4Q22 plan: drill ~15 complete ~11 DIMMIT COUNTY  ~11,000’ expected average lateral feet per well WEB

  20. Slide 20: South Texas: Austin Chalk Success Continues

    SOUTH TEXAS: AUSTIN CHALK SUCCESS CONTINUES AUSTIN CHALK SUPPORTS RAPID GROWTH IN OIL/LIQUIDS PRODUCTION NEW WELLS THAT REACHED IP30 (1) Austin Chalk Wells Currently Producing Northern Area Eastern Area 54 wells producing ~50-90% liquids(3) WELLS 5 2 90 80 Average Cumulative Production (MBoe per 1,0

  21. Slide 21: Confidence in the Austin Chalk: Repeatable & Predictable

    SOUTH TEXAS CONFIDENCE IN THE AUSTIN CHALK: REPEATABLE & PREDICTABLE Not Your “Old” Austin Chalk: 1988-2010 Wells Much Different Than Today’s EUR P10:P90 Ratio(1) 1988 – ~ 400 Expected 50 2010 Wells Locations 41 40 Austin Chalk Wells Well Count = 3,644 30 1981 – 2011 Wells 20 17 Well Count 10 = 228

  22. Slide 22: SM Energy - Leader in Stewardship

    SM ENERGY - LEADER IN STEWARDSHIP SUPPORTED BY THIRD PARTIES RYSTAD & ENVERUS EQT SM CTRA PXD OVV CHK AR CRK CPG PDCE SWN DVN CRC MUR NVA WLL EOG CVE Ranked BTE #3 Ranked #2 OAS APA BIR SU by PEY by KEL Enverus(2) CDEV Rystad(1) CLR DEC (1) Rystad Energy ESG ranking provided May 4, 2022. Peers inclu

  23. Slide 23: 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 REPEATABLE  Organically Add Inventory  Strategic Inventory Capture and Growth 23

  24. Slide 24: Appendix

    Appendix > © a wi Zz wy = a

  25. Slide 25: 3Q 2022 Realizations by Region

    3Q 2022 REALIZATIONS BY REGION TWO TOP-TIER AREAS OF OPERATION Benchmark Pricing NYMEX WTI Oil ($/Bbl) $ 91.56 Midland South NYMEX Henry Hub Gas ($/MMBtu) $ 8.20 Hart Composite NGL ($/Bbl) $ 42.47 Basin Texas Total Production Volumes Oil (MBbls) 4,497 1,179 5,676 Gas (MMcf) 16,082 14,872 30,954 NGL

  26. Slide 26: Activity by Region

    ACTIVITY BY REGION WELLS DRILLED, FLOWING COMPLETIONS, AND DUC COUNT Wells Drilled Flowing Completions DUC Count(1)(2) 3Q22 2022 YTD 3Q22 2022 YTD As of September 30, 2022 Gross Net Gross Net Gross Net Gross Net Gross Net Midland Basin RockStar 8 7 31 29 12 11 25 23 33 30 Sweetie Peck 4 3 13 8 3 3 3

  27. Slide 27: 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) 18,150 RockStar 63,650 Midland Basin total 81,800 South Texas 154,800 Rocky Mountain Other 10,300 Other Areas / Exploration 25,500 SOUTH TEX

  28. Slide 28: NGL Realizations

    NGL REALIZATIONS Realizations by Quarter 3Q 2021 4Q 2021 1Q 2022(1) 2Q 2022 3Q 2022 Mont Belvieu Benchmark Price ($/Bbl) $40.39 $44.21 $48.36 $50.05 $42.47 SM NGL Realization ($/Bbl) $36.87 $39.63 $38.56 $42.08 $36.36 NGL price realizations tied to % Differential to Mont Belvieu 91% 90% 80% 84% 86%

  29. Slide 29: Hedges

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  30. Slide 30: Hedging Summary

    HEDGING SUMMARY HEDGED VOLUMES DECLINING WITH LOWER LEVERAGE Oil Volumes Hedged(1) 2022 Hedge Program Oil Q4 2022  ~3,100 MBbls(1), or approximately 52% of expected Q4 2022 oil ~52% production, is hedged to WTI at a weighted-average price of 0% 100% $56.01/Bbl (weighted-average of collar ceilings a

  31. Slide 31: Oil, Gas, and NGL Derivative Positions

    OIL, GAS, AND NGL DERIVATIVE POSITIONS (1) BY QUARTER Midland - Cushing NYMEX WTI - ICE Brent MEH – WTI NYMEX WTI Roll ICE Brent Oil Oil Swaps Oil Collars Oil Basis Swaps Price Oil Basis Swaps Oil Basis Swaps Price Basis Swaps Price Oil Swaps Price Volume Volume Ceiling Floor Volume Volume Price Dif

  32. Slide 32: Non-GAAP Reconciliations and Disclosures

    Third Quarter 2022 Non-GAAP Reconciliations and Disclosures 32

  33. Slide 33: 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

  34. Slide 34: Non-GAAP Reconciliations

    NON-GAAP RECONCILIATIONS Three Months Ended Nine Months Ended Adjusted EBITDAX (1) Three Months Ended September 30, Nine Months Ended September 30, Trailing Twelve Months at September 30, Adjusted Net Income(1) September 30, September 30, (in thousands) 2022 2022 2022 (in thousands) 2022 2022 Net in

  35. Slide 35: Non-GAAP Reconciliations

    NON-GAAP RECONCILIATIONS Adjusted Free Cash Flow(1) Three Months Ended September 30, Nine Months Ended September 30, Trailing Twelve Months at September 30, (in thousands) 2022 2022 2022 Net cash provided by operating activities (GAAP) $ 513,370 $ 1,398,031 $ 1,827,661 Net change in working capital

  36. Slide 36: SM Energy Contacts

    SM ENERGY CONTACTS Jennifer Martin Samuels Vice President - Investor Relations 303.864.2507 jsamuels@sm-energy.com 36

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