SM - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SM Energy Q3 2020 Financial and Operating Results Q&A Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker, Jennifer Samuels, Vice President of Investor Relations. Please go ahead.

Jennifer Samuels

Jacqueline. you, Thank and everyone, for us. joining Good thank morning, you

risks remind we plans, results may First, statements and allow or Form forward-looking to IR that in quickly our about to XX-Q, are involve section These the performance. our the me differ discuss XQ materially our in results you our statements Please regarding forward-looking statements Factors future this filed may from that refer cause assumptions statements. expressed actual expectations was implied posted Risk release, which to presentation the morning, forward-looking of which the the our website. cautionary information of and earnings all about to

and may Our information of measures of Reconciliation provided we most evaluating those and include measures financial earnings to understanding non-GAAP presentation. comparable these non-GAAP in other our discussion and discussion our GAAP measures release the performance. believe today are that metrics directly about in are useful IR

your and our is traveling; answer this he CFO, Pursell; Wade to morning, and Herb while Ottoson, President Vogel. and CEO, who joining remotely EVP questions Here COO, is us Jay

pleasure Jay's Before me be day that back I operator, that the want as for with say, be missed many will turn you been this I announced tremendous we to CEO has to to will speak Jay, a next morning saying week. I for it last in you. it and work

next Board the the remain year. he Fortunately, on until will

So operator. I'll on everyone, pass it today. we shall go to the easy back him that, With

Operator

question KeyBanc. Instructions] Dechert [Operator from first Your Steven from you. Thank comes

Your line is open.

Steven Dechert

Hey.

from XXXX. the XXXX production in the bit more down Could little you later permeability on they Thanks. on guidance. around complete number coming to XQ plan of XQ it's maybe get in XXXX? maybe the hoping a quarter? Just give Looks like XQ Are XX% detail

Herbert Vogel

this Herb. get that Steve, one. Okay. I'll is

days up by production start just to And new on relative on where we we let out just per year, the efficiency probably a of six which this the that Also efficient wind volume completing October we most turn few the in side getting also end into know XQ early been year there. we ultimately guidance, intrusive zone followed quarter, you is read us We line consuming depends may every strong. than are rather the too on especially few the into for more pad well assumptions. And level of significantly saying much have we a wells production never at looking that quite noticing who’ve So happens XQ our put guidance bake new that efficient me you example. of shouldn't conclusions wells. that production less

that XX it's And two or So program, are working around easily. will our move push help back there some bring are things, so intentionally on the your fairly the at year. around we'll you? that more specific and things can things of minus things will come plus that there but completed are DUCs but the online, actually Does can question, so program, because would More we that that’s online. XX wells that have be end accelerate can

Steven Dechert

Yes. a That's just follow-up. And great. as

production WTI, XXXX outlook oil Just Thanks. a this last double-digit reevaluate maybe growth couple $XX of with to all? the has is guys to wanted in down at you around price to ask, cause barrel for days oil that

Herbert Vogel

our we'll December, call price Right early and react out starting short-term it. lay to complete in January we a typically go budget, on strip now, oil to November, work We and the don't fluctuation. use there, from which will we're in we to Steve, plan. make

at all. not now right would influence fluctuations us So

Steven Dechert

Okay. Great. Thanks.

Wade Pursell

will is add. This I Wade.

aware, do, you're especially upcoming the typically we As as year. probably to hedge continuing we’ve been

next to the ballpark in oil compared we've somewhere think probably I two of year’s got ballpark. of thirds

Steven Dechert

That's Okay. great you. additional detail. Awesome. Thank

Wade Pursell

Thanks.

Operator

question Michael next from Stifel. Your from Scialla comes

Your line open. is

Michael Scialla

Yes. question. pleasure over the with a well. It's Jennifer's sentiments really to I'd Jay follow-on as echo Jay like to the the to last years. working to Thanks. And I want

into stay there – in [indiscernible] planning kind – here process, go lowest prices Slide at breakeven have you XX-month if the your looking of As a I’d strip. oil in high-XXs. and your XX, breakeven a you the the conjunction you it’s but show with with say in Looks the when price stay plan at or on a just Any reducing you maybe DUC bit, little strip plan year. prices all three the like running going next to on here inventory? even play introducing you be and there down it's thoughts the focus the if would consider rigs is

Herbert Vogel

working we're – we about take Michael, really as on XXXX. Well, XXXX,

generating look So that were really flow. free at the metrics cash we

And We’re time. our making working over pay sure absolute down leverage debt. to we're drops

doing So have next we'll going that price relatively then are got, obviously And there. costs Jay what make [indiscernible] we be economics. the hurdle be at that also. look when return of not could in two-thirds on year helps we've January strip breakeven our oil things we're And our aren't program hedge and looking determination. mentioned, high that hurdles And as the like we to down just coming

Michael Scialla

Great.

of oil the that Okay. those that than chance Permian how year. looks how oil. any many this South a curious chalk And there's are of just three looking DUCs – it – chalk and many at in you lower program XX XX the Texas, last like your was they your have that larger have breakeven I'm in portion actually price a wells, average

Herbert Vogel

in underway in we picked we'll Permian, we many prices are as We lock So about that that's completions And in and one. right of going program look we'll Texas. Permian with rigs locked Obviously because where the is at more Michael, looking there in be we'll haven't the three got have have and and how later have, the like performance make DUCs what Exactly scenarios we determination. budget scenarios that – in that of now. on process, talked well into many the that several But year. both we what the we But we to which get yet. before and how South is activity we had running. levels different the

I really really see really with think really but particular, drilling Chalk right. We're Chalk we're we to Austin prices Austin gas now. wells in pleased and some on breakevens we're seeing. drop those DUCs, with what you're pleased have high those do And is right

Michael Scialla

they'd those are last Herb are you it to many and those of chalk Ford actually the DUCs Can say think three comparable wells. you or would – how is Eagle wells primarily be XX

Herbert Vogel

be Eagle we’re number Ford Austin many not for XXXX. to right completing because planning know not is drilling them. I more just DUCs, Austin all there a least But be got completions obviously we've complete now. of out the that's the six, But necessarily we I and XXXX want but Chalk, DUCs number don't of more at know but should finished in I So a don't I to many to got there it's Chalk, them. we're them know – put couple how

So that those six. to add would

for not of be it's yes, So That's going half to sure. more those than DUCs.

Michael Scialla

Thank Okay. you.

Operator

Gail next Nicholson Stephens. comes from Your question from

open. is Your line

Gail Nicholson

real retirement. Good the morning, on couple last the you with over Jay. It years. pleasure was a working of Congrats

XXXX lowered kind and XQ guys of savings the think of at LOE how much XXXX environment, LOE, achieved you XXXX you that full-year is that the When look retainable? Looking in you guide. into you

Herbert Vogel

do. great LOE we lower to to that All has costs We embed Herb how point again. many because on out those been It's structural is be we've great side. this workovers were swing our changes plus. [indiscernible] going there. Gail, doing The to doing come is

justify low more in So harder justify a prices price to you workovers. as doing then environment, workovers can it's improve,

that's [indiscernible], with to So be LOE. little we’ll a that wind up LOE always Texas a the bit swing. South produced higher Permian little bit And we of from the because more reduces also going a

So come we that we'll yet haven't XXXX for budget I given think, out we and process. of do when guidance

Gail Nicholson

you and to also a then in entails about testing that you're last prepared there? what trying you details Can remarks, achieve some And Great. the on night design. what completion cost just provide higher Okay. talked

Herbert Vogel

the we XXXX. we little for on where but operators completion which bake that, production the if We’ve then budget that using a that's and see return into And the would incremental is seen other some case look costly, may some significant. more our enhance and the designs, spend

have enhancements, make but those or we an have let's them wait And and to may at we you same to thinking in number you may on we least let's history production ourselves, good the there. want as the months completions say could place. may to make are assessment that this. how to better, as we fewer And before quite test of Or we that or those we say, want we put may six some performance XX performed – So performed see but not well call. have

on put get done them haven't budget where we'll see we So them yet those. yet, together the we and to

Gail Nicholson

Okay. you. Great. Thank

Operator

Gabe [Operator Instructions] comes question next Daoud Your Cowen. from from

Your line is open.

Gabriel Daoud

Jay and dryer Eagle remarks night small-scale your of potential on retirement. the everyone, if was and for bit Good that Hey. prepared morning, I a you portion there, be elaborate a a on indicated maybe guess, Ford could last more little could I JV congrats, the wondering asset. your

what So just could curious if look little the bit talk like? potential timing structure about a you or could maybe

Javan Ottoson

Gabe. Sure,

And for we results it's recent improving to quite getting it's of talking others attention and been and a some really of us and for NGL combination talked we came quite gas the well natural aware. to this as So prices. that parties, awhile, third had outlook just to bit that great you're and

eye further at just any We So it plans discussion, guidance but time. don't but well, on we one have in an or really if announcement, locked issue out. yet. an I it keep do don't can't any of we’ll our we comment probably And this have in

Gabriel Daoud

maybe Okay. Understood. for that. Thanks follow-up. a just And

cash mentioned than based on spend Could And high a XXXX? remarks, elaborate level for more you'd would essentially assumes be I little goalposts bit XXXX flow XXXX. think you your pricing. that maybe a mentioned lower those You growing the just in also had free in on that to prepared capital

Wade Pursell

cash absolute Yes. That's lot just next out we'll about to we but and continue where flow XXXX is high we'll we're focused because flow we’ll production, And which obviously XXXX, with of true. XXXX reduction things come do for looking in on, weeks. as We've through what cash XXXX, several free prices. look we things generate generation, see free debt for And a strip XXXX level at the over a budget – leverage. talked we're we get to see is of the

Javan Ottoson

not current we costs. costs It's assuming The go are that [indiscernible] down. but is deflation,

Wade Pursell

cost. Current Yes.

Gabriel Daoud

Great. Thank you, guys.

Operator

from question Mike from next comes Stifel. Your Scialla

Your open. line is

Michael Scialla

add can for want the Yes. them client stands Can remarks? the to foresee company you color you banks? base. what said your it surprises on the just request say the I maintain follow-up. don't now? asked to prepared you any in where in your any This remarks you comments to You that Or prepared made you from the Wade, redetermination. just is

Wade Pursell

Sure, the Mike. that can really something in expect are. area All of I we is say you should where

what is area. Anything, think how it's want I going I remarks. But process surprised your we're think resilient should specific testament price I in I the any are, be should since can don't think where the give I to numbers right those I assets that would and be it don't say through to and now. say. the frankly, a they you is

Michael Scialla

helpful. that plan. Herb, better XXXX And give number you've the cost you that haven't foot, sense contemplated intensity obviously, you've down? like that pushed the can said in that your that much how you you it's but changes into other seeing I’m or reduction. specifically That's on if And think per And XXX included to you it's the in you just than side, well-designed or sustainable, any slide frac better? put yet, lower it any contributed even of any it been though wondering changes taken said

Herbert Vogel

when a more than the low get Michael, combination better we've and really we bit we just it's especially best may in you've But a be let's at any say, not worse our design, tested production really peers. with it. some look numbers do of peers on mean, going a just to strong execution we're deflation, we seen put little then as and to I part, where completion things

finalized for why just and really execution, cost. there. or a yet it's we a to really little deflations contributes now. said – efficiencies, the going assumption lower So down – less comes use to And we're haven't evaluating bit for what right that's so do our that's We're that's to to we XXXX, XXX good but

Michael Scialla

Got it.

fourth could you production do maintenance have for you just you XXXX? the Where at oil if level. quarter if heading Okay. hope mentioned, And that XXXX. aren't you Herb, want into if you would of say, just XXXX? what production to sort prices decline Any into maintain on see what you to capital be idea heading base spend And strong need there, do you what

Herbert Vogel

Yes.

Permian now South base the So on was decline about XX% and year Texas. XX% ago, on it's a

was now, around think that I somewhere running it XX%, XX% in probably range.

it we around new so XXX on, as you've as from how big And is many XXXX, drops go And somewhat on have. seen generally well we've year. which you completions, depending this a said completions uptick

production the growth. to strong contributes that So

do have pricing, you've have make different, that which of something but fact anything, our flexibility we in strip choose commodity strip materially plan. we at We for if to saw did is That's prices, change scenarios that the and adjusted what can the here. basis. We don't add have current pricing. seen kind program we XQ. We we and in We our in

prices different significantly appropriately. see we in adjust January, we As strip

Michael Scialla

Okay.

compete on. one well would area. based in I now. there. of realized me. area And you're last you you sense some make What anything that that price to assume – mentioned, curious a Wade, Ford for done somebody able follow-up capital? that's you approaching need dry did there is just that think to in what you seeing Eagle and say of there just yet, kind some other seeing but on you're right performance to operators want area active I haven't I gas operators, you for significant

Wade Pursell

Yes.

field significantly the as if JV, in to is even condensate move is want bit the it those rich, obviously, that would new It's depending to So a there's And of North. in liquid NGL on the partner JV and content. through the the the economic then and quite where that vary pursue. that's economics you

So they vary quite a bit.

the they've numbers you Denver, I what for they think the people Eagle see good when breakevens that strip has And can breakeven the would at happening. that at you're there and current that look if I seeing look return you make got Ford out you that's expect. West think can

activity you So operators. can Eagle other see Ford up from picking Western

of on focused response are trying market dry gas We to the We're on bunch a focused not Arkansas. in potential short-term produce pricing. to

Michael Scialla

Thank it. you. Got

Operator

for back There I are no and time. at now this the turn COO closing to Vogel, President will over Herb further questions remarks. call

Herbert Vogel

Thank Okay. you, Jacqueline.

an with seeing status as that's take Jay the a leadership. company is health about Energy we Jay individual today and truly He his current work the our the where to initiated and and integrity leader So and I'd over our COVID led safety to operator the for enormous SM like a action call that's many his to ensure testament best cared with the just to wish tier passionate employees of this turn a He outstanding and moment And Jay. live, and years the nearly thank to communities And to doubt without top assets. and to of leadership with very during in taken of that, the visible we're contributions sixth him is the He supporting for contractors. CEO. and been long, The XX during and the operate. of results are premier enjoyable truly success retirement. time. healthy, his known I'll Personally, years. We I've transformation highest

Javan Ottoson

of appreciate Herb. you our management all with Well how I well. mixed leadership. I I want thank these of phone, you say It's with work future extremely the much on to Herb’s company had about the always set all excited get last the analysts I've say to of opportunity you, as will days. few the and I'm the emotions a team on

company. country going for leader, and with think hope really he's a times be our better the I business to obviously ahead. our certainly person I And I for – industry well terrific fantastic a he's and

will So and Thank for the look all over very today. you to success words to Jennifer, kind your I best. wish forward you your you.

Jennifer Samuels

call. Thank That's very the of the end you much.

Operator

gentlemen, and and concludes may you participating this for Thank disconnect. today's call. Ladies conference you now

SM Energy (SM) 30 Oct 202020 Q3 Earnings call transcript