SM - Earnings call transcript Q4 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. And welcome to SM Energy's Q4 2020 Financial and Operating Results Question-and-Answer Session. [Operator Instructions] I'd now turn the conference over to your speaker today Jennifer Samuels, Vice President, Investor Relations. Thank you. Please go ahead Ms. Samuels.

Jennifer Samuels

morning you're thank all Good us. for Julianne. hope I warm you, everyone you and joining Thank and safe.

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

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

to morning and questions remarks. now for and opening it Wade CFO to President this I turn Pursell. some are your EVP and Vogel Herb a Herb? Herb Vogel CEO, Here answer will

Herb Vogel

morning Energy. Jennifer. and for you, in you SM Good Thank interest your thank

water, the Before for by affected many to communities. heat words without community I to without homes storms. the With still had to our that Energy not days, millions would opening and up say is your many these questions, power, Texas call have like a few SM of certainly Texans

our keeping open, and night moving natural keep was generation local homes communities. was doing and SM safety regional our to power Texas, and our we enabling health gas instrumental what can and the on support South plant as in plant people's in grateful gas many processing is heated. the them of focus Our Monday In employees

certain speak responding and their best quarter continue our to of weather-related first efforts. with production, terms In is team implications issues our as we

quantifying and days. coming the impact over assessing will We be the

me let turn Julianne it to for to open back up Now, questions.

Operator

come Thank from Capital you. Please Markets. will go [Operator RBC from Hanold question Scott Instructions] Your ahead. first

open. is line Your

Scott Hanold

morning. Thanks. Good

Herb Vogel

Morning.

Scott Hanold

Can little into I talked Chalk a color Chalk -- ask and about you bit and us you or about five before that happened Ford some wells has of Austin you deferral? there? give the And in insight wellbore the Austin happened what Can this either before? what Eagle issues those

Herb Vogel

pads to acreage issues pad, Herb. northwestern at Chalk, so that their newly had and Scott, I'll completed all. issue just yet. get The each portion that developed of our nothing it's we And the had in Chalk just some this Yes, just to wells drilled on AusChalk casing here. five -- above a the other up close the really that briefly, were on two Austin is wells one sections not to vertical been Reservoir Austin related three on localized

got to it of on type we running with they've in to sort us companies and success service problem. and pipe basically Fortunately, run pipe the the fix had method

three pre-drill our per X is case, to five to and million XX five it of So, five possibly planning, what is out hey, we which said, we'd of million, total out did about worst in just have X about of a the million comes exposure we wells wells, well.

justify -- fourth was -- that was that the reason quarter. production up it the So just because in we bring to CapEx important thought the the for

XXX of had nothing we interval wells, of and none. terms long-term, but problem before. with through only -- impact, then in -- So really drilled and we've And terms one this in

So, this a is issue local there.

Scott Hanold

whatnot? -- happened was more do or it that was issue a geology was mistake issue more there was that it service more guess, than operational local of with -- or clarify, the something it Okay. an side? it just And when that of whether was to something down geology on you to say But I a it issue, was in going -- something is or it

Herb Vogel

it's casing No, a issue.

And right where make is, section. have through area sure problem it's run we have that we through -- local just we can and the and so integrity to quite

Wade Pursell

Not geology.

Herb Vogel

That’s not geology

Scott Hanold

Not geology. it. Got

Understood. Okay.

Do strong good of and a look a And so sort then of high your of contribution more obviously want a just is part more you're range. to is based and Chalk in Permian the -- Austin it; great my budget do allocating thought the costs follow-up the color on next pretty returns is you us move little get just can you bit bit there in stay in obviously to year delineation within or and and you there, question performance you like the give performance continue it's to solid. well think really and little your level

Herb Vogel

wanting how reserves. see these Scott, for of with Well, an of what our competitive first fully are what can all, and with to it Austin and we the is can well do demonstrate do our wells inventory and co-developments Chalk element there. can And there with our it Permian

component there the program, of there's also. of XXXX component delineation So, there's a a in development in

Scott Hanold

Thanks. Understood.

Operator

Leo next ahead, KeyBanc. Please go Your from Mariani your open. from comes line question is

Leo Mariani

indication in that to with, that. in any point in know disruptions access, you us point so you about based you're at on Hey, downtime just the year full came Texas in weather the guys. your and to of just guide? there quarter already prepared the significant final the a XXXX disruptions sense just the that related that I I South time I out Permian answer. experiencing this to XXXX contemplate tough that But probably clarify no could guess got is on the guidance you any first kind wanted comments. question if out this have tell And does was just

Herb Vogel

a it -- have well start last we on. really quarter into than you'll we of be any the baked then it's So, with Leo can impacts bring first. first question me sort rather back but estimates when weather-related up impact, let Yes, and our getting wind deferral not --

answer So, you are trucks briefly so the -- shortly sand in. is really get problems, roads can't

shut So, our frac operations are down.

of you down a then while, no little Certain running have of rely up them of shut there is pumps most but And rigs generally production that down to are electricity, production, And flow there's affects now. them downstream when for compressors. that just running. electricity doesn't long basically shut everything production. can on in terms Our where and impacts are as as and

that on that helps So, Leo one?

Leo Mariani

helps. Texas And problem, it's bit? a South totally trying definitely part last West just Texas, was this little a of in the that just Yes, or that to is unaffected South that again, Texas, isolate

Herb Vogel

South see we're deferral significant, but it's don't we'll able really. what and seem as back, to look the impacts to severe, we're past impact though come wells once be with to problems even is is, some everything an Texas, this there's estimate, in bad make simply at these the we're short-term going No, then shut event, weather we a but and when going

Leo Mariani

Right.

Okay. if Well, kind to respect first the kind higher, for that's I certainly numbers, bit here, and then a definitely CapEx annualize full-year quarter CapEx it year budget. with the saw was And the just little the we looks of that of helpful. plan like your

plan to tell me as what in to wanted there the weighted kind can that? of XXXX more activity of you on is on sense, can kind at Just half get a have CapEx look a plan,

Herb Vogel

year. loading end original had Yes, to front of plan first the the half Leo, the

but was And obviously major, end right frac not reduces loading. So, there shut our spreads spending that yes, down, with front now CapEx that now.

over so event this we don't know is wind where with. we And exactly up until

Leo Mariani

No, that sense. makes it. Got

delineation Texas or you here South at doing? a The clearly, were point, very on the asset. at of about guys is something I much ago, asset potential follow-up Just some you see now what company, a in very as because quick you're obviously, so to but you previously, asked was strong. element returns the divestment, sort core an the talking Do were of look know question this year there's

So, of inventory foundational, see you that's drill divestment kind more table as something years. kind this really can for it's piece on of and we off the a

Herb Vogel

little so the XXXX, in code a the there. less the in Yes, thing Leo, uncracked more key Austin really down we're late is Chalk bit or

that that So, found our XXXX, were and competitive Permian. with in wells improved with we wells on fully the and confirm then were we the drilled they perspective that are

combination I development, inventory. in And and with Permian extent competitive when delineate really returns, areas in said then the of nature terms where development expand the have at of But delineation of be asset. we to looking very continue we're the it's So, great we returns could that'll it. a the and of core a the know determine to

Leo Mariani

Okay. Thank you.

Operator

from question is ahead, Jayaram next Please comes JPMorgan. Arun your line Your open. go from

Arun Jayaram

should plus -- XXXX around about charts what But of we the happens to plan plan thoughts plus if cash we you to BOEs Good you could always. production rates? kind flow, about provided should and some just free about the a hold flat, think thoughts I XXXX how be that designed reinvestment sheet wanted on and Yes. is basis, one thinking the as thinking give on long-term I'm Herb how to some oil balance -- the XXXX obviously, morning. on us and some see

Herb Vogel

our that our returns we so the you quality strong, are was assets see Yes, Arun, outperforming. was is bass keeps thought good. very the of clear quite what And production

but don't transformation realize quality to rate. to could with So, the growing last this with people it over you're really that's now place when three taking reinvestment assets, results less of a it, we than we really look keep single-digit starting in flat of production see I years. to four our at XX% And the think our

Arun Jayaram

it. it. Got Got

the rate reinvestment over So, the longer growth term, single-digit opportunities long-term? type and flat

Herb Vogel

Exactly.

Arun Jayaram

completions, in kind higher question drilled, In completions you it. drilled XX South DUCs, in or of -- housekeeping should pulling kind Texas, One kind some Got XX, the they Midland, this as on of kind in building Got down model? XXXX, you're XXXX a are a term wells just DUCs. wells about a to mix, think a some know, it. South year think of about, we of, mix little so longer of we on XX XX bit anticipate is, Texas,

Herb Vogel

the terms capital everything and out multiple with and Texas much same way. the of frankly, financials we get, returns the and Arun, level, change allocation we panning can we we to South that the asset Well, Permian in can run pretty scenarios, get get and the we between

of get the results we kind end And that bottom-line. the to same and can is so the two mix between

one the so, this, scenario someone be other. variation that percentage, in using one case will for And oil plan, and the this we're only here to

Arun Jayaram

Got it. Got it.

Okay. All Herb. a lot Thanks right.

Herb Vogel

bet. You

Operator

from line Your Goldman [Indiscernible] comes go Carl next your ahead, question Sachs. open. from Please is

Unidentified Analyst

maybe Hi, benefit Thanks on be optimal is the one then flexibility for what or really last regular this capital want one had interest balance Question there much savings secondly, of very a bonds. bonds bank relative year, forward. I'd focuses middle adding time. cost on the more would is and discussions the think I nice run to debt way structure you is approach? there? approach very have that from sheet; about in your the to of good from your for you the morning. high your as guess that from issuing thoughts the your lenders interested have And increased there going around suggest with another Is an element you weighed yield

Wade Pursell

Hey Wade. Carl, it's

I of think there. questions a lot there's

the I debt long-term XXXX. the one generating would you that cash from of made answer than free actual more our I in comments its through think has think plan maturities here the general, remarks in are just biggest mean, assume I should that flow I I was

that's flow should So, to move I I free we bondholders. great doubt as should that not -- be great the I assumption for base my forward. think in shareholders, is And think using there's the think delever cash that your that you mind for much

lien certainly second at looking that about even increasing and cost higher interest Asking debt, no debt at and in all.

flow, two from within maturities time below into through think, is I here year, cash And paying free the main XXXX, idea. approaching next delivering the So, one XXXX. down times

Arun Jayaram

inventory down priority now in you Yes, coming certainly sit your of -- time, you're list does cash when or to saw maturity being think terms the cash? where period the of cash the the on that a generation, to into of on on before acquisition adequate cure, comments M&A about use in pay XXXX

Wade Pursell

I'll I'll herb inventory, one comment in. make make can on then chime

there's period, one we when talk One could have slideshows very is that next need knowing return forward replenish lean that that beyond the period. the these no over is five-years, that that metrics and as during we inventory of the to me we exciting inventory that high because things to about well is of

basis, work pay. see need So, and thought -- during real there's day-in to we to and the we're about, additional Who'd we're her certainly, acreage years inventory fortunate able to today, we So, the with Chalk inventory of that but do a the it's Carl, located I'll we'd optimization, inventory, that there. where we be talking returns talk just there's thing the in there strategically. right? years there to have going stack a continue organic basically no and room on to Austin day-out are let add growth we're intervals ago, sort improve trades, even then from few see that be for

how we really that's So, at look it.

are XX% forced reinvestment something runway a not do do quite only inventory, We particularly go we because to of rates. with have these

Wade Pursell

very whole available of the you when comments. yourself. helpful. you. for That's bond that it's much have to look pricing you a certainly Thanks levels, the And Thank at lot options

Operator

go line ahead, Your Gail open. next question comes Please from Stevens. your is from Nicholson

Gail Nicholson

Good morning everybody.

on you drivers in your modeling? talk you about previously there? costs good were Can You DC&E versus guys improvement guys Texas really the where South just made

Herb Vogel

is from sector less per day, of services efficiency the rigs, That efficiencies. then services of again, with cost each so basically it's Gail, drivers really are are or across are pumping to costs and rigs, board cost stages just associated that is costs down. of well, runtime but the this. The this really by Herb. down, So, a pumping key the our more on And minute-by-minute sand reductions combination deflation

Gail Nicholson

allowed what the the profit about you And even Can get profit previously the Great. and higher photo you with can quarter? cost get then in able were fact wall anticipated loading talk that loading you were some you your even this even, saw profit guys there, higher the to in also what higher you middle loading.

Herb Vogel

Gail results with we increased on results the fourth profit we loading -- the loading, higher did assumption but high for I others wasn't loading that what material based some then, our tested real in is And on amount. So, profit loading, a profit and we profit quarter, XXXX.

costs some additional And in there. so we paid

does per $XXX So, the we quarter. XX fourth that said running were that profit we And higher integrate can I've in below you as lateral and foot see, loading. XXXX

Gail Nicholson

What you seeing profit type well with loading? uplift the of anticipate higher

Herb Vogel

once share I'll bunch got you. results show a with you of to we've

Gail Nicholson

a generation, with the of about the to then hedges Fair you in of guys guys you XXXX hedge lower upcoming to on about And level really Can of you the is from enough. be have amount kind just target standpoint the would level for XXXX XXXX cash what timeframe, significant the talked talk free appropriate you a outlook. just like in XXXX?

Herb Vogel

question. great That's a

I you leverage a kind In think of very been as to XX% a the past, when at general said we've past, done in is more to a we've some area, us that mentioned. of area of times three we kind year. hedging the tied math is the number go as we've into it just looking driven

thinking of general, our trying manage I something round we're closer as hedged like more to that's you XX% going as I be times think opportunistic. XX% inverting more if closer trying to you the -- be balance think two if a that year. -- using starts thinking to Obviously, think numbers. sheet more to just the in the if and then turns thinking change you're two confident up you far of area, and strip you're going could getting think somewhere to that risk times, and as But approach

down below from As move we the to percentage there forward then starts that, and get well. go as

Gail Nicholson

you. Great. Thank

Herb Vogel

You bet.

Operator

go is Tom your question next open. from from line Your Fargo. Wells comes Hughes Please ahead,

Tom Hughes

you're thinking Maybe to both Chalk. go delineation you And Thanks. versus quarter. see Wanted congrats and into on about in results could productivity if guys, Yes. application? spacing the hey development how the

Herb Vogel

program, line show up we slide that the is herb. think I the are XXXX. The this so we where on wells in way Chalk drilling Austin we'd Tom,

So, we are existing show XX completing the also and the are. where wells XXXX in wells

where really like more we're delineation you stepping what more what out. So, that's development like looks looks see when can really and

of be areas there. a different different we So, testing on that we will and show there a number with those things have that combination pad

Tom Hughes

production probably as the preliminary standpoint. versus up made XXXX guidance And a follow-up, a indicate from better product Okay. for changes set you're

fair activity base? into backlog slow you eat is better into XXXX, DUC assume the as match begin you So, to rig the it to to

Herb Vogel

So, always comes Tom, it's up. that year end that issue

well, a so XXXX CapEx and we of then XXXX. during wells wells, I got XXXX and terms the completing we've of XX we number comes on So, the XXXX work the about it's that in turn on think of completed in wells start at

Overall, where thing will the year-in be lock end of or flat, flat just XXXX. happens it'll to same drawdowns the So, your in the exactly of year going year-out. the sort it's pretty down year. In to be start or we're depend overall, be real hard near what XXXX, it'll either we're the right what of

Tom Hughes

you. Okay. Thank

Operator

next open. go Michael [Operator Instructions] from your ahead, line Please is Stifel. question Your comes from Scialla

Michael Scialla

Yes, guys. good morning

Herb Vogel

Good morning Michael.

Michael Scialla

a I sense cause going beyond? you from would cause maybe and five-year price want hedge a out of five-year to production XX% do your said if anything detail you're XXXX terms to on would there? little in laid to to you of get the kind plan or prices, of you you've range particularly plan, differently deviate of what What than from what

Herb Vogel

plan. trading to develop there's really I given Well, affect relook oil, and can things to the pointing Mike, or how at risk and things answer, look general the And constantly you go where that's give five-year no at that a the hard develop. circumstances in you relative our But question on really that. pin NGL, there's and at so okay, we really factors around they're ahead We down. slides, gas can to we and the say XX-year

Wade Pursell

of right clear, for commodity of hedging time informs five prices a is if all not. the years we time as not our move, they in close certainly that's upward be cost to target, when on as We're that And more a out the know, you of follow. say the as year that. far we move now, one the Mike at when decisions XX% next This edging, in going and we too forward. just And a go direction, year the XX% to eventually move

of So, there. as variable to there's a can as we -- like we stay lot

Michael Scialla

be the incremental that chalk share -- When with with casing more some had to the to difficulty mentioned wells, Austin Understood. problem? Want the you you'd new Chalk to any expect would on you with the see data willing investors? you wells

Herb Vogel

be include those those XX the the the coming -- in not five throughout that had completions; XX they'll that year, in issue. do three those Well, -- were the

So, through we'll got those a But on them couple them. online the year. be wait three report we'll to months after getting really -- we

So, late be second relatively then coming they'll after you anything in quickly just be then won't probably. the -- that. And see until quarter you'll on

Michael Scialla

prior a there wells. then the that it more on state the at you really wanted higher than And Basin, Wolfcamp I the you profit the mentioned with doing that's loading was ask bit little at profit to what state if see with that Midland loading both or -- we in data consistent one the something always you're looking Okay. want else? data was with vintage in a looks -- was XXXX just your And Texas, of Spraberry? result and like are experimenting the don’t better the just case seeing to the know suspect, but higher Spraberry,

Herb Vogel

factors, XXXX. little XXXX profit XXXX yes, a That teams Yes, to of that. do related Okay. that. That of see other is to bit on XXXX But completion And are Michael. that loading. not focused we all from to spacing our rolled question, to great detailed is improvement a the optimization into that's

when keep -- going -- performance all they're co-developing those that's up So, those even the practically we're well motivated areas. to really

Michael Scialla

you. Thank good. Very

Herb Vogel

you. Thank

Operator

to question-and-answer Vogel, the to over for conclude President today's will Herb I This would call like turn and CEO remarks. closing session. back

Herb Vogel

in at in thank Energy. shown you you can Any you know Well, SM for number contact your Jennifer the Samuels questions, interest deck. always the

Operator

call. today's concludes This conference

You may now disconnect.

SM Energy (SM) 18 Feb 212020 Q4 Earnings call transcript