Sm Energy Company · NYSE:SM
Sm Energy — Q2 2023 Earnings Presentation
35 slides from Sm Energy's earnings presentation, Aug 2, 2023
Slide 1: Second Quarter 2023 Financial and Operating Results
SECOND QUARTER 2023 FINANCIAL AND OPERATING RESULTS AUGUST 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 “demonstrate,” “estimate,” “expect,” “plan,” “target,” “believes,” and similar expressions are intended to identify forward-looking statements. Forward-lookin
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: 2023 Strategic Objectives
2023 Strategic Objectives 2Q23 Delivering Results on All Fronts INCREASED RETURN OF CAPITAL TO STOCKHOLDERS – OPPORTUNISTIC REPURCHASES 2.6 ~$87 92% Million in total Million shares capital returned FCF(2) returned repurchased(1) to stockholders to stockholders OPERATIONAL EXECUTION – OUTPERFORMANCE
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 Organically Add Inventory Strategic Inventory Capture and Growth 5
Slide 6: 2Q23 Key Bottom Line Results
Premier Operator of Top Tier Assets 2Q23 Key Bottom Line Results $1.25 per diluted share NET INCOME $390.2 million ADJUSTED EBITDAX(1) $361.5 CASH PROVIDED BY OPERATING ACTIVITIES million BEFORE NET CHANGE IN WORKING CAPITAL(1) $94.8 million ADJUSTED FREE CASH FLOW(1) Note | Amounts shown are for th
Slide 7: Second Quarter 2023 Performance
Second Quarter 2023 Performance Key Metrics 2Q23 Production and Pricing 2Q23 Production 154.4 MBoe/d Total Production (MMBoe) 14.1 Total Production (MBoe/d) 154.4 Oil percentage / Liquids 42% / 60% Pre-Hedge Realized Price ($/Boe) $38.89 Post-Hedge Realized Price(1) ($/Boe) $40.00 Costs (per Boe) 2Q
Slide 8: Delivering a Sustainable Return of Capital Program
Delivering a Sustainable Return of Capital Program 6% Yield-to-Market Capitalization Over ~9 months(1) RETURN OF CAPITAL TO STOCKHOLDERS SINCE INCEPTION:(1) ~5.3 million TOTAL SHARES REPURCHASED ~$221 million TOTAL $ RETURNED(2) SUSTAINABLE QUARTERLY DIVIDEND UPSIDE THROUGH REPURCHASES $0.15 2.6 PER
Slide 9: Empowered by a Strong Balance Sheet
Empowered by a Strong Balance Sheet Balance Sheet Flexibility 0.7x NET DEBT-TO- ADJUSTED EBITDAX(1) LIQUIDITY $1.6 billion CASH BALANCE $378 million NET DEBT(1) $1.2 billion(2) BB- BB- B1 CREDIT AGENCY SENIOR UNSECURED DEBT RATINGS: S&P Outlook: Stable Fitch Outlook: Stable Moody’s Outlook: Stable N
Slide 10: 2023 Plan Guidance
2023 Plan Guidance* Optimizing Free Cash Flow Over a Multi-year Plan Key Metrics Guidance FY 2023 Capital Expenditures(1) ($B) $1.05 Updates to Original Guidance Total Production (MMBoe) 53.5–55.5 Total Production (MBoe/d) 147–152 Production ↑ 1.0 MMBoe Oil percentage 43%–44% LOE (per Boe) $5.25-$
Slide 11: 2023 Plan Guidance: Q3 and Regional Details
2023 Plan Guidance Q3 and Regional Details Q3 2023 Guidance 2023 Regional Activity Production: ~14.0 MMBoe (~152 MBoe/d), Midland Basin Plan Details at ~44% oil, 60-61% liquids 2023 Net wells planned: drill 40-45; complete ~50 Capital expenditures(1): $235-$240 million ~11,600’ expected aver
Slide 12: Premier Operator of Top-Tier Assets
Premier Operator of Top-Tier Assets
Slide 13: Top-Tier Assets
Top-Tier Assets Midland Basin Net Acreage Expanded by 35% in 1H23 2023 Newly Acquired 20K Net Acres! OPERATING DETAILS(1) 2 RIGS RUNNING Midland 1 COMPLETION CREW Basin ~111,000 NET ACRES OPERATING DETAILS(1) 3 RIGS RUNNING ~155,000 South Texas 1 COMPLETION CREW NET ACRES (1) Current activity as of
Slide 14: Midland Basin
Midland Basin High-Quality | Long-Duration | Tier-1 Inventory LEONARD LEONARD 6,500’ • First test ~ 970 days on production, 314 MBoe produced to date from 9,900’ lateral MIDDLE SPRABERRY • Six Leonard test wells scheduled to be on-line summer 2023 7,100’ DEAN JO MILL • Among best portfolio returns t
Slide 15: Midland Basin: Execution, Well Performance and Capital Efficiency
Midland Basin Focused on Execution, Well Performance and Capital Efficiency SM Energy Wells vs. Howard County Peers(1) ‘21-’22 Midland Oil Wells – Breakeven(2) 300 SM SM Energy Best Peer 1 Among Significant Peer 2 Regional Peers! Avg. Cumulative Oil Production (MBbl/10,000 ft) 250 Peer 3 Outperforma
Slide 16: South Texas – Austin Chalk
South Texas – Austin Chalk 10 New Wells With Peak IP30 Demonstrate Continued High Returns Across Acreage New Wells Reached IP30 ‘22 – ‘23 SM Energy Austin Chalk Wells to Date(1) Oil 50 40 Liquids-rich Gas Number of wells: 22 (Mboe per 1,000' / 3-stream) Avg. Cumulative Production 30 Liquids-rich Gas
Slide 17: South Texas: Best Austin Chalk Inventory Amongst Peers
South Texas Best Austin Chalk Inventory Amongst Peers “SM, MGY and Mesquite Lead With Over 300 AC Locations Remaining” | Enverus(1) 600 500 Net Remaining AC Locations 400 300 200 100 0 Endeavor SM Mesquite REP BTE Protégé BlackBrush Escondido KNOC EOG Lime Rock Verdun DVN Kimmeridge APA Texas Americ
Slide 18: South Texas: Confidence in the Austin Chalk
South Texas Confidence in the Austin Chalk Not Your “Old” Austin Chalk: Austin Chalk P10:P90 Ratio(1) is Indicative of an Outstanding Resource Play 50 1988 – 2010 Wells 400 41 40 ~ Expected Well Count = 3,644 30 1981 – 2011 Wells Austin Chalk Locations 20 17 Well Count = 228 10 (1) P10:P90 ratio bas
Slide 19: Inventory Quality: SM Energy a Favorite Among SMID-Caps
Inventory Quality SM Energy a Favorite Among SMID-Caps “We continue to believe that SM has the deepest and highest-quality well inventory among our SMid-cap coverage. ” Capital One Securities, Inc. April 28, 2023 19
Slide 20: 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 @ $65/bbl oil (1) Co-development enables capital efficiency and long life, high return inventor
Slide 21: SM Energy - Leader in Stewardship
SM Energy - Leader in Stewardship Exceeded 2022 Internal Targets 2023 Mile High United Way Social Impact Award #2 for lowest methane intensity among Permian Basin operators by Basinwide Independent Methane Emissions Social Impact Award recognizes a corporate partner that has embraced corporate socia
Slide 22: SM Energy - Leader in Stewardship: 2023 Disclosures Posted
SM Energy - Leader in Stewardship 2023 Disclosures Posted Updated ESG Disclosures: Letter from our CEO to Stakeholders Performance Highlights and Quick Reference Metrics (2022 data) 2023 Sustainability Accounting Standards Board Report (2022 data) 2023 CDP Climate Change Questionnaire (2022
Slide 23: Appendix
Appendix
Slide 24: 2Q 2023 Realizations by Region
2Q 2023 Realizations by Region Two Top-Tier Areas of Operation Midland Basin South Texas Total Production Volumes Benchmark Pricing Oil (MBbls) 4,175 1,696 5,871 NYMEX WTI Oil ($/Bbl) $ 73.78 Gas (MMcf) 14,767 18,944 33,711 NYMEX Henry Hub Gas ($/MMBtu) $ 2.10 NGL (MBbls) 8 2,557 2,565 OPIS Composit
Slide 25: Activity by Region
Activity by Region Wells Drilled, Flowing Completions & DUC Count Wells Drilled(1) Flowing Completions(1) DUC Count 2Q23 2023 YTD 2Q23 2023 YTD As of June 30, 2023 Gross Net Gross Net Gross Net Gross Net Gross Net Midland Basin RockStar(1) 2 1 7 4 10 8 15 13 21 18 Sweetie Peck 9 4 15 9 13 9 20 14 15
Slide 26: Leasehold Summary
Leasehold Summary Growing Midland Basin Position Net Acres(1) MIDLAND BASIN NET ACRES ~111,000 Midland Basin RockStar(2) 84,000 Sweetie Peck(3) 17,900 New Acreage 9,100 Midland Basin total 111,000 South Texas 154,800 SOUTH TEXAS NET ACRES Rocky Mountain Other Other Areas / Exploration Total 10,300 2
Slide 27: NGL Realizations
NGL Realizations Austin Chalk – 2023 Plan Assumes Ethane Processing All Year High Liquids Content Realizations by Quarter % Liquids 2Q 2023 1Q 2023 4Q 2022 3Q 2022 2Q 2022 OPIS(1) Benchmark Price ($/Bbl) $25.21 $30.95 $33.03 $42.47 $50.05 SM Energy NGL Realization ($/Bbl) $20.83 $26.24 $26.10 $36.36
Slide 28: Hedges
Slide 29: Hedging Summary
Hedging Summary Hedging Volumes Lower – Aligned with Lower Leverage 2023 Hedge Program OIL ~3,600 MBbls(2), or ~30% of expected Q3-Q4 2023 oil production, is hedged to contract prices in the Midland Basin at a weighted-average price of $76.21/Bbl (weighted-average of collar floors and swaps) ~25%
Slide 30: 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 31: Second Quarter 2023 Non-GAAP Reconciliations and Disclosures
Second Quarter 2023 Non-GAAP Reconcil Disclosures. .
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 Adjusted EBITDAX(1) Three Months Ended Trailing Twelve Months Ended (in thousands) June 30, 2023 June 30, 2023 Net income (GAAP) Interest expense $ 149,874 $ 22,148 1,088,129 90,070 Adjusted Net Income(1) Three Months Ended (in thousands) June 30, 2023 (2) Interest income (4
Slide 34: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted Free Cash Flow(1) Three Months Ended (in thousands) June 30, 2023 Net cash provided by operating activities (GAAP) $ 383,251 Net change in working capital (21,780) Cash flow from operations before net change in working capital (non-GAAP) $ 361,471 Capital expenditur
Slide 35: Jennifer Martin Samuels, Investor Relations
JENNIFER MARTIN SAMUELS Vice President - Investor Relations and ESG Stewardship 303.864.2507 jsamuels@sm-energy.com