EXECUTION DRIVES PRODUCTION OUTPERFORMANCE;
1.4 MILLION SHARES REPURCHASED
DENVER, April 27,
2023 /PRNewswire/ -- SM Energy Company (the
"Company") (NYSE: SM) today announced operating and financial
results for the first quarter 2023 and provided certain second
quarter 2023 guidance.
Highlights include:
- Growing profitability. In the first quarter 2023, net
income was $198.6 million, or
$1.62 per diluted common share, up
more than 300% compared with the prior year period. Adjusted net
income(1) was $1.33 per
diluted common share. Net cash provided by operating activities was
$331.6 million and Adjusted
EBITDAX(1) was $401.4
million.
- Exceeding production guidance. Production for the first
quarter 2023 was 13.2 MMBoe, or 146.4 MBoe/d, at 43% oil.
Production was approximately 178,000 Boe above the mid-point of
guidance, primarily due to outperformance from new South Texas wells, including outperformance
from a seven-well pad that turned-in-line one week earlier than
initially planned.
- Delivering capital returns to stockholders. The Company
repurchased 1,413,758 shares of its common stock during the first
quarter. In combination with the $0.15 per share quarterly dividend paid
February 6, 2023, return of capital
to stockholders totaled $58.3 million
in the quarter. Since announcing the return of capital program, the
Company has returned $133.9 million
to stockholders, inclusive of dividends and common stock
repurchases.
- Driving capital efficiency. First quarter capital
expenditures of $240.7 million,
adjusted for an increase in capital accruals of $66.9 million, totaled $307.6 million.(1) Capital
expenditures included $9.9 million
for leasehold acquisitions in the Midland Basin that were not considered in
guidance.
- Maintaining low leverage and strong liquidity. In
April 2023, the Company's lenders
under its senior secured revolving credit facility reaffirmed the
borrowing base at $2.5 billion and
lender commitments at $1.25 billion,
a testament to the quality of the Company's asset base in a
changing commodity price environment. At first quarter-end, there
was zero drawn on the Company's credit facility and Net
debt-to-Adjusted EBITDAX(1) was 0.6 times.
- Stewardship recognition. SM Energy received a score of
A- from CDP for supplier engagement, exceeding CDP's North American
regional and E&P peer group averages. The Company considers
environmental stewardship one component of being a premier
operator.
President and Chief Executive Officer Herb Vogel comments: "During the first quarter,
we delivered on each of our core strategic objectives for 2023.
Return of capital to stockholders totaled $58.3 million in the quarter and $133.9 million since inception of the program in
September 2022. This equates to an
approximate 4% yield to market capitalization over a less than
8-month period. Our focus on operational execution delivered higher
than projected production, early completion of a seven-well pad in
South Texas and pads with top tier
lateral length wells in the Midland Basin, while our emphasis on building
inventory led to the acquisition of approximately 6,300 net
leasehold acres in the Midland
Basin. We are off to a strong start in 2023."
PRODUCTION BY OPERATING
AREA
|
|
|
|
|
|
Midland
Basin
|
South
Texas
|
Total
|
Oil (MBbl /
MBbl/d)
|
4,239
/ 47.1
|
1,424
/ 15.8
|
5,664
/ 62.9
|
Natural Gas (MMcf /
MMcf/d)
|
14,471
/ 160.8
|
17,760
/ 197.3
|
32,232
/ 358.1
|
NGLs (MBbl /
MBbl/d)
|
5 / -
|
2,138
/ 23.8
|
2,142
/ 23.8
|
Total (MBoe /
MBoe/d)
|
6,656
/ 74.0
|
6,522
/ 72.5
|
13,178
/ 146.4
|
Note: Totals may not
calculate due to rounding.
|
|
|
|
First quarter production volumes were 13.2 MMBoe, or 146.4
MBoe/d. Volumes were approximately 51% from the Midland Basin and 49% from South Texas, and were 43% oil.
First quarter volumes in South
Texas benefited from early time outperformance from all 16
new wells turned-in-line during the quarter. This includes seven
wells located in the liquids-rich northern area that have yet to
reach peak rates, which came on one week early with higher liquids
content than projected.
REALIZED PRICES BY
OPERATING AREA
|
|
|
|
|
|
Midland
Basin
|
South
Texas
|
Total
(Pre/Post-hedge)(1)
|
Oil ($/Bbl)
|
$75.51
|
$70.71
|
$74.31
/ $73.21
|
Natural Gas
($/Mcf)
|
$3.44
|
$2.47
|
$2.91
/ $3.26
|
NGLs ($/Bbl)
|
nm
|
$26.21
|
$26.24
/ $26.24
|
Per Boe
|
$55.61
|
$30.77
|
$43.31
/ $43.70
|
Note: Totals may not
calculate due to rounding.
|
|
|
|
The first quarter average realized price before the effect of
hedges was $43.31 per Boe, and the
average realized price after the effect of hedges (post-hedge) was
$43.70 per Boe.(1)
- Benchmark pricing for the quarter included NYMEX WTI at
$76.13/Bbl, NYMEX Henry Hub natural
gas at $3.42/MMBtu and OPIS Composite
NGLs at $30.95/Bbl.
- The effect of commodity derivative settlements for the first
quarter was a gain of $0.39 per Boe,
or $5.1 million.
- The realized price for natural gas continued to be affected by
wider differentials at the Midland
and Houston regional trading
hubs.
For additional operating metrics and regional detail, please see
the Financial Highlights section below and the accompanying slide
deck.
NET INCOME, NET INCOME PER SHARE AND NET CASH PROVIDED BY
OPERATING ACTIVITIES
First quarter 2023 net income was $198.6
million, or $1.62 per diluted
common share, compared with net income of $48.8 million, or $0.39 per diluted common share, for the same
period in 2022. The current year period included a 4% decline in
production volumes and a 13% decline in the average realized price
per Boe after derivative settlements, while benefiting from lower
interest expense and a (non-cash) net derivative gain. The higher
prior year period total oil, gas, and NGL production revenue and
other income was partially offset by a (non-cash) net derivative
loss.
First quarter 2023 net cash provided by operating
activities of $331.6 million
before net change in working capital of $26.2 million totaled $357.9 million(1) compared with net
cash provided by operating activities of $342.1 million before net change in working
capital of $138.0 million that
totaled $480.1 million for the
same period in 2022. The $122.2 million, or 25%, decline in the
current year period is primarily due to decreased realized prices
for natural gas and NGLs after the effect of derivative settlements
and reduced oil volumes.
ADJUSTED EBITDAX,(1) ADJUSTED NET
INCOME,(1) AND NET DEBT-TO-ADJUSTED
EBITDAX(1)
First quarter 2023 Adjusted EBITDAX(1) was
$401.4 million, down
$123.2 million, or 23%, from
$524.6 million for the same
period in 2022, primarily due to decreased realized prices for
natural gas and NGLs after the effect of derivative settlements and
reduced oil volumes.
First quarter 2023 Adjusted net income(1) was
$162.2 million, or $1.33 per diluted common share, which compares
with Adjusted net income(1) of $245.9 million, or $1.98 per diluted common share, for the same
period in 2022.
At March 31, 2023, Net debt-to-Adjusted
EBITDAX(1) was 0.6 times.
FINANCIAL POSITION, LIQUIDITY, CAPITAL EXPENDITURES AND ADJUSTED
FREE CASH FLOW(1)
On March 31, 2023, the outstanding principal amount of the
Company's long-term debt was $1.6
billion with zero drawn on the Company's senior secured
revolving credit facility, and cash and cash equivalents were
$477.9 million. Net
debt(1) was $1.1
billion.
Subsequent to quarter-end, the Company's lenders under its
senior secured revolving credit facility reaffirmed the borrowing
base at $2.5 billion and lender
commitments at $1.25 billion.
First quarter 2023 capital expenditures of $240.7 million adjusted for increased
capital accruals of $66.9 million were $307.6 million,(1) which included
$9.9 million for the acquisition of
leasehold acreage in the Midland
Basin that was not considered in guidance. Capital activity during
the quarter included drilling 15 net wells, of which 7 were in
South Texas and 8 were in the
Midland Basin, and adding 26 net
flowing completions, of which 16 were in South Texas and 10 were in the Midland Basin. In South Texas, the Company optimized drilling
efficiencies by replacing four planned 5,000 foot lateral wells
with four average 11,700 foot lateral wells, thereby extending the
drilling time of two pads into the second quarter. Capital
expenditures before acquisition costs were below the guidance range
of $320-330 million, primarily due to
timing and deferred facilities costs.
During the first quarter 2023, net cash provided by operating
activities of $331.6 million
before net change in working capital of $26.2 million totaled $357.9 million,(1) and capital
expenditures of $240.7 million
adjusted for increased capital accruals of $66.9 million totaled $307.6 million,(1) delivering
Adjusted free cash flow of $50.3 million.(1)
COMMODITY DERIVATIVES
As entered into as of April 24,
2023, commodity derivative positions for the second through
fourth quarters of 2023 include:
- Oil: Approximately 30% of expected 2Q-4Q 2023 oil production is
hedged to contract prices in the Midland Basin at an average price of
$75.29/Bbl (weighted-average of
collar floors and swaps, excludes basis swaps).
- Oil, Midland Basin
differential: Approximately 4,100 MBbls are hedged to the local
price point at a positive $0.92/Bbl
basis.
- Natural gas: Slightly less than 30% of 2Q-4Q 2023 expected
natural gas production is hedged at an average price of
$4.03/MMBtu (weighted-average of
collar floors and swaps, excludes basis swaps).
A detailed schedule of these and other derivative positions are
provided in the 1Q23 accompanying slide deck.
2023 OPERATING PLAN AND GUIDANCE
The Company is unable to provide a reconciliation of
forward-looking non-GAAP capital expenditures because components of
the calculation are inherently unpredictable, such as changes to,
and timing of, capital accruals. The inability to project certain
components of the calculation would significantly affect the
accuracy of a reconciliation.
GUIDANCE FULL YEAR 2023:
- Guidance metrics for full year 2023 are unchanged.
GUIDANCE SECOND QUARTER 2023:
- Capital expenditures (net of the change in capital accruals),
excluding acquisitions: $295-315
million. In the second quarter of 2023, the Company expects to
drill approximately 17 net wells, of which 10 are planned for
South Texas and 7 are planned for
the Midland Basin, and
turn-in-line approximately 22 net wells, of which 8 are planned for
South Texas and 14 are planned for
the Midland Basin.
- Production: 13.3-13.5 MMBoe or 146-148 MBoe/d, at 42-43% oil
and 59-60% liquids.
UPCOMING EVENTS
EARNINGS Q&A WEBCAST AND CONFERENCE CALL
April 28, 2023 – Please join SM
Energy management at 8:00 a.m. Mountain
time/10:00 a.m. Eastern time
for the first quarter 2023 financial and operating results Q&A
session. This discussion will be accessible via webcast (available
live and for replay) on the Company's website at ir.sm-energy.com
or by telephone. To join the live conference call, please register
at the link below for dial-in information.
- Live Conference Call Registration:
https://conferencingportals.com/event/pAjDSntN
- Replay (conference ID 11299) - Domestic toll
free/International: 800-770-2030/647-362-9199
The call replay will be available approximately one hour after
the call and until May 12, 2023.
CONFERENCE PARTICIPATION
- May 16-17, 2023 - TPH & CO
Hotter N' Hell Energy Conference. President and Chief Executive
Officer Herb Vogel will be meeting
with investors in one-on-one settings. The event will not be
webcast.
- June 6, 2023 - 2023 RBC Capital
Markets Global Energy, Power and Infrastructure Conference.
Executive Vice President and Chief Financial Officer Wade Pursell will host a breakout session at
11:20 a.m. Eastern time and will also
meet with investors in one-on-one settings. The presentation will
not be webcast. The Company will post a presentation to its website
prior to the event.
- June 7, 2023 - BofA Securities
2023 Energy Credit Conference. Executive Vice President and Chief
Financial Officer Wade Pursell will
be meeting with investors in one-on-one settings. The event will
not be webcast.
DISCLOSURES
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of securities laws. The words "estimate," "expect," "goal,"
"generate," "plan," "target," "believes," and similar expressions
are intended to identify forward-looking statements.
Forward-looking statements in this release include, among other
things, projections for the full year and second quarter 2023,
including guidance for capital expenditures, production, production
costs, DD&A, exploration expense and G&A; the percent of
future production to be hedged, and the number of wells the Company
plans to drill and complete in second quarter 2023. These
statements involve known and unknown risks, which may cause SM
Energy's actual results to differ materially from results expressed
or implied by the forward-looking statements. Future results may be
impacted by the risks discussed in the Risk Factors section of SM
Energy's most recent Annual Report on Form 10-K, and such risk
factors may be updated from time to time in the Company's other
periodic reports filed with the Securities and Exchange Commission.
The forward-looking statements contained herein speak as of the
date of this release. Although SM Energy may from time to time
voluntarily update its prior forward-looking statements, it
disclaims any commitment to do so, except as required by securities
laws.
FOOTNOTE 1
Indicates a non-GAAP measure or metric. Please refer below to
the section "Definitions of non-GAAP Measures and Metrics as
Calculated by the Company" in Financials Highlights for additional
information.
ABOUT THE COMPANY
SM Energy Company is an independent energy company engaged in
the acquisition, exploration, development, and production of oil,
gas, and NGLs in the state of Texas. SM Energy routinely posts important
information about the Company on its website. For more information
about SM Energy, please visit its website at www.sm-energy.com.
SM ENERGY INVESTOR CONTACTS
Jennifer Martin Samuels,
jsamuels@sm-energy.com, 303-864-2507
SM ENERGY
COMPANY
|
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
March 31,
2023
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
(in thousands, except
share data)
|
March
31,
|
|
December
31,
|
ASSETS
|
2023
|
|
2022
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
477,869
|
|
$
444,998
|
Accounts
receivable
|
187,810
|
|
233,297
|
Derivative
assets
|
81,062
|
|
48,677
|
Prepaid expenses and
other
|
9,535
|
|
10,231
|
Total current
assets
|
756,276
|
|
737,203
|
Property and equipment
(successful efforts method):
|
|
|
|
Proved oil and gas
properties
|
10,483,159
|
|
10,258,368
|
Accumulated depletion,
depreciation, and amortization
|
(6,339,303)
|
|
(6,188,147)
|
Unproved oil and gas
properties, net of valuation allowance of $37,904 and $38,008,
respectively
|
497,127
|
|
487,192
|
Wells in
progress
|
342,875
|
|
287,267
|
Other property and
equipment, net of accumulated depreciation of $57,338 and
$56,512,
respectively
|
45,694
|
|
38,099
|
Total property and
equipment, net
|
5,029,552
|
|
4,882,779
|
Noncurrent
assets:
|
|
|
|
Derivative
assets
|
15,373
|
|
24,465
|
Other noncurrent
assets
|
68,957
|
|
71,592
|
Total noncurrent
assets
|
84,330
|
|
96,057
|
Total
assets
|
$
5,870,158
|
|
$
5,716,039
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued expenses
|
$
522,279
|
|
$
532,289
|
Derivative
liabilities
|
30,723
|
|
56,181
|
Other current
liabilities
|
10,144
|
|
10,114
|
Total current
liabilities
|
563,146
|
|
598,584
|
Noncurrent
liabilities:
|
|
|
|
Revolving credit
facility
|
—
|
|
—
|
Senior Notes,
net
|
1,572,991
|
|
1,572,210
|
Asset retirement
obligations
|
110,163
|
|
108,233
|
Deferred income
taxes
|
330,782
|
|
280,811
|
Derivative
liabilities
|
3,639
|
|
1,142
|
Other noncurrent
liabilities
|
59,642
|
|
69,601
|
Total noncurrent
liabilities
|
2,077,217
|
|
2,031,997
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.01
par value - authorized: 200,000,000 shares; issued and
outstanding:
120,517,918 and 121,931,676 shares, respectively
|
1,205
|
|
1,219
|
Additional paid-in
capital
|
1,743,567
|
|
1,779,703
|
Retained
earnings
|
1,489,032
|
|
1,308,558
|
Accumulated other
comprehensive loss
|
(4,009)
|
|
(4,022)
|
Total stockholders'
equity
|
3,229,795
|
|
3,085,458
|
Total liabilities
and stockholders' equity
|
$
5,870,158
|
|
$
5,716,039
|
SM ENERGY
COMPANY
|
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
March 31,
2023
|
|
Condensed
Consolidated Statements of Operations
|
(in thousands, except
per share data)
|
For the Three Months
Ended
March
31,
|
|
2023
|
|
2022
|
Operating revenues
and other income:
|
|
|
|
Oil, gas, and NGL
production revenue
|
$
570,778
|
|
$
858,721
|
Other operating
income
|
2,727
|
|
1,055
|
Total operating
revenues and other income
|
573,505
|
|
859,776
|
Operating
expenses:
|
|
|
|
Oil, gas, and NGL
production expense
|
142,348
|
|
144,691
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
154,189
|
|
159,481
|
Exploration
(1)
|
18,428
|
|
9,046
|
General and
administrative (1)
|
27,669
|
|
24,996
|
Net derivative (gain)
loss (2)
|
(51,329)
|
|
418,521
|
Other operating
expense, net
|
10,153
|
|
1,305
|
Total operating
expenses
|
301,458
|
|
758,040
|
Income from
operations
|
272,047
|
|
101,736
|
Interest
expense
|
(22,459)
|
|
(39,387)
|
Other non-operating
income (expense), net
|
4,470
|
|
(724)
|
Income before income
taxes
|
254,058
|
|
61,625
|
Income tax
expense
|
(55,506)
|
|
(12,861)
|
Net
income
|
$
198,552
|
|
$
48,764
|
|
|
|
|
Basic weighted-average
common shares outstanding
|
121,671
|
|
121,907
|
Diluted
weighted-average common shares outstanding
|
122,294
|
|
124,179
|
Basic net income per
common share
|
$
1.63
|
|
$
0.40
|
Diluted net income per
common share
|
$
1.62
|
|
$
0.39
|
Dividends per common
share
|
$
0.15
|
|
$
0.01
|
|
|
|
|
(1)
Non-cash stock-based compensation included in:
|
|
|
|
Exploration
expense
|
$
951
|
|
$
991
|
General and
administrative expense
|
3,367
|
|
3,283
|
Total non-cash
stock-based compensation
|
$
4,318
|
|
$
4,274
|
|
|
|
|
(2)
The net derivative (gain) loss line item consists of the
following:
|
|
|
|
Derivative settlement
(gain) loss
|
$
(5,076)
|
|
$
168,183
|
(Gain) loss on fair
value changes
|
(46,253)
|
|
250,338
|
Total net derivative
(gain) loss
|
$
(51,329)
|
|
$
418,521
|
SM ENERGY
COMPANY
|
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
March 31,
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Stockholders' Equity
|
(in thousands, except
share data and dividends per share)
|
|
|
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|
Common
Stock
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balances, December
31, 2022
|
121,931,676
|
|
$
1,219
|
|
$
1,779,703
|
|
$
1,308,558
|
|
$
(4,022)
|
|
$
3,085,458
|
Net income
|
—
|
|
—
|
|
—
|
|
198,552
|
|
—
|
|
198,552
|
Other comprehensive
income
|
—
|
|
—
|
|
—
|
|
—
|
|
13
|
|
13
|
Cash dividends
declared, $0.15 per share
|
—
|
|
—
|
|
—
|
|
(18,078)
|
|
—
|
|
(18,078)
|
Stock-based
compensation expense
|
—
|
|
—
|
|
4,318
|
|
—
|
|
—
|
|
4,318
|
Purchase of shares
under Stock
Repurchase Program
|
(1,413,758)
|
|
(14)
|
|
(40,454)
|
|
—
|
|
—
|
|
(40,468)
|
Balances, March 31,
2023
|
120,517,918
|
|
$
1,205
|
|
$
1,743,567
|
|
$
1,489,032
|
|
$
(4,009)
|
|
$
3,229,795
|
|
|
|
|
|
Additional
Paid-in
Capital
|
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|
Common
Stock
|
|
|
Retained
Earnings
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balances, December
31, 2021
|
121,862,248
|
|
$
1,219
|
|
$
1,840,228
|
|
$
234,533
|
|
$
(12,849)
|
|
$
2,063,131
|
Net income
|
—
|
|
—
|
|
—
|
|
48,764
|
|
—
|
|
48,764
|
Other comprehensive
income
|
—
|
|
—
|
|
—
|
|
—
|
|
182
|
|
182
|
Cash dividends
declared, $0.01 per share
|
—
|
|
—
|
|
—
|
|
(1,218)
|
|
—
|
|
(1,218)
|
Issuance of common
stock upon vesting
of RSUs, net of shares used for tax
withholdings
|
1,929
|
|
—
|
|
(24)
|
|
—
|
|
—
|
|
(24)
|
Stock-based
compensation expense
|
—
|
|
—
|
|
4,274
|
|
—
|
|
—
|
|
4,274
|
Balances, March 31,
2022
|
121,864,177
|
|
$
1,219
|
|
$
1,844,478
|
|
$
282,079
|
|
$
(12,667)
|
|
$
2,115,109
|
SM ENERGY
COMPANY
|
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
March 31,
2023
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
|
(in
thousands)
|
For the Three Months
Ended
March
31,
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
198,552
|
|
$
48,764
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
154,189
|
|
159,481
|
Stock-based
compensation expense
|
4,318
|
|
4,274
|
Net derivative (gain)
loss
|
(51,329)
|
|
418,521
|
Derivative settlement
gain (loss)
|
5,076
|
|
(168,183)
|
Amortization of debt
discount and deferred financing costs
|
1,371
|
|
4,010
|
Deferred income
taxes
|
49,968
|
|
11,948
|
Other, net
|
(4,295)
|
|
1,239
|
Net change in working
capital
|
(26,216)
|
|
(137,962)
|
Net cash provided by
operating activities
|
331,634
|
|
342,092
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(240,712)
|
|
(150,127)
|
Other, net
|
307
|
|
—
|
Net cash used in
investing activities
|
(240,405)
|
|
(150,127)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Cash paid to
repurchase Senior Notes
|
—
|
|
(104,770)
|
Repurchase of common
stock
|
(40,068)
|
|
—
|
Dividends
paid
|
(18,290)
|
|
—
|
Other, net
|
—
|
|
(24)
|
Net cash used in
financing activities
|
(58,358)
|
|
(104,794)
|
|
|
|
|
Net change in cash,
cash equivalents, and restricted cash
|
32,871
|
|
87,171
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
444,998
|
|
332,716
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
477,869
|
|
$
419,887
|
|
|
|
|
Supplemental
schedule of additional cash flow information:
|
|
|
|
Operating
activities:
|
|
|
|
Cash paid for
interest, net of capitalized interest
|
$
(33,882)
|
|
$
(64,204)
|
Investing
activities:
|
|
|
|
Increase in capital
expenditure accruals and other
|
$
66,873
|
|
$
15,627
|
|
DEFINITIONS OF NON-GAAP MEASURES AND METRICS AS CALCULATED BY
THE COMPANY
To supplement the presentation of its financial results prepared
in accordance with U.S. generally accepted accounting principles
(GAAP), the Company provides certain non-GAAP measures and metrics,
which are used by management and the investment community to assess
the Company's financial condition, results of operations, and cash
flows, as well as compare performance from period to period and
across the Company's peer group. The Company believes these
measures and metrics are widely used by the investment community,
including investors, research analysts and others, to evaluate and
compare recurring financial results among upstream oil and gas
companies in making investment decisions or recommendations. These
measures and metrics, as presented, may have differing calculations
among companies and investment professionals and may not be
directly comparable to the same measures and metrics provided by
others. A non-GAAP measure should not be considered in isolation or
as a substitute for the most directly comparable GAAP measure or
any other measure of a company's financial or operating performance
presented in accordance with GAAP. A reconciliation of the
Company's non-GAAP measures to the most directly comparable GAAP
measure is presented below. These measures may not be comparable to
similarly titled measures of other companies.
Adjusted EBITDAX: Adjusted EBITDAX is calculated
as net income (loss) before interest expense, interest income,
income taxes, depletion, depreciation, amortization and asset
retirement obligation liability accretion expense, exploration
expense, property abandonment and impairment expense, non-cash
stock-based compensation expense, derivative gains and losses net
of settlements, gains and losses on divestitures, gains and losses
on extinguishment of debt, and certain other items. Adjusted
EBITDAX excludes certain items that the Company believes affect the
comparability of operating results and can exclude items that are
generally non-recurring in nature or whose timing and/or amount
cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP
measure that the Company believes provides useful additional
information to investors and analysts, as a performance measure,
for analysis of the Company's ability to internally generate funds
for exploration, development, acquisitions, and to service debt.
The Company is also subject to financial covenants under the
Company's Credit Agreement, a material source of liquidity for the
Company, based on Adjusted EBITDAX ratios. Please reference the
Company's first quarter 2023 Form 10-Q and the most recent
Annual Report on Form 10-K for discussion of the Credit Agreement
and its covenants.
Adjusted net income (loss) and adjusted net income (loss) per
diluted common share: Adjusted net income (loss)
and adjusted net income (loss) per diluted common share excludes
certain items that the Company believes affect the comparability of
operating results, including items that are generally non-recurring
in nature or whose timing and/or amount cannot be reasonably
estimated. These items include non-cash and other adjustments, such
as derivative gains and losses net of settlements, impairments, net
(gain) loss on divestiture activity, gains and losses on
extinguishment of debt, and accruals for non-recurring matters. The
Company uses these measures to evaluate the comparability of the
Company's ongoing operational results and trends and believes these
measures provide useful information to investors for analysis of
the Company's fundamental business on a recurring basis.
Adjusted free cash flow: Adjusted free cash flow
is calculated as net cash provided by operating activities before
net change in working capital less capital expenditures before
increase (decrease) in capital expenditure accruals and other. The
Company uses this measure as representative of the cash from
operations, in excess of capital expenditures that provides
liquidity to fund discretionary obligations such as debt reduction,
returning cash to stockholders or expanding the business.
Net debt: Net debt is calculated as the total
principal amount of outstanding senior notes plus amounts
drawn on the revolving credit facility less cash and cash
equivalents (also referred to as total funded debt). The Company
uses net debt as a measure of financial position and believes this
measure provides useful additional information to investors to
evaluate the Company's capital structure and financial
leverage.
Net debt-to-Adjusted EBITDAX: Net debt-to-Adjusted
EBITDAX is calculated as Net Debt (defined above) divided by
Adjusted EBITDAX (defined above) for the trailing twelve-month
period (also referred to as leverage ratio). A variation of this
calculation is a financial covenant under the Company's Credit
Agreement. The Company and the investment community may use this
metric in understanding the Company's ability to service its debt
and identify trends in its leverage position. The Company
reconciles the two non-GAAP measure components of this
calculation.
Post-hedge: Post-hedge is calculated as the average
realized price after the effects of commodity derivative
settlements. The Company believes this metric is useful to
management and the investment community to understand the effects
of commodity derivative settlements on average realized
price.
SM ENERGY
COMPANY
|
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
March 31,
2023
|
|
|
|
|
|
|
|
|
|
|
Production
Data
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended
|
|
Percent
Change
Between
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
1Q23 &
4Q22
|
|
1Q23 &
1Q22
|
|
2023
|
|
2022
|
|
2022
|
|
|
Realized sales price
(before the effect of derivative settlements):
|
Oil (per
Bbl)
|
$
74.31
|
|
$
82.35
|
|
$
94.03
|
|
(10) %
|
|
(21) %
|
Gas (per
Mcf)
|
$
2.91
|
|
$
4.52
|
|
$
5.42
|
|
(36) %
|
|
(46) %
|
NGLs (per
Bbl)
|
$
26.24
|
|
$
26.10
|
|
$
38.56
|
|
1 %
|
|
(32) %
|
Equivalent (per
Boe)
|
$
43.31
|
|
$
50.92
|
|
$
62.25
|
|
(15) %
|
|
(30) %
|
Realized sales price
(including the effect of derivative settlements):
|
Oil (per
Bbl)
|
$
73.21
|
|
$
67.30
|
|
$
74.03
|
|
9 %
|
|
(1) %
|
Gas (per
Mcf)
|
$
3.26
|
|
$
3.60
|
|
$
4.56
|
|
(9) %
|
|
(29) %
|
NGLs (per
Bbl)
|
$
26.24
|
|
$
25.83
|
|
$
32.89
|
|
2 %
|
|
(20) %
|
Equivalent (per
Boe)
|
$
43.70
|
|
$
42.12
|
|
$
50.06
|
|
4 %
|
|
(13) %
|
Net production
volumes: (1)
|
Oil (MMBbl)
|
5.7
|
|
5.7
|
|
6.5
|
|
(1) %
|
|
(12) %
|
Gas (Bcf)
|
32.2
|
|
32.1
|
|
31.4
|
|
— %
|
|
3 %
|
NGLs
(MMBbl)
|
2.1
|
|
2.1
|
|
2.1
|
|
3 %
|
|
2 %
|
Equivalent
(MMBoe)
|
13.2
|
|
13.1
|
|
13.8
|
|
— %
|
|
(4) %
|
Average net daily
production: (1)
|
Oil (MBbl per
day)
|
62.9
|
|
62.0
|
|
71.8
|
|
1 %
|
|
(12) %
|
Gas (MMcf per
day)
|
358.1
|
|
348.9
|
|
348.4
|
|
3 %
|
|
3 %
|
NGLs (MBbl per
day)
|
23.8
|
|
22.7
|
|
23.4
|
|
5 %
|
|
2 %
|
Equivalent (MBoe per
day)
|
146.4
|
|
142.9
|
|
153.3
|
|
2 %
|
|
(4) %
|
Per Boe
data:
|
|
|
|
|
|
|
|
|
|
Lease operating
expense
|
$
5.16
|
|
$
5.20
|
|
$
4.25
|
|
(1) %
|
|
21 %
|
Transportation
costs
|
$
2.81
|
|
$
2.86
|
|
$
2.74
|
|
(2) %
|
|
3 %
|
Production
taxes
|
$
2.02
|
|
$
2.43
|
|
$
2.93
|
|
(17) %
|
|
(31) %
|
Ad valorem tax
expense
|
$
0.81
|
|
$
0.97
|
|
$
0.58
|
|
(16) %
|
|
40 %
|
General and
administrative (2)
|
$
2.10
|
|
$
2.50
|
|
$
1.81
|
|
(16) %
|
|
16 %
|
Derivative settlement
gain (loss)
|
$
0.39
|
|
$
(8.80)
|
|
$
(12.19)
|
|
104 %
|
|
103 %
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
$
11.70
|
|
$
10.93
|
|
$
11.56
|
|
7 %
|
|
1 %
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts
and percentage changes may not calculate due to
rounding.
|
(2) Includes
non-cash stock-based compensation expense per Boe of $0.26, $0.30,
and $0.24 for the three months ended March 31, 2023,
December
31, 2022, and March 31, 2022,
respectively.
|
SM ENERGY
COMPANY
|
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
March 31,
2023
|
|
|
|
Adjusted EBITDAX
Reconciliation (1)
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net
income (GAAP) and net cash provided by operating
activities (GAAP) to Adjusted EBITDAX (non-GAAP):
|
For the Three Months
Ended
March 31,
|
|
For the Trailing
Twelve Months
ended March 31,
|
|
2023
|
|
2022
|
|
2023
|
Net income
(GAAP)
|
$
198,552
|
|
$
48,764
|
|
$
1,261,740
|
Interest
expense
|
22,459
|
|
39,387
|
|
103,418
|
Income tax
expense
|
55,506
|
|
12,861
|
|
326,463
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
154,189
|
|
159,481
|
|
598,488
|
Exploration
(2)
|
17,477
|
|
8,055
|
|
60,400
|
Stock-based
compensation expense
|
4,318
|
|
4,274
|
|
18,816
|
Net derivative (gain)
loss
|
(51,329)
|
|
418,521
|
|
(95,838)
|
Derivative settlement
gain (loss)
|
5,076
|
|
(168,183)
|
|
(537,441)
|
Net loss on
extinguishment of debt
|
—
|
|
379
|
|
67,226
|
Other, net
|
(4,854)
|
|
1,025
|
|
(8,154)
|
Adjusted EBITDAX
(non-GAAP)
|
$
401,394
|
|
$
524,564
|
|
$
1,795,118
|
Interest
expense
|
(22,459)
|
|
(39,387)
|
|
(103,418)
|
Income tax
expense
|
(55,506)
|
|
(12,861)
|
|
(326,463)
|
Exploration
(2)(3)
|
(8,181)
|
|
(8,055)
|
|
(36,936)
|
Amortization of debt
discount and deferred financing costs
|
1,371
|
|
4,010
|
|
7,642
|
Deferred income
taxes
|
49,968
|
|
11,948
|
|
307,077
|
Other, net
|
(8,737)
|
|
(165)
|
|
(6,755)
|
Net change in working
capital
|
(26,216)
|
|
(137,962)
|
|
39,683
|
Net cash provided by
operating activities (GAAP)
|
$
331,634
|
|
$
342,092
|
|
$
1,675,948
|
|
|
|
|
|
|
(1)
See "Definitions of non-GAAP Measures and Metrics as Calculated by
the Company" above.
|
(2)
Stock-based compensation expense is a component of the exploration
expense and general and administrative expense line items on the
unaudited condensed
consolidated statements of operations.
Therefore, the exploration line items shown in the reconciliation
above will vary from the amount shown on the unaudited
condensed consolidated statements of operations
for the component of stock-based compensation expense recorded to
exploration expense.
|
(3)
For the three and trailing twelve months ended March 31, 2023,
amount excludes certain capital expenditures related to
unsuccessful exploration activity for one well that
experienced technical issues during the
drilling phase. For the trailing twelve months ended March
31, 2023, amount also excludes certain capital expenditures related
to
unsuccessful exploration efforts outside of the
Company's core areas of operation.
|
SM ENERGY
COMPANY
|
FINANCIAL HIGHLIGHTS
(UNAUDITED)
|
March 31,
2023
|
|
Adjusted Net Income
Reconciliation (1)
|
(in thousands, except
per share data)
|
|
Reconciliation of net
income (GAAP) to adjusted net income (non-GAAP):
|
For the Three Months
Ended
March
31,
|
|
2023
|
|
2022
|
Net income
(GAAP)
|
$
198,552
|
|
$
48,764
|
Net derivative (gain)
loss
|
(51,329)
|
|
418,521
|
Derivative settlement
gain (loss)
|
5,076
|
|
(168,183)
|
Other, net
|
(152)
|
|
1,443
|
Tax effect of
adjustments (2)
|
10,070
|
|
(54,636)
|
Adjusted net income
(non-GAAP)
|
$
162,217
|
|
$
245,909
|
|
|
|
|
Diluted net income
per common share (GAAP)
|
$
1.62
|
|
$
0.39
|
Net derivative (gain)
loss
|
(0.42)
|
|
3.37
|
Derivative settlement
gain (loss)
|
0.04
|
|
(1.35)
|
Other, net
|
0.01
|
|
0.01
|
Tax effect of
adjustments (2)
|
0.08
|
|
(0.44)
|
Adjusted net income
per diluted common share (non-GAAP)
|
$
1.33
|
|
$
1.98
|
|
|
|
|
Basic weighted-average
common shares outstanding
|
121,671
|
|
121,907
|
Diluted
weighted-average common shares outstanding
|
122,294
|
|
124,179
|
|
|
|
|
Note: Amounts may not
calculate due to rounding.
|
|
|
|
|
|
|
|
(1) See
"Definitions of non-GAAP Measures and Metrics as Calculated by the
Company" above.
|
(2) The tax
effect of adjustments for each of the three months ended
March 31, 2023, and
2022, was calculated using a tax rate of 21.7%.
This rate approximates the Company's
statutory tax rate for the respective periods,
as adjusted for ordinary permanent differences.
|
|
|
Reconciliation of
Total Principal Amount of Debt to Net
Debt (1)
|
(in
thousands)
|
|
As of March 31,
2023
|
Principal amount of
Senior Notes (2)
|
$
1,585,144
|
Revolving credit
facility (2)
|
—
|
Total principal
amount of debt (GAAP)
|
1,585,144
|
Less: Cash and cash
equivalents
|
477,869
|
Net Debt
(non-GAAP)
|
$
1,107,275
|
|
|
(1) See
"Definitions of non-GAAP Measures and Metrics as Calculated by the
Company" above.
|
(2) Amounts
are from Note 5 - Long-term Debt in Part I, Item I of the Company's
Form 10-Q as of March 31, 2023.
|
|
|
Adjusted Free Cash
Flow (1)
|
(in
thousands)
|
|
For the Three Months
Ended
March
31,
|
|
2023
|
|
2022
|
Net cash provided by
operating activities (GAAP)
|
$
331,634
|
|
$
342,092
|
Net change in working
capital
|
26,216
|
|
137,962
|
Cash flow from
operations before net change in working capital
(non-GAAP)
|
357,850
|
|
480,054
|
|
|
|
|
Capital expenditures
(GAAP)
|
240,712
|
|
150,127
|
Increase in capital
expenditure accruals and other
|
66,873
|
|
15,627
|
Capital expenditures
before accruals and other (non-GAAP)
|
307,585
|
|
165,754
|
|
|
|
|
Adjusted free cash
flow (non-GAAP)
|
$
50,265
|
|
$
314,300
|
|
|
|
|
(1) See
"Definitions of non-GAAP Measures and Metrics as Calculated by the
Company" above.
|
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SOURCE SM Energy Company