Sm Energy Company · NYSE:SM
Sm Energy — Investor Presentation (May 2017)
38 slides from Sm Energy's investor presentation, May 2017
Slide 1: May 2017 Investor Presentation
May 2017 Investor Presentation PREMIER OPERATOR OF TOP TIER ASSETS 1
Slide 2: Please Read: Forward-looking statements
Please Read This presentation makes reference to: Forward-looking statements This presentation contains forward-looking statements within the meaning of securities laws. The words “anticipate,” “assume,” “believe,” “budget,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “plan,” “project,”
Slide 3: SM Energy 3-Year Plan Focused on Two Core Assets
SM Energy 3-Year Plan Focused on Two Core Assets Top tier oil in Midland + top tier NGLs and gas in Eagle Ford Midland Basin Sweetie Peck/RockStar ~88,000 net acres Maverick Basin Eagle Ford ~167,000 net acres Successful transformation to core up portfolio 3 3
Slide 4: A Premier Operator of Top Tier Assets: Expected Outcomes
SM Energy A Premier Operator of Top Tier Assets 3 Year Plan Expected Outcomes: Big growth in Big growth in Debt:EBITDAX Top Tier high-margin cash flow ~2x in 2019 portfolio production 4
Slide 5: Big Expected Production Growth
Big Expected Production Growth ~100% CAGR Midland Basin Adjusted 3-year plan(1) 70,000 50% 60,000 40% 50,000 Production 30% 40,000 (MBoe) Oil % 30,000 20% 20,000 10% 10,000 - 0% 2016 2017(e) 2018 (e) 2019 (e) Midland Basin Operated Eagle Ford Rockies Revised Guidance Sold (2) Oil % (1) Adjusted for
Slide 6: Big Cash Flow Growth Driven by Expected Margin Expansion
Big Cash Flow Growth Driven by Expected Margin Expansion Operating margin expected to increase 80% 4Q16 – 2019 Production growth expected within cash flow in 2019 Adjusted plan results in increased cash flow, decreased outspend Adjusted 3-year plan(1) $1,300 $25 $22 Operating Margin Cash Flow $19 $6
Slide 7: Financial Discipline Strengthening the Balance Sheet
Financial Discipline Strengthening the Balance Sheet On track with 2017 financial strategy • Liquidity of $1.6 billion (as of March 31, 2017) • $747 million net cash proceeds from non-operated Eagle Ford sale March 2017 • Net debt reduced to $2.3 billion; reduced 22% 1Q17/4Q16 • No bond maturities u
Slide 8: 3-Year Plan Prefunded by Cash Flow and Divestiture Proceeds
3-Year Plan Prefunded by Cash Flow and Divestiture Proceeds from non-operated Eagle Ford sale > 2017-2018 expected outspend Non-operated 2017 – 2018 Eagle Ford Projected sale OutspendFacilities 6% (2) (1) Other 2018 8% Midland 86% Outspend Other Basin 86% 8% 80% • Additional cash flows from retentio
Slide 9: Hedging Provides Cash Flow Stability
Financial Discipline Hedging Provides Cash Flow Stability • ~75% of expected 2017 production volumes hedged (at the midpoint of guidance) • ~ 70% of oil, 80% of natural gas and 80% of NGLs • Approximately 1/2 of expected 2018 volumes hedged Hedged Volumes as of April 26, 2017 10 9 8 7 6 (MMBOE) 5 4
Slide 10: 2017 Priorities
SM Energy A Premier Operator of Top Tier Assets 2017 Priorities: Midland Basin Focus capital Complete Strong development on drivers of portfolio balance sheet acceleration value creation transition and liquidity 10
Slide 11: Midland Basin Setting Up for Expanded 2018 Program
Midland Basin Setting Up for Expanded 2018 Program Excellent vendor relationships and continued improvements in operating efficiencies set the stage for expansion in 2018 Significant experience Sufficient takeaway in the basin - strong capacity vendor relationships Sufficient water Continued perform
Slide 12: Midland Basin 1Q17
Midland Basin 1Q17 Ramping up quickly – setting up for 2018 Midland Basin ~88,000 net acres • 6 horizontal rigs and 1 data gathering rig; 3 completions crews active • Production up 55% sequentially; RockStar wells significantly outperforming acquisition RockStar assumptions • Drilled 20(1) 10,000’ l
Slide 13: Midland Basin Premier Operator
Midland Basin Premier Operator Applying technology to optimize development 140,000 Example: Venkman wells in RockStar Area • Acquiring core and log data 120,000 Cumulative Production (BOE) Improved 100,000 Completion Steering to best zones Design 80,000 Identifying new pay intervals 60,000 40,00
Slide 14: Howard County Significant Increase in Activity
Howard County Significant Increase in Activity Industry confidence drives increased drilling activity across the county January 2017: 18 Rigs April 2017: 28 Rigs 14
Slide 15: Howard County Positive Peer Well Results
Howard County Positive Peer Well Results Peer wells extend “confirmed” geologic assessment to east and south • Thumper 14-23 • 7,500’ lateral • 24-hour rate: 1,357 Boe Thumper 14-23 (91% oil) • Tubb A 1HA • 9,366’ lateral • produced 141,000 Boe over 132 days Tubb A 1HA Source: Tubb A 1HA well data c
Slide 16: RockStar Top Tier Well Performance Continues
RockStar Top Tier Well Performance Continues Initial production rates on SM completed wells soundly beating acquisition assumptions 240,000 220,000 Gross Cumulative Production (BOE) 200,000 RockStar wells average ~90% oil at ~40 API gravity 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,00
Slide 17: Howard County Recent Well Results
Howard County Recent Well Results Recent wells targeting three intervals: Wolfcamp A, Wolfcamp B, and Lower Spraberry 1Q17 Wells Lateral IP Rate IP Well Name Interval Length (BOE/d) Days Guitar North 2722LS(1) LS 9,692 1,093+ 20 Guitar North 2742WA(2) WCA 9,698 1,981 20 Guitar North 2762WB(3) WCB 9,
Slide 18: Eagle Ford Increasing Value With More Wells Per Section
Eagle Ford Increasing Value With More Wells Per Section All three areas support UEF/LEF co-development East Operated Eagle Ford – Recent Well Results 4Q16 Completions 50 Continued Outperformance at 312’ plan view spacing Gross Cumulative Production (BOE/FT) 40 6 Wells (A) 30 North Area 4Q16 900’ Eas
Slide 19: A Premier Operator of Top Tier Assets
SM Energy A Premier Operator of Top Tier Assets 3 Year Plan Expected Outcomes: Big growth in Big growth in Debt:EBITDAX Top Tier high-margin cash flow ~2x in 2019 portfolio production 2017 Priorities: Midland Basin Focus capital Complete Strong development on drivers of portfolio balance sheet accel
Slide 20: Appendix
Appendix sMA ENERGY
Slide 21: Regional Well Projected Economics
Regional Well Projected Economics 2017 capital program focusing on areas with top tier returns RockStar – Wolfcamp A Sweetie Peck – Lower Spraberry 120% 120% 100% 100% 80% 80% IRR 60% 60% IRR 40% 40% 20% 20% 0% 0% $40 $45 $50 $55 $60 $40 $45 $50 $55 $60 NYMEX WTI NYMEX WTI 7,600' 10,000' 7,600' 10,0
Slide 22: 1st Quarter 2017 Performance
1st Quarter 2017 Performance Production 1Q17 Total Production (MMBoe) 12.1 Average Daily Production (MBoe/d) 134.4 Pre-Hedge Realized Price ($/Boe) $27.55 Post-Hedge Realized Price ($/Boe) $27.55 Costs LOE ($/Boe) $3.82 Ad Valorem ($/Boe) $0.55 LOE including Ad Valorem ($/Boe) $4.37 Transportation (
Slide 23: 1Q17 Regional Realizations
1Q17 Regional Realizations Pricing NYMEX WTI Oil ($/Bbl) $51.91 NYMEX LLS Oil ($/Bbl) $53.39 NYMEX Henry Hub Gas ($/MMBTU) $3.32 Hart Composite NGL ($/Bbl) $26.74 Eagle Ford Production Volumes Eagle Ford Op(1) Rocky Mountain Permian Non-Op(2) SM Total Oil (MBbls) 421 999 1,623 483 3,525 Gas (MMcf) 2
Slide 24: 2017 Activity Wells Drilled, Flowing Completions & DUC Count
2017 Activity Wells Drilled, Flowing Completions & DUC Count Wells Drilled Flowing Completions DUC Count 1st Quarter 2017 1st Quarter 2017 1st Quarter 2017 Region Gross Net Gross Net Gross Net Permian Sweetie Peck 7 7 11 11 7 7 RockStar 12 12 5 5 13 13 Permian total 19 19 16 16 20 20 Eagle Ford (ope
Slide 25: Leasehold Summary
Leasehold Summary As of March 31, 2017 Net Acres(1) 3/31/17 Midland Basin Sweetie Peck(2) 15,880 Halff East (Upton County) 5,985 RockStar 66,195 Eagle Ford Operated 166,760 Rocky Mountain Divide 123,570 Powder River Basin 156,260 Rocky Mountain Other(3) 190,330 Other Areas/Exploration 24,915 Total 7
Slide 26: Adjusted EBITDAX Reconciliation
Adjusted EBITDAX Reconciliation Reconciliation of net income (GAAP) to Adjusted EBITDAX (non-GAAP) to Three Months Ended net cash provided by operating activities (GAAP): (in thousands) March 31, 2017 Net income (GAAP) $74,434 Interest expense 46,953 Other non-operating income, net (335) Income tax
Slide 27: Adjusted Net Loss Reconciliation
Adjusted Net Loss Reconciliation Reconciliation of net income (GAAP) to adjusted net loss (non-GAAP): Three Months Ended (in thousands, except per share data) March 31, 2017 Net income (GAAP) $74,434 Net derivative gain (114,774) Net gain on divestiture activity (37,463) Other, net 5,028 Tax effect
Slide 28: Total Capital Spend Reconciliation
Total Capital Spend Reconciliation Three Months Reconciliation of Costs Incurred in Oil and Gas Activities (GAAP) Ended to Total Capital Spend (Non-GAAP)(1) (in millions) March 31, 2017 Costs incurred in oil and gas activities (GAAP): $281.5 Less: Asset retirement obligation (0.9) Less: Capitalized
Slide 29: Derivative Positions Summary By Quarter Through 2018
Derivative Positions Summary By Quarter Through 2018 As of April 26, 2017 Fixed Swaps Oil Gas NGL(3) Volume Volume Volume (2) Period (MBbls) $/Bbl(1) (BBTU) $/MMBTU(1) (MBbls) $/Bbl 2Q’17 1,444 $46.44 26,205 $3.98 2,114 $21.40 3Q’17 1,340 $46.66 23,657 $4.01 2,019 $20.89 4Q’17 1,254 $46.35 22,001 $3
Slide 30: NGL Derivative Position Detail
NGL Derivative Position Detail(1) NGL Swaps OPIS Eth Purity Mt Belv NGL Swaps OPIS Propane Mt Belv Non-TET NGL Swaps Natural Gasoline Mt Belv Non TET Volume Volume Volume (2) (2) (2) Period (MBbls) $/Bbl Period (MBbls) $/Bbl Period (MBbls) $/Bbl 2Q’17 892 $9.11 2Q’17 634 $21.90 2Q’17 249 $48.47 3Q’1
Slide 31: NGL Realizations
NGL Realizations • Nearly 90% increase in realized price (before hedges) from 1Q16 to 1Q17 • SM NGL price realizations are predominately tied to Mont Belvieu, fee based contracts • Differential reflects NGL barrel product mix and transportation and fractionation fees SM Typical NGL Bbl(1) 1Q16 2Q16
Slide 32: 2017 Capital Program
2017 Capital Program Aggressive growth expected in the Midland Basin Total Capital Budget ~$875MM Operated Eagle Ford 20% Facilities 6% Drilling and (2) Completion (1) Other Midland 8% 86% Other Basin 86% 8% 80% • Average 7 rigs • ~$750MM drilling and completion budget • Planning more than 115 gross
Slide 33: Setting Up for Expanded 2018 Program
Setting Up for Expanded 2018 Program Excellent vendor relationships and continued improvements in operating efficiencies set the stage for expansion in 2018 Significant • Use multiple contractors experience in • Eagle Ford: Rigs and frac crews contracted through year-end, sand volumes the basin – an
Slide 34: Midland Basin Infrastructure
Midland Basin Infrastructure Excellent proximity to gathering/processing and takeaway with significant capacity Oil Gas NGLs • 100% sold at wellhead • 100% sold at wellhead • 100% sold at wellhead • 65% on pipeline (35% trucked) • 100% third party gathered • 100% third party gathered • Currently wor
Slide 35: Howard County Operators
Howard County Operators SM Energy Callon Encana Surge/Yantai Xinchao Diamondback Oxy Energen Breitburn Sabalo 35
Slide 36: Sweetie Peck Operators
Sweetie Peck Operators SM Energy Apache Chevron Concho Devon Diamondback Discovery Endeavor Exxon Legacy Oxy Pioneer Summit Miscellaneous 36
Slide 37: Eagle Ford Operators
Eagle Ford Operators APC APC APC CHK Dimmit APC SN Lewis APC SM EF North CHK NBL (ROSE) SM EF East SM EF South SFY 37
Slide 38: Contact Information
Contact Information Jennifer Martin Samuels Senior Director, Investor Relations 303-864-2507 jsamuels@sm-energy.com 38