Sm Energy Company · NYSE:SM
Sm Energy — Q3 2023 Earnings Presentation
34 slides from Sm Energy's earnings presentation, Nov 3, 2023
Slide 1: Third Quarter 2023 Financial and Operating Results
THIRD QUARTER 2023 FINANCIAL AND OPERATING RESULTS NOVEMBER 2, 2023 NYSE: SM WEB: sm-energy.com
Slide 2: Disclaimers
Disclaimers Forward-looking statements This presentation contains forward-looking statements within the meaning of securities laws. The words “believes,” “demonstrate,” “estimate,” “expect,” “intends,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements. For
Slide 3: SM Energy Is… A Premier Operator of Top-Tier Assets
SM Energy Is… A Premier Operator of Top-Tier Assets A PREMIER OPERATOR Capital Efficiency OWNER OF TOP-TIER ASSETS High Inventory Quality with Long Runway A LEADER ESG Stewardship 3
Slide 4: Increased Return of Capital Program
Increased Return of Capital Program Repurchase 6% of Shares Outstanding Since Program Inception(1) INCREASED SUSTAINABLE DIVIDEND:(2) PER SHARE NEW 20% FIXED DIVIDEND $0.18 | $0.72 QUARTERLY ANNUALLY RETURN OF CAPITAL TO STOCKHOLDERS SINCE INCEPTION:(1) ~7.7 million TOTAL SHARES REPURCHASED ~$335 mi
Slide 5: 2023 Strategic Objectives
2023 Strategic Objectives 3Q23 Delivering Results on All Fronts 31%↑ RETURN OF CAPITAL QUARTER OVER QUARTER 20% 2.35 ~$114 Million in total ↑ Fixed Million shares capital returned Dividend(1) repurchased(2) to stockholders OPERATIONAL EXECUTION – OUTPERFORMANCE 14.1 MMBoe 44% Oil 3 Wells accelerated
Slide 6: Sustainable Long-Term Capital Structuring
Sustainable Long-Term Capital Structuring Drives Low Leverage, Increasing Return to Shareholders, High Quality Inventory Sources Uses 1/1/2022 to Present: Other 5% Acquisition $1.2 billion Capital(2) FCF(1) 10% 1/1/22-9/30/23 ~ Return of Cash Debt ~$333 million Capital to ~$402MM Reduction Cash Stoc
Slide 7: Empowered by a Strong Balance Sheet
Empowered by a Strong Balance Sheet Balance Sheet Flexibility 0.7x NET DEBT-TO- ADJUSTED EBITDAX(1) LIQUIDITY $1.65 billion CASH BALANCE $402 million NET DEBT(1) $1.2 billion(2) BB- BB- B1 CREDIT AGENCY SENIOR UNSECURED DEBT RATINGS: S&P Outlook: Stable Fitch Outlook: Stable Moody’s Outlook: Stable
Slide 8: Third Quarter 2023 Performance
Third Quarter 2023 Performance Key Metrics 3Q23 Production and Pricing 3Q23 Production 153.7 MBoe/d Total Production (MMBoe) 14.1 Total Production (MBoe/d) 153.7 Oil percentage / Liquids 44% / 61% Pre-Hedge Realized Price ($/Boe) $45.24 Post-Hedge Realized Price(1) ($/Boe) $45.22 Costs (per Boe) 3Q2
Slide 9: 2023 Plan Guidance
2023 Plan Guidance Optimizing Free Cash Flow Over a Multi-year Plan Key Metrics Guidance FY 2023 Capital Expenditures(1) ($B) $1.1 Capital expenditure guidance remains unchanged plus the additional 5 net wells from asset exchange Total Production (MMBoe) 55.1–55.4 Midland completions increased f
Slide 10: 2023 Plan Guidance: Q4 and Regional Details
2023 Plan Guidance Q4 and Regional Details Q4 2023 Guidance 2023 Regional Activity Production: 13.7-14.0 MMBoe (149-152 MBoe/d), Midland Basin Plan Details at ~42% oil, ~60% liquids 2023 Net wells planned: drill ~46; complete ~55 Capital expenditures(1): $290-$305 million ~11,560’ expected a
Slide 11: Premier Operator of Top-Tier Assets
Premier Operator of Top-Tier Assets
Slide 12: Premier Operator
Premier Operator SMid Cap Company Large Cap Technical Team “SM boasts a SIZEABLE GEOSCIENCE STAFF… and has had past SUCCESS IN ORGANICALLY ADDING INVENTORY THROUGH ITS TECHNICAL PROWESS (pushing the boundaries of the Midland Basin further east in Howard County, successfully developing the S TX Austi
Slide 13: Consistent Top-Tier Well Performance
Consistent Top-Tier Well Performance Third Parties Agree! “SM... remains the most SM has the HIGHEST OIL EUR of productive Midland operator in operators with 30 or more wells! 2023... numero uno!”(1) 150 16 Midland Basin Productivity by Operator 14 Barrels of oil per foot (6-month) 12 Oil EUR, WH (M
Slide 14: A Leader in Capital Efficiency
A Leader in Capital Efficiency Third Parties Agree! SM a leader among peers in SM ranks #2 among Permian peers in lowest capital per EUR:(1) Proppant Pumped/day(2) Median proppant per day (2023 completions) 150 Capital per EUR ($/BBL), Mean 100 32 50 22 18 17 0 (1) Enverus data as of 10/16/2023 | Pe
Slide 15: Premier Operator of Top Tier Assets
Premier Operator of Top Tier Assets Delivering Optimized Performance Year-over-Year “The Leaders: ...SM has shown solid trends in both South TX and the Midland Basin....”(1) 30 Midland Basin Total SM development program 25 has co-developed multiple zones throughout this time period 20 employs cu
Slide 16: Top-Tier Assets
Top-Tier Assets Increased Midland Basin Acreage 35% YTD OPERATING DETAILS(1) 2 RIGS RUNNING Midland 0-1 COMPLETION CREW Basin ~111,000 NET ACRES OPERATING DETAILS(1) 4 RIGS RUNNING ~155,000 South Texas NET ACRES 1-2 COMPLETION CREWS (1) Reflects the average of expected 4Q23 activity. 16
Slide 17: Midland Basin Performance Update
Midland Basin Performance Update SM Wells v. Howard County Peers(1) Organically Building Inventory and Economic Value 300 North Martin/Dawson 20,000 net acre Acquisition Significant Implementing SM Permian Ops model Avg. Cumulative Oil Production (MBbl/10,000 ft) 250 Outperformance Production op
Slide 18: South Texas – Austin Chalk
South Texas – Austin Chalk 30 Wells YTD Reach Peak IP30 | Demonstrate Continued High Returns Across Acreage Wells Reached IP30 in 2023 ‘22 – ‘23 SM Energy Austin Chalk Wells to Date(1) Oil 60 50 Liquids-rich Gas Number of wells: 28 (Mboe per 1,000' / 3-stream) Avg. Cumulative Production 40 30 Liquid
Slide 19: Operations Surveillance Room
Operations Surveillance Room Collaboration Technology Efficiencies Stewardship Production Operations 24/7/365 Monitoring by Operations Specialists Driving operational efficiencies and cost savings Permian Instrumentation Electrical Automation & Communications Improved response time to mitigate emiss
Slide 20: Appendix
Appendix
Slide 21: Sustainable and Repeatable Business Model
Sustainable and Repeatable Business Model Sustainable Premier Operator of Top-Tier Assets SUSTAINABLE Return of Capital Strong Balance Sheet Repeatable World Class Technical Team REPEATABLE Organically Add Inventory Strategic Inventory Capture and Growth 21
Slide 22: Quality Inventory Designed to Optimize Returns
Quality Inventory Designed to Optimize Returns TOTAL COMPANY EXPECTED ECONOMIC INVENTORY(1) 10–13+ years IN EACH OF THE MIDLAND BASIN AND SOUTH TEXAS >60% TOTAL COMPANY INVENTORY EXPECTED AVERAGE RETURN @ $65/bbl oil (1) Co-development enables capital efficiency and long life, high return inventor
Slide 23: 3Q 2023 Realizations by Region
3Q 2023 Realizations by Region Two Top-Tier Areas of Operation Midland Basin South Texas Total Production Volumes Benchmark Pricing Oil (MBbls) 4,549 1,618 6,167 NYMEX WTI Oil ($/Bbl) $ 82.26 Gas (MMcf) 15,388 17,543 32,931 NYMEX Henry Hub Gas ($/MMBtu) $ 2.55 NGL (MBbls) 7 2,478 2,485 OPIS Composit
Slide 24: Activity by Region
Activity by Region Wells Drilled, Flowing Completions & DUC Count Wells Drilled(1) Flowing Completions(1) DUC Count 3Q23 2023 YTD 3Q23 2023 YTD As of September 30, 2023 Gross Net Gross Net Gross Net Gross Net Gross Net Midland Basin RockStar(1) 12 8 19 12 20 17 35 30 13 9 Sweetie Peck 7 3 22 12 - -
Slide 25: Leasehold Summary
Leasehold Summary Growing Midland Basin Position Net Acres(1) MIDLAND BASIN NET ACRES ~111,000 Midland Basin RockStar(2) 83,800 Sweetie Peck(3) 18,000 New Acreage 9,100 Midland Basin total 110,900 South Texas 154,800 SOUTH TEXAS NET ACRES Rocky Mountain Other Other Areas / Exploration Total 10,300 2
Slide 26: NGL Realizations
NGL Realizations Austin Chalk – 2023 Plan Assumes Ethane Processing All Year High Liquids Content Realizations by Quarter % Liquids 3Q 2023 2Q 2023 1Q 2023 4Q 2022 3Q 2022 OPIS(1) Benchmark Price ($/Bbl) $27.81 $25.21 $30.95 $33.03 $42.47 SM Energy NGL Realization ($/Bbl) $23.61 $20.83 $26.24 $26.10
Slide 27: Hedges
Slide 28: Hedging Summary
Hedging Summary Hedging Volumes Lower – Aligned with Lower Leverage 2023 Hedge Program ~25% OIL ~1,800 MBbls(2), or ~30% of expected Q4 2023 oil production(3), is hedged to contract prices in the Midland Basin at a weighted-average price of $76.69/Bbl (weighted-average of swaps) of total expected
Slide 29: Oil, Gas, and NGL Derivative Positions
Oil, Gas, and NGL Derivative Positions(1) By Quarter NYMEX WTI NYMEX WTI Midland - Cushing MEH – WTI NYMEX WTI ICE Brent Weighted Average Oil Oil Swaps Oil Collars Oil Basis Swaps Oil Basis Swaps Roll Basis Swaps Oil Swaps Price Price Price Price Price Volume Volume Ceiling Floor Volume Volume Volum
Slide 30: Third Quarter 2023 Non-GAAP Reconciliations and Disclosures
Third Quarter 2023 Non-GAAP Reconcill Disclosure
Slide 31: Definitions of Non-GAAP Measures and Metrics as Calculated by the Company
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 32: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted EBITDAX(1) Three Months Ended Trailing Twelve Months Ended Adjusted Net Income(1) Three Months Ended (in thousands) (in thousands) September 30, 2023 September 30, 2023 September 30, 2023 Net income (GAAP) $ 222,343 $ 829,232 Net income (GAAP) $ 222,343 Interest exp
Slide 33: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted Free Cash Flow(1) Three Months Ended (in thousands) September 30, 2023 Net cash provided by operating activities (GAAP) $ 382,994 Net change in working capital 52,893 Cash flow from operations before net change in working capital (non-GAAP) $ 435,887 Capital expendi
Slide 34: Jennifer Martin Samuels, Vice President - Investor Relations and ESG Stewardship
JENNIFER MARTIN SAMUELS Vice President - Investor Relations and ESG Stewardship 303.864.2507 jsamuels@sm-energy.com