SM - Earnings call 4 2023 | SM Energy Company

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Jennifer Samuels

Good afternoon, and welcome to SM Energy's Fourth Quarter and Full Year 2023 Results Webcast.

Before we get started on our prepared remarks, I'll remind you that our discussion today will include forward-looking statements. I direct you to Slide 2 of the accompanying slide deck Page 7 accompanying earnings release and the Risk Factors section of our most recently filed 10-K, which describe risks associated with forward-looking statements that could cause actual results to differ.

We will also discuss non-GAAP measures and metrics. Definitions and reconciliations of non-GAAP measures and metrics to the most directly comparable GAAP measures and discussion of forward-looking non-GAAP measures can be found in the back of the slide deck and earnings release.

Today's prepared remarks will be given by our President and CEO, Herb Vogel, and our CFO, Wade Pursell. I will now turn the call over to Herb.

Herbert Vogel

you interest thank SM and afternoon, for in your Energy. Good

of our very up financial each into Today, our pleased looking are XXXX. more excellent will very XXXX spend we to against plans measured We forward We report XXXX time objectives. results. and well for our operating

leverage. to slightly XXXX development initiate of acquired in We to and an stockholders, increase are well attractive our deliver maintain our low and activity positioned return of capital properties

starting with strategic Turning XXXX X or to X and up will stated Slides do How our exceeded I measure objectives? key we through as and results. met now. step each against objective We

million objective We return million cash to and to Our to an flow return increased our our stockholders. was This generated. generated of X% and cash stockholders. free the stockholders is yield for capital of free we $XXX returned first substantial approximate of $XXX deliver of XX% approximately flow

price at approximately repurchase the $XX this included This $XX transacting dividends is we paid stockholders XXXX, in reinvested Xx portfolio, and leasehold million million. prospective and average of to our in of Notably, in the million million shares $XXX million to fixed returned $XXX an positions. of X.X $XX.XX

billion improved reduced of a a debt. proved of $X met our balance SEC barrels year sheet, with pricing million, equivalent, million which In At company XXX our record to addition, despite by reserves, $XXX environment. we same less million year-end net reducing from up set for ending objective we time, XXXX $XXX the net almost debt the than XX%

price is profitability flow appreciation. cash intended to free share sustainable of drive and allocation long-term Our

was stewardship. on safety and objective excellent including operational second execution, focus environmental to Our

wells discussed guidance, execution we growth production which program, in performance, performance completion by consistent course and June. drill midpoint by was early-year Chalk our efficiencies of about serve to Increased in operating X.X% If with Midland XXXX accelerate came from was Austin approximately exceeded Basin. the of mid-single-digit up ahead for last year-over-year, expectations production of the driven the over and certain well X% operational production while measure guidance production times

emphasized well designs peer-leading on we the As Austin compared by shown to the Midland well differential both outcomes. supports optimize measure wells outperform that sizably regional have in to application past, peers, completion and performance operational technology in peers. If of Slide we execution our Basin Chalk, SM performance our X, as

of per oil These charts feet XX,XXX normalized show cumulative lateral. production

we're you and oil west plays, well. of look months you That get even economics working around an see condensate average If closely, oil of production well leads average both Howard excellent almost as is production cumulative may XXX,XXX area, surprised be better. Austin in XXX,XXX XX from an Chalk simply after to same, that to barrels to to County the always

Slide we of year, another to thanks to In to efforts excellent Turning X. had focused operating teams. regards safety our and the stewardship,

families one winners. with one courtesy a specialists work our contest of Texas. was In of Sosa, culture, SM to hold effort in we calendar, this is of an South our our Aiden and drawing is slide son the operations Our our on who engage safety of safety annually, Aiden for

metric a produced. barrels comprises both highlight recordable spill which and rate, worked, superior spilled per X,XXX a per incident or reportable and barrels safety we XXXX, X.XXX truly rate For injuries man-hours of total TRIR, X.X XXX,XXX employees of contractors

and few weeks area excellent were ago posted never Just SM an CDP of work, top leadership be will complacency. To level off, score a received a it A-. but scores for

truly integral that environmental believe operational that stewardship For stellar a a company an and in are excellence. our simply is of We part industry, safety outcome.

Turning to Slide X.

Peck as And and the nonstop data as find a result Crane analytics on was Upton identify, divestitures, grassroots focus and is developing value west In between top-tier finding know, geosciences, record. working many have And on reservoir inventory. They we by track the acres located see building land we net objective increasing teams. collaboration can as which Sweetie you our engineering, and net of Creating our of acquired to are to counties. This map, expansion you just Counties in Midland position XX% offset area is and few where now. our XX,XXX existing in our replacing indicating transact XXXX, our and grow buy into in data refer Martin is this new confidence inventory. detailed Klondike you In third we on I'll assets acres, as well what to extension stealth to tell as in of reserves of of This from strong a located performance a minutes. we Dawson focus. talk North evaluation Our an intervals XX,XXX referred subsurface Basin, certain our the our and about by that can includes our to as basin. that is top-tier our leasehold in of plans well I we often acreage, position and areas. case, more here have expect

a in performance say these like really dimensions all XXXX, in thank I'd you to well to of for done. XXX employees commitment to our outstanding the each job excellence for your Given

X. Slide to Turning

objectives specifics for our of Let strategic Wade XXXX the me our covers plan. before just summarize

low the given the through finally, into presented a We acreage. breakeven upside value ability year commodity leverage, outlook low oil-directed current coming the cost portfolio, and recently acquired positioned increase proposition are well to price really activity with

leadership to XXXX execute transferring and stockholders to and deliver repurchases depth to the maintain Our third, stewardship; and return debt; through expand through objectives high-return continue portfolio new breakeven, to our analytics while efficiencies second, quality innovation. technologies share stockholders operationally to and first, of and ESG wells strategic low in value employing are: and drive dividends implementation to by advanced to capital reduce technical

call XXXX let the to Now the to over me turn Wade? to Wade speak plan.

A. Pursell

afternoon. Herb. Good Thanks,

delivering world-class some team, sheet actually straightforward, to poised we're XXXX. The assets, strategic so X of the a expectations. each quite this let's premier repeat certainly execution, that is operational in forward XXXX top-tier to support operator of that designed demonstrated sustainable results of plan success. solid our balance by As empowered a that return Those technical reminder, and We with capital, Herb we're strong results spend time XXXX objectives driving just exceeded looking are into outlined. a Street

flat capital-efficient that we our our over environment. which over results a XXXX is low plan methodology As XXXX, discussed the countercyclical program, generally have flow multiyear production deflationary a through The free years, growth. Starting Slide this the development increases to with in in cash single-digit activity develop reflects XX. to optimizes program capital most approach

an range team the flow yield while and acquired billion. cash initiate $X.XX enabling and $X.X development expenditures delineation Total program properties the deliver XXXX. attractive are to expect billion to between in free capital expected to We of

and first in include: with level, Basin the year. wells majority Midland in expects Texas. roughly to for net in inputs Key rig We to company drill Midland activity total fourth the plan retain XX% of complete South XXX and to XX% the XXX the

in cost around drilling XX,XXX-foot cost for realizing certain activity year expected to largely laterals fleet and to increased XX% running Second, entire the which as as of is XX efficiency deflation. include be recognizing the simul-frac gains, well average Midland a year-over-year XX on offset by

of items on the across essentially board exception deflation seeing are the with larger labor. We

turns. being I and Midland are As to expected point a employ similar. and notably low foot optimize and per well well loadings, to include out with costs Texas range well to cost we $XXX well in performance our South and sand very that result, foot complete fluid equip cost will the our per drill, higher-than-average which

Together, We factors costs peer would compare D&C these per oranges also report based foot add to to DC&E. $XXX per approximately well. can This with $XXX normalized which peer if only. be on apples a to in comparing foot metrics

around WTI, drilling prices facilities for program including equip and Hub NGLs, expected and Henry complete $X.XX of is deliver XXXX $XX an XX% to $XX drill, average flat XX%. Assuming to of return, the

include costs expansion intended of disposal as facilities to related controls, and South local the upgrades area, They infrastructure community, reduces Klondike upgrades in and emissions Total reduce facilities. and to handling capital emissions. footprint costs include and costs operational continued saltwater Texas the and pipeline improved a oil facilities water the also also such which around expansion the

Production a a Midland the million expected XX program. BOE X%. XX basis average is around year oil X% are XX% volumes from Production while on of be capital This to Turning and of to outlet expected Slide are the increase South the oil now is X% volumes to guidance of an increase XX. to guidance Texas BOE an on basis. XX-XX for to BOE year-over-year million roughly Basin split on in

quarter on year expected the of cadence timing through increase Production completions. is the to each based

of XX in XXXX takes net of or First XX BOE line adverse BOE the quarter well fourth in weather. quarter is account XXX,XXX the approximately into as guidance turned January wells only effect per day, as which million

in $X.XX at Midland Basin considers handling $X.XX infrastructure to the as BOE, electric need We're water electrical to per for costs. generators increased which the LOE the increasing on as guiding demand well due temporary

to we expected for carry $XX The are There regards taxes that these benefit to will around significant have R&D which earned. of million, is during call, we here. through to cash cash the In significant credits last XXXX. likely talked about taxes, XXXX flow credits quarter's carryforward cash reduce to

allocation than to a Low year reserves debt of on net very of growth and Net we are balance to ended leverage I'm million the record. $X Slide this the stockholders. continued and Turning cash, gives net less we year-end more BOE of in XXXXs achieved of positions to report the sheet, to call $XXX cash free reserves the flexibility in EBITDAX than flow debt in choose. Skipping with which XXXX SM if to affords have return We XX. X.XXx. of flexibility the XXX for year capital Slide pleased billion to million in adjusted company XX. proved

XX% is The more proved XXXX reserves to proved by As production years. the year-over-year, than reserves net Herb up X.Xx. XX.X year-over-year production ratio increase reserves mentioned, are replaced and in net

We notable greater XX%. let's inventory completions for that the XXXX of me, XX. inventory, ended average approximately at of It's estimated XXX to year. look years XX on average XX-plus with Slide per assuming Lastly inventory is than IRR

XX% more as addition, count implies inventory high is location which than quality. categorized very XP, the In is inventory of

calculations to believe companies calculate inventory our compared are We potentially inventory. how may conservative other

have length, all have type optimized assigned economic, well the spacing reminder, area reserves curve, latest XP within and estimate our are wells a an development on lateral at an As a schedule. spot defined are specific

At years. past inventory Austin wells with XXX locations confidence remaining. XXX brought given XX% Austin wells year-end Chalk we economic drilled today, the increase our reflects the production significant locations XXX over the than This into performance in X Chalk, including excellent already to the increased have gross of more XXXX, the

efficiency more we and XXXX, XX upside inventory by removing WTI Hub in new In of and in Middle Leonard optimize locations added development area so drill we the will our tested delineation some and determined overlying from the $X.XX where Leonard locations offers capital increasing that into was calculate also so oil XXXX gas. inventory the add acreage and acquisitions, wells RockStar from identify wells those in We can benchmark instead XXXX used far from fracs Leonard. pricing to Long-term grow Middle and to Henry inventory Spraberry $XX Spraberry, underlying acquisitions.

closing, results I'd outperformance XXXX the again Herb. gas to set support. And more to same. to was positive shareholder down SM appears for be in like So say I'll the how shares. corresponding down and being oil XXXX now XX% despite are we XXXX XX% in your call being and of return Total and achieved SM Herb? in the turn shares for for back the Thanks up XX%, proud

Herbert Vogel

Wade. Thanks,

XX, last We XX,XXX in that wrap March. and breakeven from seismic order the low specifics me drilled and plan and conduct net call work of our up to XD we're on focusing At by our located some one North to core extend summer, Turning we the let log Klondike, high-return Counties, doing Martin start we acquired in this Dawson we to well science to have and optimize inventory. acres acquiring gathered high-quality, Slide data which plans. development in what

expected a of include to to X X of wells. program XXXX is X having pads development Our total

should come third the of online to to the have end meaning expected in First report by June, completions are initial we results quarter.

about some XX know, are Dean wells you As our away. and most drilled into North Martin prolific located of area miles RockStar the in

upside. in and We well as net and Crane acres locations Sweetie includes stealth to X,XXX acreage on delineation and in Klondike approximately to The to we Counties. further based all added you bring position offset our Peck adjacent referred expect development data, Upton

We from target, And an have acreage acquisition. evaluate this not intervals. a inventory yet we we while counted primary will multiple have

interest year. With our that, call you on for live morning. in the excited in forward We are this to your let see to SM Energy. acreage me well look tomorrow Q&A thank later results I

SM Energy (SM) 21 Feb 242023 Q4 Earnings call transcript