Sm Energy Company · NYSE:SM
Sm Energy — Q4 2023 Earnings Presentation
31 slides from Sm Energy's earnings presentation, Feb 22, 2024
Slide 1: 2023 Results & 2024 Operating Plan
2023 Results & 2024 Operating Plan FEBRUARY 21, 2024 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…
SM Energy Is… A Premier Operator of Top-Tier Assets A PREMIER OPERATOR Capital Efficiency OWNER OF TOP-TIER ASSETS High Quality Inventory with Long Runway A LEADER ESG Stewardship 3
Slide 4: 2023 Strategic Objectives Accomplished
2023 Strategic Objectives Accomplished Results Meet or Exceed Plan Goals Deliver increased return of capital to $509 MM FCF(1) generated stockholders while maintaining a strong 7% annual yield-to-market capitalization Reduced net debt(1) to < $1B balance sheet Focus on operational execution: opti
Slide 5: Sustainable Long-Term Capital Structuring
Sustainable Long-Term Capital Structuring Balanced Approach to Long-Term Profitability Increased return of capital in 2023 Return of Capital 6.9MM shares repurchased in Acquisition Reduction of 2023 to Stockholders(2) $300 Net Debt(3) $171 Capital(1) 7% of outstanding shares $125MM MM MM repurch
Slide 6: Operational Excellence
Operational Excellence SM Energy | Significant Oil Production Outperformance Compared to Peers 2023 J.P. Morgan Jayaram Award Recipient for Midland Basin:(1) #2 best YoY performance; #2 highest well productivity; and #1 most intense completion design 300 SM Wells v. Howard County Peers (2) 300 SM We
Slide 7: Operational Excellence
Operational Excellence Leader in Stewardship 2024 EHS Safety Calendar Winner YOY 2023 Safety Results Aiden Sosa | Son of Operations Specialist Improvement Total Recordable Incident Rate(1) 0.20 38% Reported Spill Rate(2) 0.006 45% CDP SCORE | LEADERSHIP LEVEL Note | Safety results disclosed are 2023
Slide 8: Organic Inventory Growth
Organic Inventory Growth Increased Midland Basin Acreage 37% in 2023 and Added Austin Chalk Inventory +65 NEW! LOCATIONS ADDED ORGANICALLY Midland Basin ~111,000 NET ACRES ~29,700 ~155,000 NET ACRES ACQUIRED South Texas NEW! NET ACRES 8
Slide 9: 2024 Strategic Objectives
2024 Strategic Objectives Well Positioned for Another Great Year Focus on operational execution to deliver “SM Energy is a premier operator of top 1 low breakeven, high return wells, while employing new technologies and maintaining ESG leadership. tier assets delivering sustainable return of capital
Slide 10: 2024 Plan Guidance
2024 Plan Guidance Increased Midland Basin Activity | Delineation of New Assets | Optimized Well Costs Midland Basin Plan Details 2024 PROGRAM 2024 Net wells planned: drill and complete ~70 55-60% EXPECTED RETURN(1) ~11,850’ expected average lateral length per well, including 25-30 wells at ~15,
Slide 11: 2024 Plan Guidance
2024 Plan Guidance Optimizing Free Cash Flow Over a Multi-year Plan Key Metrics Guidance FY ‘24 Capital Expenditures(1) ($B) $1.16–$1.20 Capital Expenditures (1) Total Net Production (MMBoe) 56–59 $1.16-1.20 billion Total Net Production (MBoe/d) 153–161 Oil percentage ~44% LOE (per Boe) $5.30–$5.60
Slide 12: Empowered by a Strong Balance Sheet
Empowered by a Strong Balance Sheet Low Leverage and Balance Sheet Flexibility 0.57x NET DEBT-TO- ADJUSTED EBITDAX(2) LIQUIDITY $1.86 billion CASH BALANCE $616 million NET DEBT(2) $969 million(3) BB- B1 CREDIT RATING AGENCY SENIOR UNSECURED DEBT RATINGS: S&P BB- Outlook: Stable Fitch Outlook: Stable
Slide 13: Hedging Summary
Hedging Summary Hedging Volumes Aligned with Lower Leverage 2024 Hedge Program OIL ~25% ~6,800 MBbls,(3) or slightly less than 30%, of expected 2024 net oil production(1) is hedged at an average price of $70.70/Bbl (collar floors and swaps) to $82.78/Bbl (collar ceilings and swaps), excludes basis
Slide 14: 2023 Company Record Proved Reserves
2023 Company Record Proved Reserves(1) 605 MMBoe ↑ 13% Compared to 2022 Proved Reserves (1) 605 MMBoe Pre-tax PV-10 (2) $ B 7 Reserves life index(3) 11 years Net Production Replacement(4) >2.2X (1) (1) (1) “Proved Reserves” is estimated net proved reserves. (2) Indicates a non-GAAP measure or metric
Slide 15: High Quality Inventory
High Quality Inventory High Average Expected Return | Low Breakeven Cost | > 80% 3P AC INVENTORY ESTIMATED AVERAGE HIGH QUALITY RETURN(1) ↑16% INVENTORY ~10+ YEARS >65% ORGANICALLY ADDED >80% MIDLAND BASIN TOTAL COMPANY INVENTORY 65 CATEGORIZED AS 3P(1) & SOUTH TEXAS(1) LOCATIONS Austin Chalk | In
Slide 16: High Quality Inventory
High Quality Inventory Acquired Acreage Klondike 20,700 acres located in north Martin & Dawson Counties Drilled 1 science well | Gathered log and core data | Plan to start 3D seismic in March 2024 Drilling Program includes 3 pads (8 – 9 wells total) with results expected in 3Q Sweetie Peck ~
Slide 17: Well Positioned in Current Environment
Well Positioned in Current Environment Third Parties Agree “We think SM... trades at a RELATIVELY LOW MULTIPLE... with SOLID FREE CASH FLOW, COMPELLING DIVIDEND, and a STRONG BALANCE SHEET... We think it is WELL POSITIONED IN THE CURRENT ENVIRONMENT.”(1) (1) Seaport Research Partners | E&P Group – P
Slide 18: Appendix
Appendix
Slide 19: Sustainable and Repeatable
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 19
Slide 20: 2023 Company Record Proved Reserves
2023 Company Record Proved Reserves!(1) Proved Reserves(1) by Region YE 2022 (MMBoe) 257.4 280.0 537.4 Midland South YE 2023 Texas Total Basin Oil (MMBbl) 159.2 70.9 230.1 Proved 605 Gas (Bcf) 654.8 877.2 1,532.0 NGL (MMBbl) 0.2 119.3 119.5 Reserves(1) 13% Total (MMBoe) 268.5 336.4 604.9 % Proved De
Slide 21: 4Q and Full Year 2023 Performance
4Q and Full Year 2023 Performance Key Metrics 4Q23 2023 Net Production and Pricing 2023 Net Production 152.0MBoe/d Total Net Production (MMBoe) 14.1 55.5 Total Net Production (MBoe/d) 153.5 152.0 Oil percentage / Liquids 43% / 60% 43% / 60% Pre-Hedge Realized Price ($/Boe) $42.99 $42.60 Post-Hedge R
Slide 22: 4Q 2023 Realizations by Region
4Q 2023 Realizations by Region Two Top-Tier Areas of Operation Midland Basin South Texas Total Net Production Volumes Benchmark Pricing Oil (MBbls) 4,552 1,523 6,075 NYMEX WTI Oil ($/Bbl) $ 78.32 Gas (MMcf) 15,187 18,309 33,496 NYMEX Henry Hub Gas ($/MMBtu) $ 2.88 NGL (MBbls) 5 2,455 2,460 OPIS Comp
Slide 23: Activity by Region
Activity by Region Wells Drilled, Flowing Completions & DUC Count Wells Drilled(1) Flowing Completions(1) DUC Count 4Q23 2023 YTD 4Q23 2023 YTD As of December 31, 2023 Gross Net Gross Net Gross Net Gross Net Gross Net Midland Basin RockStar(1) 14 12 33 24 2 2 37 32 25 19 Sweetie Peck 2 2 24 14 10 9
Slide 24: Leasehold Summary
Leasehold Summary Growing Midland Basin Position Net Acres(1) MIDLAND BASIN NET ACRES ~111,000 Midland Basin RockStar 84,300 Sweetie Peck(2) 27,100 Midland Basin total 111,400 South Texas 154,800 SOUTH TEXAS NET ACRES ~155,000 Rocky Mountain Other 10,600 Other Areas / Exploration 25,500 Total 302,30
Slide 25: NGL Realizations
NGL Realizations Austin Chalk – 2024 Plan Assumes Ethane Processing All Year High Liquids Content Realizations by Quarter % Liquids 4Q 2023 3Q 2023 2Q 2023 1Q 2023 4Q 2022 OPIS Benchmark(1) Price ($/Bbl) $26.89 $27.81 $25.21 $30.95 $33.03 SM Energy NGL Realization ($/Bbl) $21.92 $23.61 $20.83 $26.24
Slide 26: 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 Oil Oil Swaps Oil Collars Oil Basis Swaps Oil Basis Swaps Roll Basis Swaps Oil Swaps Average Price Footnotes Price Price Price Price (1) Includes derivative contracts for
Slide 27: Fourth Quarter 2023 Non-GAAP Reconciliations and Disclosures
Fourth Quarter 2023 Non-GAAP Reconcill Disclosure
Slide 28: 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 29: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted EBITDAX(1) Three Months Ended Twelve Months Ended Adjusted Net Income(1) Three Months Ended Twelve Months Ended (in thousands) December 31, 2023 December 31, 2023 (in thousands, except per share data) December 31, 2023 December 31, 2023 Net income (GAAP) $ 247,111 $
Slide 30: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted Free Cash Flow(1) Three Months Ended Twelve Months Ended Net Debt(1) As of (in thousands) December 31, 2023 December 31, 2023 (in thousands) December 31, 2023 Net cash provided by operating activities (GAAP) $ 476,515 $ 1,574,394 Principal amount of Senior Notes(3)
Slide 31: Jennifer Martin Samuels, Investor Relations
JENNIFER MARTIN SAMUELS Vice President - Investor Relations and ESG Stewardship 303.864.2507 jsamuels@sm-energy.com