SM - Earnings call transcript Q1 2022

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Operator

Good day. Thank you for standing by and welcome to the SM Energy First Quarter 2022 Financial and Operating Results Q&A. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Jennifer Samuels, VP of Investor Relations. you. Thank ahead. go Please

Jennifer Samuels

CFO, thank Q&A joining questions call. President Vogel have and first today, for quarter our and Herb CEO, XXXX To and Pursell. you morning us for our we Wade Good answer your

recently and may the of of morning for Page non-GAAP Before have and that, XX-K to measures. forward-looking associated earnings questions. accompanying definitions X of refer filed. filed this most release forward direct to of also discussion discussion take the our of release Also GAAP I with statements turn Slide measures. the look for results include to X to that which reconciliations we the non-GAAP to the accompanying directly it and XX-Q, measures our section which looking Please describe appendix comparable get may forward-looking see XX-Q, you we Operator We with And non-GAAP started back will most could your to discussion slide deck Risk today Factors of and our and actual measures slide cause measures. and quarter earnings first differ. deck, risks I statements non-GAAP

Operator

from comes you from to touch question here first line Mariani base on The Just Instructions] of Leo Mariani with the Leo [Operator KeyBanc. wanted CapEx.

quarter, be in you tighter environment the that a is that this kind be frac keep can holiday case here So Perhaps, off just might still to wanted and a Is just a if feasible there's or peak like something then 'XX. in something year that? second and to the terms in on? the the fourth CapEx the that in And sense crews the to is of quarter? noticeable going have the get service is is of fourth quarter really frac in additionally, drop there holiday

Herb Vogel

spend activities were into moved quarter million. by -- the just Thanks we is quarter. you probably in really second and all peak saw way. just like much XQ. so we and first, because XQ running at this that that efficiency better if And Leo, we leads in really XQ production we capital the to get The CapEx under and first to keep that's about consistently, relate possible, more crews and Herb. XQ On We that timing, XX that

works. can we'll to out just things That's steady do year. with the we it what activity line So really the through way

Leo Mariani

your like in about some of And it transcript, I of sound to ask the kind just just also you capital, quarter. in prepared the believe return all you'll wanted comments reading the of hit fourth metrics debt

investors in 'XX? So that of board understood or position the it receive there. will something be maybe and sounds fourth a that decision make capital and I Just maybe will the timing quarter be on the wanted to a a whatever to of return mechanics like in in sure make will kind

Wade Pursell

method like to approaching $X leverage, down they talk would very to something feel we be might heard based the a in commodity things right be that cash time then and too time. the comments, look sometime of we that the things that cetera, pretty And return that would in that that being quarter, times want you been way you shareholders. billion. about would that sustainable. would would what be it on at looking to about analyze we Leo. we've the et mean, potential And And start confident quickly, early at that indicated, occur our I fourth no, Yeah, are one absolutely to also targets as we're and but right, the prices, should really clear stay get now

Operator

the question Your from Parham from line JPMorgan. Zach comes of next

Zach Parham

year. the on backhalf into of based of rest the year trajectory talk half a straight of in 'XX? XQ will in the your about quarter ramp With of of little and the 'XX. of I guess kind you the after oil the just back big declining one, oil production trajectory volumes guide Can production third be the a for bit

Herb Vogel

history Yeah, the Zach, this with event much and there XQ 'XX Texas. in up is in how ramped XQ Herb. There's some in following we weather

that we that ended with we kind completions So how 'XX few at of and changed 'XX how time. started relatively

So and our flat that's XQ, we leads we've production Permian we talked XQ before. four and in coming activity on, have pretty here step level’s more wind up through what to more then XQ. as those 'XX great and we tabs about in completions and And with

come come don't So 'XX. online, early until that those don't online that's XX well,

much So the maximize free us. cash a flow. three When should the flow cadence way quarterly of of we and see it, increase going you numbers two type it you it's We're for designed. on to low-single-digit pretty lot difficult really period. on, way sorts the really those focused that the it, look but that's year-over-year production to growth we and is cash of year to free at year-over-year. have -- just That's plan look things see at over a plan And generating how

Zach Parham

Ford just you And you drill what Chalk decision wells forward? you Austin capital wells Ford. in and about completions three that talk some Ford XQ wells going In Eagle about the Ford drove Can more one think XQ. prepared the Eagle that spending talked Ford drilling in completing of the in versus to about kind and some Eagle Eagle the on how remarks, then Eagle

Herb Vogel

So a couple things. of

delivered. the we would X So there about about Austin payouts Chalk them two of together were talked were that wells. with we already tied And those where talk

development. that in right were they So

in. it had to to sitting have The that newest for while, DUCs made DUCs. Ford other we've pretty we our stagger sense So much those around Eagle a some

lot efficient. are for were a those. to prices sense plan it's Commodity very those It right. capital do year. our But So made original in the of

to Chalk, believe those XX I X Eagle Austin the completions are for year, Ford. of X we talked around are think I and XX about XX maybe

was efficient So very but capital get can plan, to the DUCs. that the when we original

Operator

next question from Your the Michael of comes line Scialla Stifel.

Michael Scialla

shows in the over you're best last slide at your -- Slide the industry it among deck, Just X your five the in years. efficiency’s shows it capital looking

to anything could you've Just you a while on on since wealth costs? provide out put been wealth see update It's any if current costs. want

Wade Pursell

So, had that we're we still running a off contract a a the we've goes so. for that costs while baked first had in XQ in And largely quarter that while, ago. contracted for

the side. on us helps really that efficiency capital So

to drilling providers. completion The the others, we continue and use same service

is happens what we So up actually drilling faster than expected. wind

budget that happening better. peak just think really things But it's see happen we in faster, year we at process. and every then you our when we things and efficiency we're within don't So make do

experienced So a really to that's really just with those service sustained providers. commitment team

Michael Scialla

you're in the range those say, per given to fair it with is sub contracts and those seeing? foot you're still $XXX that the So efficiencies

Wade Pursell

definitely. Yes,

Michael Scialla

they're Midland your to sand, you recently And and competitors become problems any with it issues having mentioned, having in the you? to largest basin wanted for address an see that if if plans that just does of then one getting guys are any issue

Herb Vogel

sand their we in committed No, XXXX were Mike, we're Lamesa. a anchor really logistics sand in of the fortunate also And being mine quite supply use strategic in we new customer arm. that, getting

said, we're pleased at sand our all. So we that to mines problems And relationship. we with operations. not to have availability found real had as continues deliver It any closer I and

on down costs. cut we the last mile logistics So

Operator

Michael question Stifel. have a [Operator follow-up Instructions] You from from Scialla

Michael Scialla

the I the Maybe are it's are on when know the well sounds Chalk? in in where like Can process of within design? innings pretty in a It you're Midland in to completion now. working you're terms Midland you design. you your along continuous see far of relative terms you where

Herb Vogel

Mike, that's a question. great

some are help million data And us in the about we're optimize we which will the some data. additional we've of you're cases, that probably quarter, aware, talked data. So, the completion we additional -- in gathering, midst that XX In gathering in last design. got

in Chalk, have we're thing anything Austin now still them really at implemented and is County Webb The six the it, of we've variation, that, operators though active XX interesting minor we differently so So one to There's -- public in there's five that but far. come. hard private. that's noticed lots are are there's not

been our industry. results well definitely noticed have by So

So there. activity is picking up out

Michael Scialla

seeing say with thoughts and around any plans? the how data you you any or competition? in approach you wells these you share other of being terms Do of drilled Anything – are can any the

Herb Vogel

Yeah.

few the other on So the some engage participants other a with -- of then are trade, and we're then Mike, of quite new. ones we oilier part. do data them are And in

it's dry zone. folks the gas that we're But looking there. I'm to are down seeing they not right sort what forward So out see as encouraging looking the like to well and with results much landing the doing

towards zone landing the not in the of you were Some probably see moving the and landing now early people zones. optimal wells better

Michael Scialla

on Eagle doing are, previously? know that follow-up what asked prices completion you to wanted those Looks do that. strictly or earlier, at is the higher you’d wells once, design like you with relative were I just were Eagle I to did you Ford mentioned attributable different the anything about there Ford to

Herb Vogel

inventory. drilled are helped the that in in were those but not same and been couple and targeting long approved we Well, our Ford feel there much completion much running there in that helps Eagle do a in were we also. a laterals, option XXXX definitely has out pretty out There design they're it's and our landing that our really decently that's price have there, reserves, the great zone great But we've like the is -- Ford. in Eagle

sustained out there, of inventory after. quite is a gas to there high a come if bit price have So we

Michael Scialla

different still now XXX I that there. locations got of just one best XX with, the number anything talked you’ve I you've locations for looking the inventory then delineated the that the guess one Any there? And the in in of wells that at update on play know XXX terms inventory, you've last kind target? as about

Herb Vogel

to We'll see can with we a more now. And us. But optimize in of what Mike, runway front we're quite work bit over time. sticking is XXX we'll of XXX that do.

just it's great resource but out base So, there. a

Operator

Scott Capital to Hanold comes from Markets. RBC question of next Your line

Scott Hanold

And obviously Eagle gas and the kind kind started you guys LNG issues? Ford, or good seeing you've you price the able gas you into Eagle the firm can if the takeaway your But more that, there differentials the positioned these that's lot production takeaway, us into as just Ford? also guess, oily. in of some ample what -- capacity you get larger curious. And remind there in of you and you remind going got, about gas to seeing little I'm how Permian pretty component typically there, is of in be other how I is to corridor are And given for the places? guys takeaway you’re there's bit be looking Permian is a just not XXXX, to of of us a concerns can

Herb Vogel

So, the on let's takeaway. Permian go gas

applied things oversight of most on So able of has there see quarter 'XX. be our because was half the in and kind we all not pushes the time volume said, the they'd be where out purchasers our out of selling a in be fourth those takeaway at any fourth until of wouldn't last really hold bit they're or the to fair of plans That firm side, this, 'XX. quite tightness Since back quarter of changing the 'XX. markets. you would online really by of for that capacity Kinder We're risk perception quarter and expansions in compression do that gone

getting risk volume in side, So price place we've base don't on you'll on appendix, in We've That's things there. put through tight. the then basis contaminants expect hedges see place, ‘XX. production our got side. in hedges we the start any do And

can to demand. out up and But up on to sort. which the flow a pricing that So people depend and that overall, gas allows oil there really are if shortfall Out risk we sure deliver going But it's some it's that midstream when to at Permian, occur. the might supply is flow. mitigates on see the the encouraging making the production stepping crank

So that's the Permian.

of a the On mid-decade, Eagle production out the from aware probably Eagle XXXX, of Ford, you're that lot gas there 'XX. was Ford,

drop see for our we old have $X.XX July that of by some takeaway So of Mcf. higher about takeaway were what legacy basically, – 'XX and lot and takeaway plenty costs, is an there's capacity. of baked capacity contracts And a They'll beyond at higher there's costs. fair in and

just with be we uplift, really the LNG to to marker. going As going were

wouldn't see Tennessee So Hub, would brought that where side. if or we international we on see Channel Zone Ship LNG in X the up We directly LNG pulled an access it or way. Houston it could

Scott Hanold

you capacity that affirm Permian, say said Okay. they us your back lines those on you the mean, capacity. as And room in? that I on I your where there, you ample is much you look pretty do through take gas the locked to there do that purchasers can you like 'XX, or is tell you Can Is projections, that have guess away right at have, -- there? now,

Herb Vogel

sell we market, who parties the sell what firm is like wellhead, into to are represent line purchaser they the do and So have a to capacity on the we firm the at will only market. a or purchaser local that selling

we doesn't won't have to that's risk. the who We mitigate volume how at So any sell capacity somebody all.

because they of that's Mcf so have another that of line’s let's the So XX% XX% capacity, have where one pipelines they capacity, and will say our of flow.

Scott Hanold

commodity positioning occur? cash this book drip and this a could follow-up you allowance start my I price you guys us on didn't can your question valuation is, as taxes, and that --- taxes you then And at in think when quarter remind

Wade Pursell

would stay profile It’s kind taxes Wade. mid-teens area. our kind strip cash and with of our that the begin way year, we paying would currently this assume some activity steady teen million the and in I in are things of the later probably they that

of forecasting, price. up to this not of million assumes forward area is see very again, round of peaking us that So XXX getting And basis, On XXX year. obviously. something but a kind a that for kind in type significant, to that I go million a strip that and an the

changes. could a assuming obviously offsetting big significant that's added, free So where of kind that. of that But assumes no flow, cash amount there's things be

Scott Hanold

that is Yeah, effective and on what million tax income? a curiosity, pre-tax million on XXX XXX to rate of play like in out just cash

Wade Pursell

Yeah, it's statutory rate, south XX% the certainly the well it's under wealthy of there. area,

Scott Hanold

XX%? we like around are talking Yeah, Somewhere XX%, there XX%? in

Wade Pursell

the a that of probably with of cetera. statutory all rules assumption that's program, round half round steady because continue the area, simply but IDCs, But et that's very the numbers, stayed Yeah, where tax in numbers. the somewhere of very are, tax we capital rate they

are in what's going long happen to effective those As -- with our rates. things as to respect place, that's rate

Operator

time. like There are back at this Instructions] to I Vogel [Operator would closing remarks. no Herb for to conference questions further turn the now

Herb Vogel

if in Thank your started, Since now? time when interest got this you in you Energy. the the invest attributes. me Energy I’ve for Just all SM ask key SM consider why

and tier in First, top great #X assets basins, we’re producing the breaking flow #X in two country.

flow. cash free significant generate to able We’re

We’re and to really moving rapidly EV paying off debt, equity.

pushing enjoying NAV or value. premier we’re from an confirmation operator from intrinsic technical We’re add definitely the increase a advancements Chalks. in EV to And Austin

So interest. thanks again for your

Operator

you Ladies and gentlemen, now this concludes today’s conference call. Thank you disconnect. for your may participation,

SM Energy (SM) 29 Apr 222022 Q1 Earnings call transcript