SM - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. My name is Genie, and I will be your conference operator today. At this time, I would like to welcome everyone to the SM Energy's Second Quarter 2024 Financial and Operating Results Q&A Conference Call.

[Operator Instructions] I would now like to turn the conference over to Jennifer Martin Samuels, Vice President, Investor Relations and ESG stewardship.

You may begin.

Jennifer Samuels

Genie. you, Thank everyone. Good morning, call, presentation we posted earnings today's reference our may prepared remarks, IR or are release all website. In the of to which Thank us. for you joining

questions Pursell. and your To our we and Wade Vogel; President answer CFO, CEO, today, Herb have

started, direct to remind recently get release accompanying deck you today to our results you of discussion and need describe statements risks statements forward-looking to cause which section XX-K, earnings most forward-looking differ. the filed include and I of Risk non-GAAP we that discussion with Before may measures. our could Factors I slide associated that actual

of Also, please non-GAAP definitions to for non-GAAP measures. see release measures slide discussion the the most and GAAP forward-looking earnings reconciliations comparable of appendix and directly deck and measures

XX-Q filed second morning. Also this our look for that was quarter

And with commentary. opening over that, it turn I for to brief Herb will Herb?

Herbert Vogel

Good Jennifer. quarter you, us. outstanding for you an Thank was news. lot and It morning, great a joining with thank of

get Q&A. ahead let's with to taking your I'll to back started Genie So turn questions. it start go and the

Operator

Gabe Instructions] Your [Operator of the line with TD comes Cowen. from you. first question Thank Daoud

Gabriel Daoud

about oil like the appreciate formation curious a are spacing Woodford-Barnett expected are this in the was more this I then we expected results. to look guess, are does maybe wells? that or what development from I wells more year. standpoint, the learn plan bit little turn on I in What line I these morning. and can cuts guess, here, development about a there the hoping whether time the not

Herbert Vogel

the it XX% be know the XX% oil. initially naturally they rich. artificial And XX -- we will It's an will imagine X-stream while a the that's I about I we're and and be great. Permian. don't for content this put it's overpressured The a about BTU there API the quite are Thanks, gas quite is Yes, Gabe, is on, in excited Herb. play, on basis. lift flowed which wells before yet. to oil, Woodford-Barnett

we In terms and that be of of the we're well months. We excellent, development, wells year we're not we'll we development this But for working of by the coming in planned slides operators, plans the performance ways Woodford-Barnett. in surrounded showed over have really that and is one from do do know that. the additional that these the any away turn-in-lines offset

Gabriel Daoud

near into I more around to And I gears commentary That's detail. the guess as and focus the appreciate great just of all maybe that. a buyback. leaning follow-up, term buyback versus debt reduction a then on shifting

the around on $XX I quarters, several been think last you've $XX quarter to million million buyback. a

So then to any pace on look the like in And XXXX? the close pace 'XX. what color additional does

A. Pursell

Wade. is This Yes.

As be during though, in free into that the with near shares. reduction back to prioritizing we've flow on reduction. say, taking it's we debt before that buying the all on this term will cash an we pace said, we prioritizing I deleverage, an acquisition, not of period, additional we're will kind or the debt nothing get back were

shares, be back price. stock still days will into no we probably times, buy They're the about There's times, very well where that. doubt market certainly like especially or may weakness and some We times. be step other of on

area below next flow, in of middle being that of the view cash We of have we course. Xx free that until with in our depending which on though, kind internal the commodity project of we but will back be priority prices, NAV, year, get the

Gabriel Daoud

Okay.

approach. nothing or all not So

Operator

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

Zachary Parham

of guidance the we wanted a rates your for pro First, XXX,XXX here a ask to forma you That day the little implied on barrels from bit a oil XXX,XXX as deal. 'XX, Uinta gave move XQ for compares XXXX, you I the and around just day through as to in of do barrels expect on volumes trajectory tying into preliminary and expect numbers down the can a kind Just of Do you -- activity, year? you then about talk of you out? you you early steep bit slow 'XX decline trajectory curious level together. little production those expect kind guide the just X a pretty

Herbert Vogel

question, Herb. August, approval Thanks have, Zach. and early for the HSR the still -- -- This here. TILs stage. what In projecting many we're It's obviously we're in we is how days

on that So depends we'll prices out. We're are on be figure play actually XXXX scenarios many commodity year-end at the will and lot it we next will sort out where and XCL puts of -- out will still how completions what online, how a working year.

sorting And details contracts We know side. yet so on all out. that rig XCL don't of the really we're the

in what work X look the best cadence. But at capital get do cadence, the we the how is completion really between we'll assets. rig we the So efficiency

the We a which between to know the in. X, is similar returns are great be position

do efficiency as how get capital possible. Now we good as the

now, HSR right working a assuming we're lot in August. what information more approval late we'll get that's and So

Zachary Parham

just wanted LOE. on to follow-up, My OpEx, ask particularly

here? quarter, color This Can expectations LOE was year end how BOE so low in maybe came you on the range. quarter the why below full on of give and significantly just this low per $X.XX trends it your guidance LOE that's us from any

Herbert Vogel

Yes.

expect other some number We we On than seen the of board cover. and up waiting third excellent. the the And little of second as utility we're that well of areas with side, LOE across additional reductions the connect obviously also the have cost generators pads some increase water some our have a handling in to do costs there's labor. quarter some for bit electric a then additional quarter in to we'll was

costs an be say we to going down, second it's but third expect anomaly. quarter. quarter don't want to do to bit than I keep We're higher So a driving

Operator

the Your next question Neal of comes Securities. Dingmann Truist from with line

Neal Dingmann

is question the first Ford around Eagle My activity.

with you've I'm success just going the how Eagle discuss the future wondering, that Austin get of along to the Briscoe the Specifically, sort now C Lower Briscoe you're I'm C. forward just that codevelop wondering will you the and on activity? that. can sort going you of Ford Middle Chalk after had

Herbert Vogel

that just that said in there. and fully have judicious over if on there, Ford, upper Eagle altogether. we also first didn't where in of the zone on on you but the wells Neal, west another results codeveloping Yes, tell Austin staggering But a and the question one had was your catch side, that answer Ford I'll Chalk great start there the landing lower had I'll western We anticipate number will we wells And the where we tie question. Eagle on we acreage. those. and place word me bounded do I

won't staggering wells that the a is gassier. side X. it degree probably go thinner and we with work acreage, the Austin on western just to But bit because looks Eastern great be the all to On there Chalk to over sure

Neal Dingmann

Well on is develop is said. all then additional the inventory? those that you able is are about that XCL make acquisition? on there original acres pattern that And want the have had side to any the sort in Or acres, just additional just now same you that you with change of talked to now -- my plan to sure Uinta question the add that

Herbert Vogel

Yes. Great question.

play You what currently. is of can the imagine state

to be do inheriting we in We be then integrated do that's by infrastructure XCL's assets. And of inheriting looking be time DUCs, the how at ultimately, optimize we place. XXXX, benefit get for we'll will an activity the few We'll the be optimize looking the quite underway. capital. a from infrastructure to How lot we'll a Altamont we

in So pre-invested take we're looking their throughout forward advantage XCL as see to because there fruit that of we what to that optimization some low-hanging acreage.

Operator

next Your comes Scialla from question line of Michael the with Stephens.

Michael Scialla

wells. Woodford to on Wanted up Barnett follow

clarify, were Is portion where on get of that for legacy I acreage, to XX-plus the I'm a assuming believe, me Peck, And wrong guess zones correct where in net that acres also, thousand I in you do all you you, acreage? X,XXX Howard that. the in County Sweetie there. anywhere Western those of those extension Just particular, and if area extension that have perspective Midland, plus perspective else how are to the

Herbert Vogel

the that. and we We rights underneath why bit quite acres added Mike. Great work to And entirety I be X,XXX Peck that about position, Peck. Sweetie our could question, the see of some acres XX,XXX deep the did secure can basically Sweetie The confusion to west. then is under land there a

If control there of that well a see operators, Woodford-Barnett the was look you'll offset Peck. at gap you under Sweetie

actually good those we are just why So and the confidence, under did over Peck are XX,XXX Sweetie have surrounded there. wells said we acres because the X Woodford-Barnett wells we that's that why we by

is and lot time, by -- helps why that working we'll vertical figure of confidence. a around the over map overtime control to enhances play. economics have out and it But well the of it for spacing And the obviously, that's the getting nature improved our on be then oiliness obviously, overpressured we're of And excited play. optimal the really ability too. that And we to just there's the

Michael Scialla

not really anywhere And Peck? of Okay. looking Sweetie outside

Herbert Vogel

up Woodford-Barnett, and terms yet. in good them, to don't mapped future, would never opportunities, to in can come no have if up team that -- if have geoscience stuff of have the the with they pursue be -- because know I what Woodford-Barnett come we I'm the with that our maps. amazing say see. they speak I'll I have but land, with I'm and is And for putting doubt I they we capital definitely seeing sure sometimes, we'll pretty going discipline we we about

Michael Scialla

to been a it's looking Is acquisition, XCL in follow Just looks Okay. that characterize Look Is How just to Altamont color has there? then that? like properties? delineated? that. you And it Energy more said up like mostly it acreage. on than more forward assets. wanted exploratory you would I little for nature -- It the it the previously,

Herbert Vogel

it as I technology bit question, The bit of just got quite XCL. it to and applied can they Altamont go has infrastructure optimizing acreage delayed portion quite less not driving the putting well Mike. of Yes, on wells. excellent team in and little industry at Uinta delineated, makes really is quite you around, There's really what in a successful we and a capital terms well. on it's smart then the map The bit north. so advanced as over is a well is what a learned as is further place. control of efficiencies do XCL great say And The southern vertical

see. can anything We'll that it good on And that deep And also. see Ultimately, much doesn't potential. more really now cube Altamont we so about has that's or inventory we for include locations XX how that, over put any time and like why add. we'll feel we upside

Operator

Timothy Your from with next the line KeyBanc. question Rezvan of comes

Timothy Rezvan

know in third with say a dialogue quarter recent area that on. I lot An hasn't there's the completion really on But is more suggested earnings. been release Klondike, know to have today work think I discussed and of you'd going I

assessment qualitative there right what's a like give maybe you of happening can Herb, So now? up

Herbert Vogel

Yes. hold Great question, the to back We quarter. something for had third Tim.

So online, have that final I more be come X have would say quarter, them been the there during more anticipate X for doing well. a then while, wells, online that have that we X and third just a We recently. will X. the on got Klondike We've

it IPXXs I bit, them them and there's still guess wouldn't tracking year. so So them up. of for rates been in ramping of this -- don't they're some we yet, even I'll get they've is give Klondike ramping are still -- though are looks a -- still all they're call completions -- like IPXXs producing until X we say I we're the some

Timothy Rezvan

insight to question wanted it's some talk have days helpful. you XX% Can disclose. And We'll a XX% just fair. -- Gabe's to the to sort is tuned, understand don't to there Sweetie is guess. across what on I much know range. up mean, to how oil I number. you you That's be And of peers about formation? stay in XX% should Okay. much Any that trend? too more early follow about I variability on good and obviously, heard cuts to I those talk Peck. if We XX% then would

Herbert Vogel

west be that is Tim, our will you and could be and side the acreage be will a deeper, so is east gassier, geologist shallower of side there. The oilier.

existing And the in as move trending that's west in that Woodford-Barnett oilier. see get you'll simply wells, from there. the you'll So thermal maturity see our them you level the depth

you So some will see variability.

at And off some wells so be oil are that percentage. will Western they higher if flank, just I look you peer our fully of our expect

Operator

line the from Huang TPH. comes question Oliver next of Your with

Hsu-Lei Huang

Briscoe had couple Herb, just South know Starting Wade the quarter, a in new all team, and I performing of well. Texas, strong you wells follow-ups. highlight C

play that that how for of of wondering you you've impact liquids-rich Just on results on initial space fully part just the thinking area, do about on development then southwest I that pad in the all set wells typically geometry thus there noticed from seen highlighting the future you kind bounded XXX-foot all? optimal this far spacing your the while additionally came wells that test sort of one to wells? of well, are drill of that is northwest going the all worth southeast, takeaways or about moving any C to Briscoe where northeast observations that And

Herbert Vogel

that with of me we we a terms reservoir the confirmed spacing people for did continue question. kind excellent to track noticed start how And believe with sense. We good And kind it actually and could few get We'll the degrade and get it, people line makes of spacing. But some expected. let spacing quite few to was like that. obviously, and thanks models. the wells and in that with there's modeled co-development there. Oliver, it where that very an in expected, on much that of question, returns That's not have results results pretty what we the

just get will And We see better are performing makes is orientation on something excellent. risk less you The and we of And where that out where that So that the costs lower excellent Eagle development were Eagle the we than noted have will currently. some then of selective those in off wells continue azimuth depending the Ford to if that turned doing of there's wells be the we Ford there. -- it sense. could expected. because down terms on

in first acre net area the X note that X,XXX You'll that area. over drill-to-earn our wells Chupadera

of X there over wells drilled We also. azimuth off have

you'll be the So from results also. those seeing

help see that to really we with way azimuth So wells. efficiency a those capital as off

Oliver Huang

color. helpful That's on Perfect. quick And just follow-up LOE. a Permian

the this another to quarter? had Permian be further considering anything back on in kind LOE Xs deck alongside step we the down all down be the should next or might Just that driving of of June, outlook about saw year's thinking you preliminary that aware after leg Uinta low that we

Herbert Vogel

we XXXX, Yes. the know on don't plans yet I XXXX. up on haven't worked

the So where get areas it's cost if existing injectors, pretty in down, we're go it's already water. then to be if LOE third-party when keep going to lower to we we supply, power there's near our water straightforward

right right be locating -- on the to good industry XXXX. But now. really will The in it on have very is specific up So things wells depend that And specific that don't yet. we're I team a rest and the capital activity where both assured, and just now reductions driving in the with efficiency frac going rigs for in again, we're really we're operating environment spreads. working

Operator

with question [Operator Pope Instructions] Your comes Seaport Partners. next of from Research line the Nicholas

Nicholas Pope

I bit South of a we percentages oil dig saw we basket that that here consistent mean of of in how have come well And with is a of South the guess, going into jump to production. was kind terms of oil that quarter? during you're a expect it just you Texas in Hope and what I saw huge online? What this mean, I curious you're control forward you kind kind could little more to your quarter, lot because, how And of in online second I in the wells selecting South guess, can bring these maintain Texas? going oil in in ability percentage we wells Texas.

Herbert Vogel

Nick, Herb again. Yes. this is

have oil is east how rates side the but West percentage, how South the lines on versus a on new So the that's and west you much you higher oil bit BOE turn-in look the on depend the each improving little at side, percentage. optimize in is which area, we East Texas, keep allocation know when performance lower and regularly side, on to we on side going many we on capital

you We're worried And wind aware oil around looking in we just keep we driving where where oil if somewhat. we're higher that move higher the high the oil put we It's on just a drives look that of percentage, see gas capital the performance. and with the at the a But the the capital efficiency percentage, side wind side about it. just we're the and just the capital west we're returns. so more But -- and much. it, NGL will overall, not percentage will you'll higher with East higher well at percentage improving put up really So of percentage, things. more really up gas, really side,

the I'd really that's sum way So that up.

Nicholas Pope

it. Got Appreciate it.

gave kind on other The more know and all to. of that number. you'll you little that release during in probably a I thing, XCL lot there's of the dig range pushback like production I that a XXXX, XXX, that gotten think want But broad

from current maybe are kind thinking anything, of about this guidance fourth curious you you're Uinta get decline And is you're things there's the Just release. quarter in XXXX. you're when there if now, for added what where added on coming kind that how some rate? of look of of production can of the your what's in XXXX that, that seeing as there implied guess, at kind kind implied with clarity in, kind expecting you more that I we with

Herbert Vogel

Yes. fair on days early it's Nick, like real a a this question. acquisition. new mean I it's

We are efficiency and working out capital scenarios can out we the gain. that figuring really

and what are in We can we HSR rig period. terms because in somewhat of are limited other contracts that in contracts see we

best see redacted we are contracts. can the So

will don't we term the make know sense. the So of how contracts what the and

certainty February. able August, be plans assuming are released in end we'll we approval, So and say, XXXX will into we we'll HSR to then we that the that. ramp get I working of really that our at baking up after be that our

frac that in if So the we mix capital X and returns, and know get better right terms that rig of excited at have similar of frac how we're a cadence. We optimize play. given assets spread just we're efficiency, that in and can get rig really spread we we all can just looking

A. Pursell

free maximize flow. cash And

Herbert Vogel

years Yes. we And flow the is, next free X we always the objective cash X over to do. will maximize as

Operator

will Q&A closing the our I turn Herb over Vogel, session. now President to Officer concludes That remarks. for conference and Chief back Executive

Herbert Vogel

question one that not about Basin you and the for you, and we on Thank us. And oil natural is really, they're quite Uinta because have joining and that area Okay. related up actually we takeaway were -- takeaway about is the can And of perceptions rail takeaway both in some sufficient and all a gas. question in Genie, did to outdated the believe I do terms today, now. come their are production. that grow thank for got we or -- great complications it questions that was

Until delivered refineries. mid-XXXX, all from for crude and growth sharp limited production rise refineries. crude and into industry Gulf XX,XXX was in range and to barrel City the include mid-XXXX waxy crude like to the the is Wyoming interest favorable Lake Salt production slates, increased was due prices gains Cushing and day The waxy in in And to incorporating Coast that's efficiency. oil since refineries

are or heated there's underutilized the you oil the to Coast Salt And a the no not constraints know, real goes outlets in of are and in a including expanding and There only of by insulated of production, cars, Golf because being portion for region oil less while cars. Lake generally the most there's is as moved, Wyoming number for production City, coal rail, current Cushing. railways

feet completed feet cubic month being in project West, have capable alleviated. million a day, and day by Pipeline constraints the up these of XX a in be was constraints, a million gas, in Kinder but proceeding expansion they're to Mountain will pipe Morgan and recently So relieve additional from processing moving their basin last mid-XXXX. are with service regards that been an to announced there to a the carry cubic to in will XXX plant basin, pipeline

that, we forward us, number thank to of So you and with for at look seeing a you joining events. upcoming

Operator

today's call. conclude does This

may You now disconnect.

SM Energy (SM) 8 Aug 242024 Q2 Earnings call transcript