SM - Earnings call transcript Q3 2018

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Operator

Good morning. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the SM Energy Q3 2018 Q&A Conference Call. All lines have been placed on mute to prevent any background noise. After the prepared remarks, there will be a question-and-answer session. Vice Relations, Samuels, your may Jennifer conference. Instructions] President, you Investor begin [Operator

Jennifer Samuels

and joining you a morning, thank Good everyone, for and discussion. live answer us question for today

our the I all which growth provides great presentation time trajectory. press the of release, behind and to materials, think all pre-recorded had go quarter you've details and call through solid

In addition, we filed our XX-Q morning. this

results risks. may measure or or we refer future website, to most believe making expectations, forward-looking presentation differ we remind performance. to risks IR Pursell, materially presentation. in Jay. the questions. the Please cause measures you In reference it are to that the with these will here from to results Form for be all the XX-K IR that will and results involve get statements. the Jay posted implied plans, expressed useful that to release for answer our And certain Reconciliation today's I in further release, forward-looking discussion our we to over and for earnings measures Vogel our are These Wade started earnings GAAP before I'll regarding that of evaluating those our are discussion Herb Ottoson, always, turn in our As financial statements statements actual quarter of of comparable the provided non-GAAP performance. assumptions directly your we may

Jay Ottoson

morning, Good Jennifer. thank all Thanks, and you attending. for everyone

very we today. any to time reason released I have think see the spend materials comprehensive and don't were I we more

questions. and ahead So for line just Tiffany, why go you the don't open

Operator

Capital of first Brad Your question the Instructions] comes Heffern with line RBC Markets. [Operator from

open. is line Your

Brad Heffern

everyone. Good morning, Hey.

for laterals Permian. foot your development XX about suitable XX,XXX X of you about in or versus is the getting talk talked couple first much of how mile? You XX,XXX the acreage Can down foot

Herbert Vogel

go Yeah, Brad, let this me Eagle first. Herb. Ford is

particularly Eagle laterals in even of there's for So the and the quite XX,XXX area. room in foot Ford, longer a bit Western

working this guess, and - and inventory in some the publish a don't out February. to we there's results I have number fall n there the So be we're going of

the Permian, the driven well existing the it's geometry. On really lease by in

areas there's the XX,XXX location. plus and little will and to depend between We're a going wells where few So there's bit out on XX,XXX optimal and wells. XX,XXX figure foot that quite a area

So basically, interval. location the and the

So there. I don't a have number

Brad Heffern

how I guess lines? weather then And of just issues of the terms quarter, sort is anything much of that And Thanks. know, and stacks how onetime going fourth temporary delays Okay. the barrels ramp you forward in along then infrastructure much on the that X.X or in those the of million impact. drilling of

Herbert Vogel

great question. that's Yeah, Okay.

for bit up. Let so September me I in of in a first rainfall, the time rain Big on spend were there question because a On of you this visual. picture area I'll being everywhere. through, of Willa water or was same at by wound in connecting wells and for gathering open up a standing that quite lot and water and and for a infrastructure. put to ground would quite give got come were Hurricane trenches time little and the saturated had X can bit we you place about figured this with coming lines of inches Spring plus we That followed

water can't you operations out for to those the of to our water Obviously, subside. pump or So forever be and it's very a of wait to and choices attempt to were lot inefficient. our trenches successful, pump continue

to and lines defer that So of we basically the delaying of led deferral completion. elected a to

you through picture what So happens. trucks it's Also muddy roads. hard can to move

XQ you're drop. entire this what schedule, compared differs moves we before why so is our deferral to at the that can how and to had production everything that's you So a it picture in so really look out seeing

a So as then. events event, so viewed are, temporary it we temporary one as rainfall that's a

the aspect. party The other third -

together So gas expect the we go for gathering lot there that's a successful. tying in to that removal back and when issues a on the at to some that was year. end there for been other of so come of - responded plants issue of defers there's our we very event. plant us the of the That, gathering majeure force some We system, plant where a around entire But develop of still production. by then period first, merely time our of operators are system could that plant all

one one On short, haul with but was our the really of another takeaway. and that just pipeline, purchasers takeaway, long that's of relatively oil our event that's their

production. that event, on but the results temporary so is this well our that of is a seen But performance of temporary. upshot it from put fewer is itself is great, quarter than the problem actually better So expected that some you've up but completions, with third we wound defers it completions,

there the of I could it early is the make things There XXX,XXX estimate. out go it thought to things our up. of There that was reasonable wanted but was that some as for that go estimate make quarter. kind we that the that's down, week. could best a picture lay So some estimate And that this for barrel is

Jay Ottoson

completion it's third that you stark will deferred a barrels quarter. happen it is add to the Yeah. do you XXX,XXX those ramp but than of for definitely good really comment, just to shouldn't the Brad, we I'll barrels, take just happen, our later portion schedule means We is which little going a know, make a what expected. and

that's make having 'XX we'll but push the our tend will year to the because be We in And rainfall. it impact. program, essentially the rate will defer a later in as just of few a up result. that program So an able to the overall consequence of whole weeks have volumes these a think to

want difficult to we they've great I make I of to changes this of job, working the and think sure us Really. control keep that, anyway schedule company. a regrettable. in job our nothing yet, an I a it's it's It's Unfortunately done close this conditions just say we value timing. So have to working as but haven't to could, tremendous weather people the developed as here done issue but all of just, again through that

Brad Heffern

appreciate all I color… the

Herbert Vogel

Its just later. a bit little fourth quarter,

Jay Ottoson

- completions number just than expected. we of same in Yeah, period later

Operator

[Operator Instructions] Holt. Your next question comes Tudor, Pickering, line from the Oliver with Huang of

Your open. is line

Oliver Huang

Good morning.

You all operated night. remarks on trades land bolt-on prepared enabling and and working mentioned your interest laterals are having last units closed increasing in several longer sectional acreage

wondering opportunity that your we've Just peers? given just from a go recent is forward a how thinking corporate M&A of the and seen transactions about basis also on on the basis are you all here what some

Jay Ottoson

a that's great question. Yeah,

position. been this, and all really We - in the that quart land give doing have group our up I'll our credit have successful for trades

watched started. had a then I position about trades, grow think lot to And those to still you as can others, probably the those do not well. there's list done that when over some of of number our actually and longer. that there And a more opportunities big that tackle if but time some of a still out talk we've on most is see as map, we we is ones that a you we number maps up our quart of much first, ones, think of we smaller ones a many of there. large There's

pushing now almost in XX,XXX program our all basically feet, earlier, than XX,XXX indicated is greater some areas. Herb As

And of of and deal. see a With work rationales been to every have know, flurry various for been been a bit So lot you done there to very, we've and it's it's M&A, little respect the they're different. certainly successful. there very a deals interesting all

but buy perspective is understand generally perspectives. of that let So from the ours for of competitive the side a quality. really me business a believe source do commodity most address it - scale like we us, From two in advantage asset value we do

in a So in particular open would case better. transactions business bigger. particular just make any that pressure ideas that get certainly do to to under But feel way would we're we dilutive any to about our deal our be don't

at at from things look look at and perspective. - of we lot we so a look it that And

is top differential assets we a years. carefully accelerate I frankly plan, or evaluate will for know On said, increase the would our company we're meaningfully lot might shareholders few value that every we're that operator value next board our sale extremely and that proposals executing with that tier day a create believe side, With of that well that our sell and the premier arguably, the really over for realization.

Oliver Huang

XXXX? improving Okay, of XXXX optimization you kind been Eagle on kind perfect. JV And is extend on JV design the Ford, SM, of over into about the I to of it guess to how the out switching the just But and any that far, are beneficial wondering there all thus thinking beyond program just if wells. your towards flexibility like seems has

Jay Ottoson

really another that's Yeah, good question.

plus wrapping just and X X the the on D&C We're all activities X Phase and completion this were Phase been come to we're for wells we three our phase the XX have of quarter. more So other parties DUC they'll beneficial in relationship bring been improving which up on wells, what have that has and of we've returns. learned JV. JV. midst has with the It successful in second negotiating a for great we And

the X, we talk CapEx of it in to because sure I'm affect XXXX talk obviously Eagle details give I and the about guidance our it we're be the our and Phase of Ford. So we'll in program when but negotiation about more in able spend can't XXXX midst will

Oliver Huang

great. you. Thank Okay,

Operator

Your Michael next question comes line of McAllister with the from MUFG.

Your line open. is

Michael McAllister

to marketing cash guys oil free Thanks. SMs Thank get approach it as about you well? talk to as a whether hedging? very Can and be flow helpful very you closer much. any NGLs be And comments cash and about positive would flow hopefully you neutrality

Wade Pursell

hedging this question. Hey, the address Wade. I'll

EBITDAX. tied we're locking in Our leverage protecting the hedging we're is strategy really - and to

flow goes predictable heading that it's see next in areas. leverage the down twos know, we going of So you we year lower the you our you're approach as getting and that to and metrics neutrality that told cash end getting leverage and toward we as down

seeing You know, area two year. more probably you just know a you you production as hedge XX% tell you would you a I be us that approach as like approach would that of times,

lower to definitely is short question. So your answer the

Jay Ottoson

the side, ethane of reject to are. on or and on the ethane ethane the And ability to first that's methane on from election, part have we marketing that's capture and then volumes what monthly Eagle prices by the NGLs, driven Ford our

long ethane do mode in clearly continue capture to financially we're now so. as and it's right will as So beneficial

what the past On us that. continue and got us do multiple purchasers to to marketing, firm we're successful been other in gas, takeaway that commit that aspects, a multiple capacity we'll done have with we and that's continuing the oil, takeaway with and we've strategy for they've

Michael McAllister

then helpful. the right. And - All that's to hedging. back to Great, going

that would any that? cash would balance that and almost attack be directive free value to the create flow So down go sheet through

Jay Ottoson

opportunity. at given could is great debt. you we have accelerate it have It's point. when thing say at certainly ever this. asking is Ford or flow, our three so this debt you or for point is opportunities, you you callable cash thanks the all debt we live Permian our to and And debt, - for and in use my debt down Actually bias if either it pay have call where about really some that great a that - it's Well, free that Eagle to The can great know, it's great reduction. leverage - at activity

some callable have We is now. that

be one we enhance our rate, November essentially share per more that debt in adjusted and this will to be flow opportunity that use cash - that callable growth the will to Some care have at cash. we most of we most low about the metric the think risk standpoint the from shareholders very the about should and that using is a care which

moving to a going down just balance it's that's certainly and way in So from And a the that's sheet their value that debt our we great it's strategy of think intent. to side shareholders the a equity. forward way

Michael McAllister

great. right, very you much. All Thank

Operator

back I Ottoson, will over remarks. for CEO now Mr. closing Jay conference the turn to

Jay Ottoson

you the we thank morning this again interest have hope pleasant your you Well, company Thank and you. a in and for attendance your day.

Operator

This concludes conference today's call.

disconnect. now may You

SM Energy (SM) 2 Nov 182018 Q3 Earnings call transcript