SM - Earnings call transcript Q1 2018

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David W. Copeland

Thank you for joining us by telephone and online for SM Energy Company's First Quarter 2018 Financial and Operating Results Discussion.

Before we start, I'd like to advise you that we will be making forward-looking statements during this call about our plans, expectations and assumptions regarding our future performance. These statements involve risks that may cause our actual results to differ materially from the results expressed or implied in our forward-looking statements.

For a discussion of these risks, you should refer to the cautionary information about forward-looking statements in our press release from yesterday afternoon, the presentation posted to our website for this call, the Risk Factors section of our Form 10-K that was filed earlier this year, and our Form 10-Q filed for this quarter.

We will also discuss certain non-GAAP financial measures that we believe are useful in evaluating our performance. call. to about directly described these press for measures and GAAP in those release information other non-GAAP this of the comparable most measures our Reconciliation metrics are Ottoson, Company Relations. President Pursell, officials Vice Chief Vice Vogel, and Officer; President call Samuels, President-Operations; on are and Executive and Executive Jennifer Officer; the Chief Wade Herb Executive Financial Jay Vice President-Investor over turn Jay. the call to now I'll

Javan D. Ottoson

of you you, and you to David. Thank us. Good for all afternoon joining thank

XXXX execution was in the operational of quarter Our excellent. first

can major year. you all have slide made good we As see X, objectives on progress on our the for

will Our then will will and continue quarter so the today's debt to remainder net the in important our well pre-released sizable results we operations well be to guidance are you, financial outstanding the and then increase new results the of We our results. cash discuss success in for position cover deliver and I discussion Wade many flow other particular summarize close. highlights, and brief. of Wade? reducing numbers and for year, will Herb and items,

A. Wade Pursell

on Jay. two-year track we've cash Thanks, XXXX. positive on meaning start we and good targeted plan are in Yes, off progress second to great a be the half of for on to objectives made net the year, flow our

continuing achieving this up core to the by and efficiency portfolio. and are We performance, through high-margin capital production well growth,

operating in for from completed $XX.XX XX% metric, XX% increases that up We've up margin This the liquids of quarter. completed was XX% Looking nearly at Midland for last the cash by the up quarter metrics about was An plus production. Midland accounted can or million XX% from production accounted our driven Basin sales of big slide XXX% and XX% year-to-date. growth, over Boe, first favorable mix. asset was you our our was some year-over-year. The year-over-year. production total in operating flow margin success X, Oil $XXX and demonstrate Oil about per mix. up XX% see to-date. in important sequentially Basin quarter fourth production

of located in As Eagle to we our Ford assets Midland or producing programs. all June, Basin be expect

Importantly, a closings, have quarter debt to we billion. net reduced the for $X divestiture forma second around result, as pro

So, we made in net year step as change a you date. can see, have reduction debt to

by let's sheet billion the process times Speaking and XX% than Net year-end a billion redetermination million based to and X balance reserves. slide little completed of on look detail. just the XXXX. quarter-end. that, was end quarter-end facility balance including credit commitments Lender We move adjusted XX-month and should be borrowing at liquidity debt $X.X more our by at in EBITDAX to fell scheduled to $XXX more and the billion, trailing is increased base X Liquidity X.X April total undrawn. at times $X to cash below of and this remains our facility $X.X the for

be of The I'll debt we have other closed. that all absolute make once levels will considering the comment reducing is divestitures

best-hedged the remain hedging, continue of differential, we XX% we among where Permian hedged hedged have X, slide oil to to basis to companies and Moving are we year-end. to the through well basis Permian

Permian XXXX layered collars, swaps, natural including additional We basis collars. gas have on recently and oil hedges,

growth guidance the guidance We slide to quarter first capital activity for XX% unchanged plan provided is total the supports All of spend half reiterate guidance with points few I'll respect to midpoint, full the hedged assumes Permian XX% Boe the XX% in to basis. per the due half day. We half, models. are revised in production is the we're Production margin, very Boe, benefit XXXX spend XX.X to first XX% billion, primarily us the of flow growth $X.XX per operating year. We to of day operating which modified capital year. for And second growth for meet of quarter for of the half, the flow help to the XXX,XXX XXXX. for drilling proportion with the first targets slightly per of was asset Boe range and sales, well the roughly retained million performance details production a from hedged turn With significant now back month have assets Boe half or on around share, macro. in to to the deck over roughly first for expectations consistent first plus the of calibrate X, our to appendix. the million the and slide some year At Full-year to with beat results. expectations. one-third the pleased we as which XX.X short, adjust of in positions original at cost, the completion production your XXXX, well higher XXX,XXX in this In with EBITDAX last production, full-year cash this in implies a exceeding cash

to Now, over operations. let's the turn call to discuss Herb Vogel

Herbert S. Vogel

operational Jay's Thanks, excellent and it service outstanding execution partners. was by an Wade. echo highlight to remarks first quality, excellent rock results continue and that planning industry our I quarter. will Operationally, and employees

our growth sets production and cash therefore growth, first objectives. The flow meeting the margin foundation quarter for growth

executing are performing we plan. in track or on better our Importantly,

RockStar Let's results review achievements, shown slide first starting quarter X. in with well the

and reached intervals, per The in their outstanding. all wells the During and Lower IP per and Wolfcamp average was Results slide. this XX X,XXX rates, XX XX-day A three B of peak included were Spraberry. in wells peak shown IP all wells XX-day day the well, drilled quarter, Boe

half of the interval the new our spread these these completions shown As in or acreage by slide, either fully wells bounded or were wells on above much interval of or across map Note within position. same all that an were the below. new

same feet XX wells and Berlinda spaced section A enable the interval, the to equivalent XXX between Lumbergh, Whitaker Wolfcamp on wells in Wolfcamp the B were the of to per Ann, section. pads to located All North, at Spraberry wells equivalent interval. eight within per spacing, wells same wells were wells and Lower XXX-foot Guitar between

closer in plan A We directly area, in other. above are like Ann-Whitaker as the each wells result, they recently to production stratigraphically the Wolfcamp really to Berlinda a are they about north. acres and performance view the the to However, XXX acquired than

skepticism ago, Moving in of are about farther wells contours bit portion RockStar The feet the apart. Sabalo's drilled located of the mile economic and this a producing well. are our These at of wells our expectations the acreage. XXX was confirming about within a economics our A adding Fezzik Fezzik and east east, are quite success they take geologic Thumper there wells wells look of area, which in above of well are spaced great one examples inventory. year sweet-spot

Bankman a the the RockStar the at Moving Because previous XX,XXX-foot how section. these has XXX other equivalent wells are the to These doing our south feet, wells. to wells the geometry drilling somewhat are Bob of of average of leasehold per one the eight Wiley to and Slide relative XX previous lateral wells are Wiley on unique. average wells, has spaced Bob of wells, these while also X,XXX-foot lateral. a new XX shows

the serves see, performance, testing which employed see reference, we Sweetie Peck million-barrel two as even compared X frame tighter optimized with continue wells, the in of over generally can to curve exceptional a the at especially these equivalent peer to we spacing you that As type past from years.

nearby the Speaking oil. the our are wells X,XXX B were These day acreage. drill-to-earn in are Sweetie first four averaging in on net Boe are Spraberry. some XX% feet. wells, at Laterals Lower IP of X,XXX to of Peck two very the Wolfcamp two area, wells X,XXX with the rates during good completed quarter, we Two per XX-day and

give to status XX. operational a Next, on update you me activity, our let slide brief turning

at We Basin, in have and at rigs Midland Peck. Sweetie eight operating the one RockStar nine super-spec including

the is RockStar plan, drilling currently water rigs disposal the one of be in original wells. will Per May. dropped rig One

excellent fleets. stages a running our fleets day. terms pumped currently are logistics pace and at in of And five thanks execution, to frac per record are planning, running We frac

we and complete the in the result, quarter, second of previously net during likely still May will planned we'll about talked the program reported, online drop brought for in one in previously be spread acreage. XX as complete our We've materially maximize Midland Basin late co-development importance most year. wells to contribute quarter not to plan quarter. a As of will frac will the and the to which, the We of third until our value production the

expand wells, can by you and months by into this months rapid brought intervals: large three have us some that results production then that in multiple watch our rigs fracture-stimulated dedicated simultaneously This in B. activity A while Lower will co-development ahead, production Spraberry, to to will is neighboring are the on will few scope bring and very Wolfcamp developments this multiple frac multiple This quarter-to-quarter. and other while drilled means lumpy areas spreads, lead for pad encompass Clearly, to Looking to new simultaneously pads. of succession. some in co-development,

this fully capital recovery maximize inventory will we However, in expect manner drilling and efficiency. co-development efficiency,

Now, let's turn to Ford. the Eagle slide XX in

leasehold our we inventory Here, and the ways. future value on drilling in of enhancing undeveloped concentrating are three

our returns. we increase First, development extending are Eagle and on Ford laterals up-spacing to wells

years Ford within from We in have we when ago, from XXX and feet where as were the impact and each co-developing drilled Lower Ford. changed while tight Spacing or our a offset Eagle up-spaced. data operators zone we some of own XXX-foot few value from have seen positive Eagle who as the Upper has spacing

a minimum X,XXX to Ford, XXX the Our wells Eagle XXXX Ford. XXX and the Eagle spaced includes feet feet Lower in program at in of Upper

our efficiency the stimulation completion JV to to we Second, about design permanent third, already Not on our intervals incrementally improvements. see really pleased designs. optic Operationally, that And is where category about me of this and this turn proud during relentless our to improving quarter. benefit installation, the Execution fiber performance. completion specifics was able at improved informed be how area. plan. from exceeding deliver we or The this been performance it the outstanding. in the are us only just which more recently they call teams running are our has On CapEx significantly XXX% last quarter, complete we changes deployed expect production plan one are the fleet completion and our In original first-ever tell Ford, second increase additional with nine summary, will capital fracture both installed and we point, two with covering to activity is JV the Ford influenced are In our on is direct activity net Eagle activity. and results process, let ability rigs inventory. and design would in to Jay. gains I every we incremental back in the they how that, production driving stage-by-stage have Eagle simply assessing couldn't track of frac been capital are realized With have flowback have what meeting are are over wells. us future now,

Javan D. Ottoson

Well, thanks, Herb.

clear all of are with I or thank first had taking good for quarter think to our look objectives questions year. it's a you very on your We ahead tomorrow time forward and track that the your schedule and attention. we of we for and

SM Energy (SM) 4 May 182018 Q1 Earnings call transcript