Sm Energy Company · NYSE:SM
Sm Energy — Q1 2023 Earnings Presentation
35 slides from Sm Energy's earnings presentation, Apr 28, 2023
Slide 1: First Quarter 2023 Financial and Operating Results
FIRST QUARTER 2023 FINANCIAL AND OPERATING RESULTS APRIL 27, 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,” "goal," "generate," “plan,” “target,” “believes,” “objectives,” “priorities,” and similar expressions are intended to ide
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: 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 4
Slide 5: 2023 Strategic Objectives
2023 Strategic Objectives 1Q23 Delivering Results on All Fronts INCREASED RETURN OF CAPITAL TO STOCKHOLDERS – OPPORTUNISTIC REPURCHASES 1.4 $58 116% Million in total Million shares capital returned FCF(2) returned repurchased(1) to stockholders to stockholders OPERATIONAL EXECUTION – OUTPERFORMANCE
Slide 6: 1Q23 Performance Summary
1Q23 Performance Summary 146.4 MBoe/d PRODUCTION $401.4 million ADJUSTED EBITDAX(1) $50.3 million ADJUSTED FREE CASH FLOW(1) 116% FCF(1) RETURNED TO STOCKHOLDERS Note | Amounts shown are for the quarter ending March 31, 2023. (1) Indicates a non-GAAP measure or metric. Please refer to the “Non-GAAP
Slide 7: Delivering Return of Capital to Stockholders
Delivering Return of Capital to Stockholders 4% Yield-to-Market Capitalization Over ~8-months(1) RETURN OF CAPITAL TO STOCKHOLDERS INCEPTION TO DATE(1): ~2.8 million TOTAL SHARES REPURCHASED ~$134 million TOTAL $ RETURNED(2) SUSTAINABLE QUARTERLY DIVIDEND UPSIDE THROUGH REPURCHASES $0.15 1.4 PER SHA
Slide 8: Low Leverage
Low Leverage Favorable Leverage Compared to Peers | Financial Flexibility YE23 Net Debt-to-EBITDA(1)(3) Peer 1 (0.6) 0.6x Peer 2 - NET DEBT-TO- SM 0.5 ADJUSTED EBITDAX(1) Peer 3 0.7 LIQUIDITY $1.7 billion Peer 4 0.9 CASH BALANCE $478 million Peer 5 1.0 NET DEBT(1) $1.1 billion(2) Peer 6 1.2 Peer 7 1
Slide 9: Strong Balance Sheet
Strong Balance Sheet Balance Sheet Flexibility Borrowing base and aggregate lender commitments reaffirmed(2) No debt maturities before 2025 BB- B2 CREDIT AGENCY SENIOR SECURED DEBT RATINGS: S&P BB- Outlook: Positive Fitch Outlook: Stable Moody’s Outlook: Positive Note | Amounts as of March 31, 2023.
Slide 10: 2023 Plan Guidance
2023 Plan Guidance* Optimizing Free Cash Flow Over a Multi-year Plan Key Metrics Guidance FY 2023 Capital Expenditures(1) ($B) $1.1 Total Production (MMBoe) 52.5–54.5 FACILITIES 4% DRILLING & COMPLETION— Total Production (MBoe/d) 144–150 SOUTH TEXAS ~36% Oil percentage ~43% LOE (per Boe) $5.75-$6.00
Slide 11: 2023 Plan Guidance: Q2 and Regional Details
2023 Plan Guidance Q2 and Regional Details Q2 2023 Guidance 2023 Regional Activity Production: 13.3-13.5 MMBoe (146-148 MBoe/d), Midland Basin Plan Details at 42-43% oil, 59-60% liquids 2023 Net wells planned: drill 40-45; complete ~50 Capital expenditures(1): $295-$315 million ~11,135’ expe
Slide 12: Top-Tier Assets
Top-Tier Assets Great Acreage | Great Basins | Great Results OPERATING DETAILS(1) Midland Basin 2 RIGS RUNNING 1 COMPLETION CREW ~88,000 NET ACRES OPERATING DETAILS(1) 3 RIGS RUNNING ~155,000 South Texas 1 COMPLETION CREW NET ACRES (1) 2023 expected average. 12
Slide 13: Midland Basin: Inventory Upside On Existing Acreage
Midland Basin Inventory Upside On Existing Acreage – Up To 8 Producing Intervals LEONARD LEONARD 6,500’ • First test ~ 800 days on production, 298 MBoe produced to date from 9,900’ lateral • Six Leonard tests planned for 1H23. First 2023 Leonard well brought online in March. MIDDLE SPRABERRY 7,100’
Slide 14: Midland Basin: Execution, Well Performance and Capital Efficiency
Midland Basin Focused On Execution, Well Performance and Capital Efficiency SM Energy Wells vs. Peers(1) Howard County ‘21-’22 Permian Oil Wells – Breakeven(2) 300 SM SM Energy Best Peer 1 Among 250 Significant Peer 2 Peer 3 Regional Peers! Avg. Cumulative Oil Production (MBbl/10,000 ft) Outperforma
Slide 15: Midland Basin: Best-in-Class Operator
Midland Basin Best-in-Class Operator Constant Focus On Execution to Achieve Better Well Performance & Capital Efficiency Britain Cindy Kay Pad Miracle Max Pad 5 WELL PAD 2 PADS | 5 WELLS 15,000 FOOT LATERALS 17,900 FOOT LATERALS DRILLED 20 DAYS FASTER THAN PLANNED DRILLED 13 DAYS FASTER THAN PLANNED
Slide 16: Midland Basin: Offloads Reduce Flaring and Increase Revenues
Midland Basin Offloads(1) Reduce Flaring and Increase Revenues 2022 Actual 2022 Gross Volume - 2022 Revenue - Permian flare rate 2022 Estimated Offloads Offloads <1% 2.8 $18.3 Permian flare rate 4% without offload with offload Bcf million Cumulative Offload Volume Cumulative Offload Gross Revenue 8
Slide 17: South Texas – Austin Chalk
South Texas – Austin Chalk 7 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) 40 Liquids-rich Gas 30 Number of wells: 17 (Mboe per 1,000' / 3-stream) Avg. Cumulative Production 20 Oil Number of wells:
Slide 18: 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 19: SM Energy - Leader in Stewardship
SM Energy - Leader in Stewardship Exceeded 2022 Internal Targets OVERALL CDP SCORE 2022 Results Methane Intensity 0.04 mT CH4/MBOE Scope 1 + 2 GHG Intensity down ~40% since base year 2019 SUPPLIER ENGAGEMENT Routine flaring 0% Non-routine flaring 0.4% Note | Amounts disclosed are 2022 actual results
Slide 20: Inventory Quality
Inventory Quality A Favorite Among SMID-Caps “SM remains a favorite name with what we believe to be the deepest and highest-quality well inventory among our SMID-cap coverage.” Capital One Securities, Inc. “COS Energy Earnings Recap” February 23, 2023 20
Slide 21: Appendix
Appendix
Slide 22: Year-End Inventory
Year-End Inventory Organically Replacing and Maintaining Highly Economic Inventory ORGANICALLY MAINTAINING INVENTORY Nearly 80% of inventory is classified as 3P reserves having economic and geologic certainty Organic inventory potential will be realized in future years through further testing an
Slide 23: First Quarter 2023 Performance
First Quarter 2023 Performance Key Metrics 1Q23 Production and Pricing 1Q23 Production 146.4 MBoe/d Total Production (MMBoe) 13.2 Total Production (MBoe/d) 146.4 Oil percentage / Liquids 43% / 59% Pre-Hedge Realized Price ($/Boe) $43.31 Post-Hedge Realized Price(1) ($/Boe) $43.70 Costs (per Boe) 1Q2
Slide 24: 1Q 2023 Realizations by Region
1Q 2023 Realizations by Region Two Top-Tier Areas of Operation Midland Basin South Texas Total Production Volumes Benchmark Pricing Oil (MBbls) 4,240 1,424 5,664 NYMEX WTI Oil ($/Bbl) $ 76.13 Gas (MMcf) 14,471 17,761 32,232 NYMEX Henry Hub Gas ($/MMBtu) $ 3.42 NGL (MBbls) 5 2,137 2,142 OPIS Composit
Slide 25: Activity by Region
Activity by Region Wells Drilled, Flowing Completions & DUC Count Wells Drilled(1) Flowing Completions DUC Count(1) 1Q23 1Q23 As of March 31, 2023 Gross Net Gross Net Gross Net Midland Basin RockStar(1) 5 3 5 5 29 24 Sweetie Peck 6 5 7 5 19 14 Midland Basin total 11 8 12 10 48 38 South Texas(2) Aust
Slide 26: Leasehold Summary
Leasehold Summary 6,300 Net Acres Acquired | ~$10 million Net Acres(1) MIDLAND BASIN NET ACRES ~88,000 Midland Basin RockStar 63,500 Sweetie Peck(2) 18,500 New Acreage 6,300 Midland Basin total 88,300 South Texas 154,800 SOUTH TEXAS NET ACRES ~155,000 Rocky Mountain Other 10,300 Other Areas / Explor
Slide 27: NGL Realizations
NGL Realizations 2023 Plan Assumes Ethane Processing All Year SM Energy Realizations by Quarter NGL Composition 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 Iso OPIS(1) Benchmark Price ($/Bbl) $48.36 $50.05 $42.47 $33.03 $30.95 Butane SM Energy NGL Realization ($/Bbl) $38.56 $42.08 $36.36 $26.10 $26.24 N
Slide 28: Hedges
Slide 29: Hedging Summary
Hedging Summary Hedging Volumes Lower – Aligned with Lower Leverage 2023 Hedge Program OIL ~5,300 MBbls(2), or ~30% of expected Q2-Q4 2023 oil production, is hedged to contract prices in the Midland Basin at a weighted- average price of $75.29/Bbl (weighted-average of collar floors and ~25% swaps)
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 Oil Oil Swaps Oil Collars Oil Basis Swaps Oil Basis Swaps Roll Basis Swaps Oil Swaps Price Price Price Price Volume Volume Ceiling Floor Volume Volume Volume Volume Period $/Bbl(2
Slide 31: Non-GAAP Reconciliation and Disclosure
First Quarter 2023 Non-GAAP Reconcill Disclosure
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 Adjusted Net Income(1) Three Months Ended (in thousands) (in thousands) March 31, 2023 March 31, 2023 March 31, 2023 Net income (GAAP) $ 198,552 $ 1,261,740 Net income (GAAP) $ 198,552 Interest expense 22,45
Slide 34: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted Free Cash Flow(1) Three Months Ended (in thousands) March 31, 2023 Net cash provided by operating activities (GAAP) $ 331,634 Net change in working capital 26,216 Cash flow from operations before net change in working capital (non-GAAP) $ 357,850 Capital expenditure
Slide 35: Investor Relations Contact
JENNIFER MARTIN SAMUELS Vice President - Investor Relations 303.864.2507 jsamuels@sm-energy.com