3q19 earnings · (1) previously reported well average includes all (182) previously reported sm...
TRANSCRIPT
TOP-TIER OPERATIONAL EXECUTION CONTINUES
3Q19 EARNINGS
O C T O B E R 3 1 , 2 0 1 9
NYSE: SM
PLEASE READTHIS PRESENTATION MAKES REFERENCE TO:
2
FORWARD LOOKING STATEMENTS
This presentation contains forward-looking statements within the meaning of securities laws. The words “assumes,” "anticipate," "estimate," "expect,"
"forecast," "guidance," “implied,” "plan," "project," "objectives," "target," "will" and similar expressions are intended to identify forward-looking statements.
These statements involve known and unknown risks, which may cause SM Energy's actual results to differ materially from results expressed or implied
by the forward-looking statements. Forward-looking statements in this release include: projections for production, certain operating costs, general and
administrative expenses and expected savings, and total capital spend; the expectation that the Company will spend within discretionary cash flow in the
fourth quarter of 2019 and beyond; the potential to reduce absolute debt and leverage in 2020; and, the Company’s expectations regarding capital
allocation. General risk factors include the availability, proximity and capacity of gathering, processing and transportation facilities; the volatility and level
of oil, natural gas, and natural gas liquids prices and related differentials, including any impact on the Company’s asset carrying values or reserves
arising from price declines; uncertainties inherent in projecting future timing and rates of production or other results from drilling and completion
activities; the imprecise nature of estimating oil and natural gas reserves; uncertainties inherent in projecting future drilling and completion activities,
costs or results; the availability of additional economically attractive exploration, development, and acquisition opportunities for future growth and any
necessary financings; unexpected drilling conditions and results; unsuccessful exploration and development drilling results; the availability of drilling,
completion, and operating equipment and services; the risks associated with the Company's commodity price risk management strategy; and other such
matters discussed in the Risk Factors section of SM Energy's most recent Annual Report on Form 10-K, as such risk factors may be updated from time
to time in the Company's other periodic reports filed with the Securities and Exchange Commission. The forward-looking statements contained herein
speak as of the date of this presentation. Although SM Energy may from time to time voluntarily update its prior forward-looking statements, it disclaims
any commitment to do so, except as required by securities laws.
non-GAAP financial measures and forward-looking metrics:
See Appendix for reconciliations and definitions
NYSE: SM 3
CAPITAL COSTS DOWN
LOWER OPERATING
COSTS
COMMITMENT TO GENERATING FREE CASH FLOW
G R E AT W E L L
P E R F O R M AN C E
NYSE: SM 4
3Q19 FINANCIAL & OPERATING RESULTS
UPDATE
NYSE: SM
MIDLAND BASINTOP-TIER EXECUTION, WELL PERFORMANCE AND CAPITAL EFFICIENCY
5
MARTIN
RockStarHOWARD
UPTON
Sweetie Peck
E x e c u t i n g O n O u r P l a n
COMPLETIONS EXECUTION
• ~100+ net completions planned for 2019
• 19 net completions in 3Q19; 78 net completions YTD
GREAT NEW WELLS
• 11 new RockStar wells reached their 30-day peak rates
that averaged approximately 1,180 Boe/d (90% oil)
TOP TIER CAPITAL EFFICIENCY
• Drilling/completing faster, longer laterals, lower sand costs
YE 2018 INVENTORY: 12 – 16 YEARS
O p e r a t i n g D e t a i l s ( 1 )
~81,500
Rigs Running:
Completion Crews:
N E T A C R E S
MIDLAND
(1) As of October, 2019.
NYSE: SM
0
50,000
100,000
150,000
200,000
250,000
0 30 60 90 120 150 180 210 240 270 300 330 360
Cu
mu
lati
ve
Pro
du
cti
on
(B
oe)
Days on Production
Previously Reported Well Avg New Well Avg*
MIDLAND BASIN: GREAT NEW ROCKSTAR RESULTSNEW WELL PERFORMANCE CONSISTENT WITH PRIOR WELLS
6
(1)
(1) Previously Reported Well Average includes all (182) previously reported SM operated wells at RockStar on production since 11/3/2016.
(2) New Well Average includes 11 new wells at RockStar that have not been previously reported.
(2)
• 11 new wells at RockStar tracking in-line with Previously
Reported Well Avg.
• New Well Avg. includes 4 Lower Spraberry wells;
approximately half of the new wells are located along the
eastern edge of our position (Lower Spraberry and wells
in the eastern area typically have lower IPs with flatter
declines than wells farther west)
. .
NYSE: SM 7
+21%Increase in
Lateral Feet
Drilled / Day(YTD19 / 2017)
+101%
+13%
-74%
Increase in
Lateral Feet
Completed / Day(YTD19 / 2017)
Increase in Avg.
Lateral Length
Completed(2019 Plan / 2017)
Decrease in
Sand Costs(Sep. 19 / Jan. 18)
(1) Total lateral feet delivered per day, spud to rig release.
(2) Lateral feet completed per fleet per day.(3) 2019 includes drilled and planned wells.
(4) Excludes last mile logistics as there is variability in these charges.
510
562
618
2017 2018 YTD19
Drilling FasterLateral Ft Drilled per Day(1)
9,300
10,10010,500
2017 2018 2019
Longer LateralsAvg Lateral Length Completed(3)
-
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
Jan Apr Jul Oct Jan Apr Jul
Lower Sand CostsIndexed to January 2018(4)
765
1,025
1,536
2017 2018 YTD19
Completing FasterLateral Ft Completed per Day(2)
MIDLAND BASIN: TOP-TIER CAPITAL EFFICIENCYINCREASE IN CAPITAL EFFICIENCY RECENT DC&E WELL COSTS AT
~$700 PER LATERAL FOOT
NYSE: SM
SOUTH TEXASFOCUSED ON EXECUTION AND RETURNS ENHANCEMENT
8
DIMMIT COUNTY
WEBB COUNTY
North
Area
South
Area
East
Area
COMPLETIONS EXECUTION
• 6 net completions in 3Q19; South Texas 2019 program
concluded with 19 net completions for the year
• Completed 12 gross wells during the third quarter in the
JV-funded area
AUSTIN CHALK SUCCESS
• Two Austin Chalk wells completed during the third quarter
reached an average 30-day peak rate of ~2,655 Boe/d
(>55% liquids, 3-stream)
VALUE ENHANCEMENT THROUGH HIGHER RETURN
WELLS
• 12 JV-funded wells reached an average 30-day peak rate
of ~2,530 Boe/d (~50% liquids, 3-stream)
YE 2018 INVENTORY: 12 – 14 YEARS
E n h a n c i n g I n v e n t o r y Va l u e
O p e r a t i n g D e t a i l s ( 1 )
Rigs Running:
~163,000N E T A C R E S
(1) As of October, 2019.
NYSE: SM
SOUTH TEXAS: AUSTIN CHALK SUCCESSTWO NEW TESTS: ~1,100 BOPD PEAK 24 HR RATES EACH
9
HIGHER OIL CONTENT = HIGHER RETURNS
Watson (SA2) State 167H Galvan Ranch C 917H
Briscoe C (SA1) State 108H
IP30: 1,710 Boe/d (preliminary)
IP30 oil: 787 Bbl/d
Lateral Length: 11,269’
% liquids: 74%
API Gravity: 50.0
Watson (SA2) State 167H
IP30: 3,179 Boe/d
IP30 oil: 651 Bbl/d
Lateral Length: 12,875’
% liquids: 58%
API Gravity: 56.7
Galvan Ranch C917H
IP30: 2,133 Boe/d
IP30 oil: 310 Bbl/d
Lateral Length: 7,886’
% liquids: 52%
API Gravity: 61.9
Galvan Ranch B904H
IP30: 3,599 Boe/d
IP30 oil: 896 Bbl/d
Lateral Length: 11,306’
% liquids: 61%
API Gravity: 53.5
Galvan Ranch B904H Briscoe C (SA1) State 108H
DEMONSTRATING GEOGRAPHIC EXPANSE
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
0 50 100 150 200 250 300 350 400 450 500
Bo
e/D
ay (
3-s
trea
m)
Days Online
Surface equipment repairs
Well shut-in for tubing installation
Note: Boe rates provided are 3-stream.
NYSE: SM
SOUTH TEXAS: VALUE ENHANCEMENTPOSITIVE RESULTS FROM NEW WELL DESIGN
10
• Wider spacing and new completion design
• Increasing lateral length with less capex per
lateral foot
• Increasing production volumes at lower cost
with more liquids higher expected
returns
A C T U A L P R O D U C T I O N P E R L A T E R A L F T T O T A L W E L L P R O D U C T I O N
-
10
20
30
0 50 100 150 200 250 300 350
Cu
mu
lati
ve
Pro
du
cti
on
(Mb
oe/1
,00
0’)
Producing Days
-
50
100
150
200
0 100 200 300
Cu
mu
lati
ve P
rod
ucti
on
Pe
r W
ell
(Mb
oe)
Producing Days
2019 JV Wells
2016 Wells
2019 JV Wells
2016 Wells
NYSE: SM
SOUTH TEXAS: EXCELLENT CAPITAL EFFICIENCYRECENT EAGLE FORD D&C WELL COSTS LESS THAN $650 PER LATERAL FOOT
11
666721
824
2017 2018 YTD19
Drilling FasterLateral Ft Drilled per Day(1)
8,392
10,483
12,531
2017 2018 2019
Drilling LongerAvg. Lateral Length Completed(3)
851
737
632
2017 2018 YTD19
Lower CostsD&C Cost / Lateral Foot(4)
1,210 1,256
1,663
2017 2018 YTD19
Completing FasterLateral Feet Completed per Day(2)
+24%
+49%
+37%
-26%Decrease in
Well Costs(YTD19 / 2017)
Increase in
Lateral Feet
Completed / Day(YTD19 / 2017)
Increase in
Lateral Feet
Drilled / Day(YTD19 / 2017)
Increase in Avg.
Lateral Length
Completed(2019 Plan / 2017)
(1) Total lateral feet delivered per day, spud to rig release.
(2) Lateral feet completed per fleet per day.(3) 2019 includes drilled and planned wells.
(4) Includes drilling, toe-prep, stim, drill-out & flowback.
Note: Excludes Austin Chalk wells.
NYSE: SM
BALANCE SHEET FOCUSIMPROVING DEBT METRICS EXPECTED
12
• Borrowing base re-affirmed in October
• Liquidity of $1.1B(1); no near-term maturities
$500$500$500$500$476.8
$172.5 $0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
202720262025202420232022202120202019
Debt Maturities as of September 30, 2019(in millions)
Borrowing Base: $1.6B
Commitments: $1.2B
$129
Coupon 1.500% 6.125% 5.000% 5.625% 6.750% 6.625%
Yield to worst(2) - 7.81% 8.40% 8.91% 9.63% 9.55%
Initial call date - 11/2018 7/2018 6/2020 9/2021 1/2022
Initial call price - 103.06% 102.50% 102.81% 103.38% 104.97%
(1) Liquidity as of September 30, 2019.
(2) YTW as of October 30, 2019.
NYSE: SM
SM VALUEACTIVELY MANAGING TO LONG-TERM VALUE CREATION
13
BEST WELLS IN THE MIDLAND BASIN“The Company’s high-quality Howard County assets have yielded some of the best results in the area to date in the highest oil cut county.” – Raymond James, July 2019
“SM’s prolific, oil-weighted assets in Howard County differentiate itself versus other SMID peers in a potentially lower for longer oil price.” – JP Morgan, July 2019
“Our analysis of the Permian, which includes every horizontal well drilled in the Midland Basin since 2013, indicates that the SM wells are among the most productive on a lateral foot basis in terms of cumulative production.” – JP Morgan, July 2019
Baird has repeatedly ranked SM as #1 and at least among the top 5 in their periodic ranking of highest revenue per well in the Midland Basin.
TOP-TIER CAPITAL EFFICIENCYWe are very capital efficient among Midland operators, comparable to larger scale operators.
Cost per lateral foot: ~$700 in Permian, <$650 in South Texas
INVENTORY: 12+ YEARS AND SUBSTANTIAL UPSIDE POTENTIAL
Recent and exciting successes in four new horizons, providing upside of growing inventory organically.
NYSE: SM 14
Appendix
NYSE: SM
2019 GUIDANCE(1)
15(1) As of October 31, 2019.
(2) Total capital spend is a non-GAAP financial measure. See “Definitions of non-GAAP Measures as Calculated by the Company” in the Appendix.
Capital & Production FY 2019
Total capital spend ($MM)(2) (before acquisitions) ~$1,025
Total production (MMBoe) 47.5 – 47.9
Total production (MBoe/d) 130 – 131
Oil percentage ~44%
Costs
LOE ($/Boe) ~$4.70 - $4.80
Transportation ($/Boe) ~$4.05 - $4.15
Production and Ad Valorem taxes ($/Boe)– 4% of pre-hedge revenue + ~$0.70
~$2.00
G&A ($MM) – includes ~$20MM non-cash compensation
~$125 - $130
Exploration expense, including capitalized overhead ($MM)– before dry hole expense, all of which is included in capital
expenditure guidance
~$50
DD&A ($/Boe) ~$17.00
• 4Q19 production is expected to range between 12.0 and 12.4 MMBoe (130.4-134.8) MBoe/d), 44% oil,
and reflects expected shut-ins related to offset activity and maintenance.
• G&A revised to $125 - $130 million (including non-cash compensation). Includes estimated 4Q19 costs
associated with reorganization to eliminate duplicate regional functions and reduce overhead costs.
PRODUCTION UP, COSTS DOWN
NYSE: SM
WELL HEDGEDPERCENTAGE OF PRODUCTION HEDGED
16
Benchmark Hedges(1)
4Q19
~80%
BENCHMARK
• ~90% of expected 4Q19 oil production hedged;
swaps at ~$61.35/Bbl, collar floors at ~$50.50/Bbl
• ~70% of expected 4Q19 gas production hedged;
swaps at ~$2.85/MMBtu, collar floors at
$2.50/MMBtu
• Hedged by product
REGIONAL
• ~40%(2) of expected 4Q19 Permian gas
production hedged at WAHA ($1.75/MMBtu)
• ~60-65%(3) of expected 4Q19 Permian oil
production covered by Midland to Cushing basis
hedges at ~$2.85/Bbl
(1) Total Company percentage includes oil swaps and collars at NYMEX WTI, natural gas swaps and collars at HSC, and NGL swaps (excludes WAHA swaps and basis hedges).
(2) Permian gas hedges at WAHA based on Permian residue/tailgate volumes; assumes ethane rejection.
(3) Permian Midland to Cushing basis hedges based on expected Permian oil volumes.
Note: Hedging data as of October 31, 2019
O i l
G a s
N G L s
W A H A
M i d l a n d - C u s h i n g O i l
NYSE: SM
THIRD QUARTER 2019 PERFORMANCE
17
Production & Pricing 3Q19 2019 YTD
Total Production (MMBoe / MBoe/d) 12.4/134.9 35.5/130.1
Oil Percentage 44% 44%
Pre-Hedge Realized Price ($/Boe) $31.39 $32.00
Post-Hedge Realized Price ($/Boe) $33.38 $32.68
Costs ($/Boe) 3Q19 2019 YTD
LOE $4.73 $4.67
Ad Valorem $0.39 $0.52
Transportation $4.00 $4.02
Production Taxes $1.29 $1.30
Production Expenses $10.41 $10.51
Cash Production Margin (pre-hedge) $20.98 $21.49
G&A – Cash $2.19 $2.27
G&A – Non Cash $0.44 $0.42
Operating Margin (pre-hedge) $18.35 $18.80
DD&A $17.02 $16.76
Earnings 3Q19 2019 YTD
EPS (Diluted) $0.37 $(0.76)
Adjusted EPS(1) $(0.11) $(0.43)
Adjusted EBITDAX(1) ($MM) $257.8 $707.2
(1) Adjusted EPS and Adjusted EBITDAX are non-GAAP financial measures. See “Definitions of non-GAAP Measures as Calculated by the
Company” and reconciliations to the most directly comparable GAAP metric in the Appendix.
NYSE: SM
3Q19 REALIZATIONS BY REGION
18
Benchmark Pricing
NYMEX WTI Oil ($/Bbl) $56.45
NYMEX LLS Oil ($/Bbl) $57.72
NYMEX Henry Hub Gas ($/MMBtu) $2.23
Hart Composite NGL ($/Bbl) $18.89
Production Volumes South Texas Permian Total
Oil (MBbls) 348 5,076 5,424
Gas (MMcf) 20,417 9,079 29,496
NGL (MBbls) 2,061 5 2,067
Total (Mboe) 5,812 6,595 12,407
Revenue (in thousands)
Oil $15,496 $277,362 $292,858
Gas 46,267 17,780 64,046
NGL 32,392 124 32,515
Total $94,154 $295,265 $389,419
Expenses (in thousands)
LOE $14,242 $44,452 $58,694
Ad Valorem $3,238 $1,560 $4,797
Transportation $49,515 $61 $49,576
Production Taxes $1,805 $14,170 $15,975
Per Unit Metrics
Realized Oil per Bbl $44.50 $54.64 $53.99
% of Benchmark - WTI 79% 97% 96%
Realized Gas per Mcf $2.27 $1.96 $2.17
% of Benchmark – NYMEX HH 102% 88% 97%
Realized NGL per Bbl $15.71 nm $15.73
% of Benchmark – HART 83% nm 83%
Realized per Boe $16.20 $44.77 $31.39
LOE per Boe $2.45 $6.74 $4.73
Transportation per Boe $8.52 $0.01 $4.00
Ad Val per Boe $0.56 $0.24 $0.39
Production Tax - per Boe/% of Pre-Hedge Revenue $0.31/1.9% $2.15/4.8% $1.29/4.1%
Production Margin per Boe $4.36 $35.63 $20.98
Note: Amounts may not calculate due to rounding and other classifications.
SIMPLIFIED PORTFOLIO: 2 TOP-TIER AREAS OF OPERATION
Permian realized
price/Boe reflects high oil
content of production
NYSE: SM
2019 ACTIVITY BY REGIONWELLS DRILLED, FLOWING COMPLETIONS AND DUC COUNT
19
As of September 30, 2019
(1) During the third quarter of 2019, there were twelve gross joint development wells completed.
(2) Non-operated activity relates to wells located in the Permian Basin. The single well that was drilled during the second quarter of 2019 was included in a trade
that closed in June 2019.
Wells Drilled Flowing Completions DUC Count
3rd Quarter 2019 2019 YTD 3rd Quarter 2019 2019 YTD As of September 30, 2019
Region Gross Net Gross Net Gross Net Gross Net Gross Net
Permian
Sweetie Peck 5 4 12 9 - - 11 8 6 5
RockStar 20 18 70 66 21 19 76 70 50 47
Permian total 25 22 82 75 21 19 87 78 56 52
South Texas(1) 6 6 21 16 17 6 30 19 19 19
Subtotal Operated Wells 31 28 103 91 38 25 117 97 75 71
Non-operated Wells(2) n/a - n/a 1 n/a - n/a - n/a -
Total n/a 28 n/a 92 n/a 25 n/a 97 n/a 71
NYSE: SM
SOUTH TEXAS 3Q19 WELL RESULTS DETAILJOINT DEVELOPMENT & AUSTIN CHALK WELLS COMPLETED DURING THE QUARTER
20
Well Name ZoneFirst
Production
Lateral
Length
IP24 Gas
Wet
(Mcf/d)
IP24 Oil
(Bbl/d)
IP24
(Boe/d)
(3-stream)
IP24
Oil%
IP30 Gas
Wet
(Mcf/d)
IP30 Oil
(Bbl/d)
IP30
(Boe/d)
(3-stream)
IP30
Oil%
API
Gravity
GALVAN RANCH B904H AC August 2019 11,306’ 11,109 1,082 3,900 27% 10,315 896 3,599 25% 53.5
BRISCOE G (SA4) 253H LEF August 2019 9,815’ 8,805 759 3,042 25% 7,964 531 2,647 20% 58.1
BRISCOE G (SA5) 1282H LEF August 2019 14,834’ 11,034 802 3,746 21% 9,321 599 3,080 19% 59.8
BRISCOE C (SA1) STATE 108H AC August 2019 11,269’ 4,307 1,081 2,160 49% 3,412 787 1,710 46% 50.0
BRISCOE R (SA14) 1132H LEF August 2019 8,237’ 7,527 530 2,540 21% 7,083 378 2,270 17% 61.6
BRISCOE R (SA15) 1153H LEF August 2019 8,166’ 6,738 322 2,096 15% 5,644 217 1,722 13% 60.6
BRISCOE R (SA13) 753H LEF August 2019 9,113’ 7,577 336 2,337 14% 6,634 235 2,005 12% 62.2
BRISCOE R (SA16) 732H LEF August 2019 9,066’ 8,033 422 2,444 17% 7,088 298 2,189 14% 61.9
BRISCOE G GU1 (SA3) 1253H LEF August 2019 14,503’ 7,009 600 2,470 24% 6,443 518 2,235 23% 57.7
BRISCOE G GU1 (SA4) 1232H LEF August 2019 14,973’ 6,932 603 2,408 25% 6,386 543 2,255 24% 57.7
BRISCOE G (SA6) 1192H LEF July 2019 12,560’ 6,651 671 2,416 28% 6,244 554 2,245 25% 58.1
BRISCOE G (SA7) 1173H LEF July 2019 12,324’ 6,458 673 2,409 28% 6,087 558 2,199 25% 57.9
BRISCOE R (SA17) 793H LEF July 2019 15,338’ 13,233 749 4,293 17% 12,010 527 3,747 14% 61.3
BRISCOE R (SA18) 812H LEF July 2019 15,375’ 12,860 841 4,273 20% 11,881 597 3,790 16% 61.9
NYSE: SM
LEASEHOLD SUMMARY
21
RegionNet Acres(1)
September 30, 2019
Midland Basin
RockStar 64,000
Sweetie Peck(2) 17,500
Midland Basin Total 81,500
South Texas 163,000
Rocky Mountain Other(3) 34,500
Other Areas/Exploration 26,400
Total 305,400
(1) Includes developed and undeveloped oil and gas leasehold, fee properties, and mineral servitudes held as of September 30, 2019.
(2) Sweetie Peck acreage includes 2,110 net drill-to-earn acreage.
(3) Rocky Mountain Other includes non-core acreage located in North Dakota, Montana, Wyoming, and Utah. The reduction in Rocky Mountain
Other acreage from 6/30/19 relates to Federal leases that were released back to the Bureau of Land Management.
SM HAS NO FEDERAL ACREAGE IN THE MIDLAND BASIN OR SOUTH TEXAS REGIONS
NYSE: SM
NGL REALIZATIONS
22
• NGL price realizations are predominantly tied to Mont Belvieu, fee
based contracts
• Differential reflects composite NGL barrel product mix, transportation
and fractionation fees
42%
27%
9%
9%
13%
SM Typical NGL Bbl(1)
Ethane Propane
Isobutane Normal Butane
Natural Gasoline
3Q18 4Q18 1Q19 2Q19 3Q19
Mt. Belvieu ($/Bbl) $37.97 $29.91 $26.28 $22.23 $18.89
SM Realization
($/Bbl)$30.77 $24.01 $19.39 $16.42 $15.73
% Differential to
Mt. Belvieu81% 80% 74% 74% 83%
(1) Reflects ethane rejection; if the Company were to process ethane, the typical NGL barrel would consist of 51% ethane,
23% propane, 12% natural gasoline, 7% normal butane, and 7% isobutane. During 2019, the Company elected to
process ethane in January through June. The Company rejected ethane July – Sept. 2019 and expects to continue
rejecting ethane during the fourth quarter.
NYSE: SM
OIL AND GAS DERIVATIVE POSITIONS(1)
BY QUARTER THROUGH 2020
23
Midland - Cushing
Oil Swaps Oil Collars Oil Basis Swaps
Period
Volume
(MBbls) $/Bbl(2)
Volume
(MBbls)
Ceiling
$/Bbl(2)
Floor
$/Bbl(2)
Volume
(MBbls)
Price
Differential
$/Bbl(2)
4Q’19 1,686 $61.38 3,168 $62.49 $50.54 3,338 ($2.87)
1Q’20 1,938 $60.35 2,266 $63.91 $55.00 4,193 ($0.68)
2Q’20 2,192 $59.67 1,881 $62.17 $55.00 3,311 ($0.77)
3Q’20 2,592 $56.79 1,252 $62.90 $55.00 3,325 ($0.74)
4Q’20 1,584 $59.00 610 $61.90 $55.00 3,261 ($0.73)
IF HSC Gas Swaps IF HSC Gas Collars WAHA Gas Swaps
Period
Volume
(BBTU) $/MMBTU(2)Volume
(BBTU)
Ceiling
$/MMBTU(2)
Floor
$/MMBTU(2)
Volume
(BBTU) $/MMBTU(2)
4Q’19 14,433 $2.88 4,818 $2.83 $2.50 2,962 $1.75
1Q’20 9,123 $2.98 - - 3,099 $1.93
2Q’20 4,160 $2.20 - - 3,196 $0.56
3Q’20 4,493 $2.41 - - 3,268 $1.03
4Q’20 3,722 $2.36 - - 3,419 $1.17
(1) Includes derivative contracts for settlement at any time during the fourth quarter of 2019 and later periods through 2020, entered into as of 10/31/19.
(2) Weighted-average contract price.
NYSE: SM
NGL DERIVATIVE SWAP POSITIONS(1)
OPIS MT. BELVIEU
24
(1) Includes derivative contracts for settlement at any time during the fourth quarter of 2019 and later periods through 2020, entered into as of 10/31/19.
(2) Weighted-average contract price.
Ethane
Period
Volume
(MBbls) $/Bbl(2)
4Q’19 896 $12.36
1Q’20 447 $11.53
2Q’20 264 $11.13
2020 Total 711
Propane
Period
Volume
(MBbls) $/Bbl(2)
4Q’19 660 $31.60
1Q’20 382 $22.64
2Q’20 382 $22.34
3Q’20 409 $22.33
4Q’20 466 $22.29
2020 Total 1,639
Isobutane
Period
Volume
(MBbls) $/Bbl(2)
4Q’19 29 $35.70
Natural Gasoline
Period
Volume
(MBbls) $/Bbl(2)
4Q’19 50 $50.93
Normal Butane
Period
Volume
(MBbls) $/Bbl(2)
4Q’19 39 $35.64
NYSE: SM
DEFINITIONS OF NON-GAAP MEASURES AS CALCULATED BY THE COMPANY
25
The following non-GAAP measures are presented in addition to financial statements as the Company believes these metrics and performance measures are
widely used by the investment community, including investors, research analysts and others, to evaluate and compare investments among upstream oil and gas
companies in making investment decisions or recommendations. These measures, as presented, may have differing calculations among companies and
investment professionals and may not be directly comparable to the same measures provided by others. Non-GAAP measures should not be considered in
isolation or as a substitute for the related GAAP measure or any other measure of a company’s financial or operating performance presented in accordance with
GAAP. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measure or measures is presented below. These
measures may not be comparable to similarly titled measures of other companies.
Adjusted EBITDAX: Adjusted EBITDAX is calculated as net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement
obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of
settlements, gains and losses on divestitures, and certain other items. Adjusted EBITDAX excludes certain items that the Company believes affect the comparability of operating results, including
items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that the Company presents because
management believes it provides useful additional information to investors and analysts, as a performance measure, for analysis of our ability to internally generate funds for exploration,
development, acquisitions, and to service debt. Adjusted EBITDAX is also important as it is considered among financial covenants under the Company’s Credit Agreement, a material source of
liquidity for the Company. Please reference the Company’s second quarter of 2019 Form 10-Q and 2018 Form 10-K for discussion of the Credit Agreement and its covenants.
Adjusted net income (loss): Adjusted net income (loss) excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-
recurring in nature or whose timing and/or amount cannot be reasonably estimated. These items include non-cash and other adjustments, such as derivative gains and losses net of settlements,
impairments, net (gain) loss on divestiture activity, and materials inventory loss. Adjusted net income (loss) is presented because management believes it provides useful additional information to
investors for analysis of the Company’s fundamental business on a recurring basis. In addition, management believes that adjusted net income (loss) attributable to common shareholders is widely
used by professional research analysts and others in the valuation, comparison, and investment recommendations of upstream oil and gas companies.
Total capital spend: Total capital spend is calculated as costs incurred, less asset retirement obligations (“ARO”), capitalized interest and acquisitions. Total capital spend is presented because
management believes that it provides useful information to investors in the analysis of SM Energy Company and is widely used by professional research analysts and others in the valuation,
comparison and investment recommendations of companies in the oil and gas exploration and production industry. Total capital spend should not be used in isolation or as a substitute to costs
incurred or other capital spending measures under GAAP.
Discretionary cash flow: Discretionary cash flow is calculated as net cash provided by operating activities excluding changes in current assets and current liabilities, and exploration. Exploration
expense is added back in the calculation because, for peer comparison purposes, this number is included in our total capital spend. The Company believes this measure is important to investors
because it provides useful additional information to investors for analysis of the Company’s ability to generate cash to fund exploration and development, and to service indebtedness. In addition,
management believes that discretionary cash flows is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of upstream oil and
gas companies.
FORWARD-LOOKING NON-GAAP MEASURES
The Company is unable to present a reconciliation of forward-looking discretionary cash flow and total capital spend because components of these calculations
include assumptions and estimates that are inherently unpredictable. Moreover, estimating the most directly comparable GAAP measures with the required
precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort.
NYSE: SM
ADJUSTED EBITDAX(1)
RECONCILIATION TO NET INCOME (LOSS) & NET CASH PROVIDED BY
OPERATING ACTIVITIES (GAAP)
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Reconciliation of net income (loss) (GAAP) and net cash provided
by operating activities (GAAP) to adjusted EBITDAX (non-GAAP):
(in thousands)
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2019Net income (loss) (GAAP) $42,234 $(84,946)
Interest expense 40,584 118,191
Income tax expense (benefit) 16,111 (16,337)
Depletion, depreciation, amortization, and asset retirement obligation liability accretion 211,125 595,201
Exploration(2) 10,341 30,070
Abandonment and impairment of unproved properties 6,337 25,092
Stock-based compensation expense 6,766 18,758
Net derivative gain (100,889) (3,463)
Derivative settlement gain 24,722 23,843
Net gain on divestiture activity - (323)
Other, net 434 1,129
Adjusted EBITDAX (non-GAAP) $257,765 $707,215
Interest expense (40,584) (118,191)
Income tax (expense) benefit (16,111) 16,337
Exploration(2) (10,341) (30,070)
Amortization of debt discount and deferred financing costs 3,921 11,554
Deferred income taxes 19,617 (13,620)
Other, net (1,438) (3,420)
Net change in working capital (9,673) 11,781
Net cash provided by operating activities (GAAP) $203,156 $581,586
1) See “Definitions of non-GAAP Measures as Calculated by the Company” above.
2) Stock-based compensation expense is a component of exploration expense and general and administrative expense on the unaudited condensed consolidated statements
of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the statements of operations for the component of
stock-based compensation expense recorded to exploration expense.
NYSE: SM
ADJUSTED NET LOSS(1)
RECONCILIATION TO NET INCOME (LOSS) (GAAP)
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Reconciliation of net income (loss) (GAAP) to
adjusted net loss (non-GAAP):
(in thousands, except per share data)
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2019Net income (loss) (GAAP) $42,234 $(84,946)
Net derivative gain (100,889) (3,463)
Derivative settlement gain 24,722 23,843
Net gain on divestiture activity - (323)
Abandonment and impairment of unproved properties 6,337 25,092
Other, net 435 1,347
Tax effect of adjustments(2) 15,058 (10,090)
Adjusted net loss (non-GAAP) $(12,103) $(48,540)
Net income (loss) per diluted common share (GAAP) $0.37 $(0.76)
Net derivative gain (0.89) (0.03)
Derivative settlement gain 0.22 0.21
Net gain on divestiture activity - -
Abandonment and impairment of unproved properties 0.06 0.22
Other, net - 0.01
Tax effect of adjustments(2) 0.13 (0.09)
Adjusted net loss per diluted common share (non-GAAP) $(0.11) $(0.43)
Diluted weighted-average common shares outstanding (GAAP): 113,334 112,441
Note: Amounts may not calculate due to rounding.
1) See “Definitions of non-GAAP Measures as Calculated by the Company” above.
2) The tax effect of adjustments is calculated using a tax rate of 21.7% for the three and nine month periods ended September 30, 2019. This rate approximates the
Company's statutory tax rate adjusted for ordinary permanent differences.
NYSE: SM
1) See “Definitions of non-GAAP Measures as Calculated by the Company” above.
2) Exploration expense is added back in the calculation of discretionary cash flow because, for peer comparison purposes, this number is included in our
reported total capital spend.
3) Stock-based compensation expense is a component of exploration expense and general and administrative expense on the unaudited condensed
statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the statements
of operations for the component of stock-based compensation expense recorded to exploration expense.
DISCRETIONARY CASH FLOW(1)
RECONCILIATION TO NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)
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Reconciliation of net cash provided by operating
activities (GAAP) to discretionary cash flow (non-GAAP):
(in millions)
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2019
Net cash provided by operating activities (GAAP): $203.2 $581.6
Net change in working capital 9.7 (11.8)
Exploration(2)(3) 10.3 30.1
Discretionary cash flow (non-GAAP): $223.3 $599.9
Note: Amounts may not sum due to rounding.
NYSE: SM
TOTAL CAPITAL SPEND(1)
RECONCILIATION TO COSTS INCURRED (GAAP)
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Reconciliation of costs incurred in oil and gas
activities (GAAP) to total capital spend (non-GAAP):
(in millions)
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2019
Costs incurred in oil and gas activities (GAAP): $270.9 $861.4
Asset retirement obligations (0.3) (1.1)
Capitalized interest (4.2) (14.1)
Proved and unproved property acquisitions(2) (2.9) (2.6)
Other - (3.4)
Total capital spend (non-GAAP): $263.4 $840.2
1) See “Definitions of non-GAAP Measures as Calculated by the Company” above.
2) The Company completed several non-monetary acreage trades in the Midland Basin during the first nine months of 2019 totaling $70.8 million of
value attributed to the properties transferred. This non-monetary consideration is not reflected in the costs incurred or capital spend amounts
presented above.
Note: Amounts may not sum due to rounding.
NYSE: SM
CONTACT INFORMATION
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Jennifer Martin SamuelsVice President - Investor Relations [email protected]