AUGUST 2018 INVESTOR PRESENTATION AUGUST 21, 2018
PLEASE READ THIS PRESENTATION MAKES REFERENCE TO: Forward-looking statements This presentation contains forward- looking statements within the meaning of securities laws. The words “anticipate,” “assume,” “believe,” “pending,” “budget,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “plan,” “project,” “will” and similar expressions are inten ded to identify forward-looking statements. 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. Forward-looking statements in this presentation include, among other things, guidance for production, total capital spend, and other measures. General risk factors include the availability of and access to capital markets; the availability, proximity and capacity of gathering, processing and transportation facilities; the volatility and level of oil, natural gas, and natural gas liquids prices, including any impact on the Company’s asset carrying values or reserves arising from price declines; uncertainties inherent in projecting future rates of production or other results from drilling and completion activities; the imprecise nature of estimating oil and natural gas reserves; uncertainties inherent in projecting future drilling and completion activities, costs or results, including from pilot tests; the uncertainty of negotiations to result in an agreement or a completed transaction; uncertainties inherent in projecting the timing and ultimate outcome of litigation; the uncertain nature of acquisition, divestiture, joint venture, farm down or similar efforts and the ability to complete any such transactions; the uncertain nature of expected benefits from the actual or expected acquisition, divestiture, drilling carry, farm down or similar efforts; the availability of additional economically attractive exploration, development, and acquisition opportunities for future growth and any necessary financings; unexpected drilling conditions and results; unsuccessful exploration and development drilling results; the availability of drilling, completion, and operating equipment and services; the risks associated with the Company's commodity price risk management strategy; uncertainty regarding the ultimate impact of potentially dilutive securities; and other such matters discus sed in the “Risk Factors” section of SM Energy's 2017 Annual Report on Form 10-K, as 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 announcement. 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. Non-GAAP financial measures: See Appendix for reconciliations Non-GAAP forward looking metrics: See Appendix for definitions 2
OUR VISION CREATING DIFFERENTIAL VALUE FOR OUR STAKEHOLDERS “ CASH FLOW GROWTH PER ~ 35 % PREMIER DEBT ADJUSTED SHARE IS OPERATOR THE METRIC WITH THE C A G R 2 0 1 7 - 1 9 E x p e c t e d HIGHEST CORRELATION TO CASH FLOW GROWTH INTRA SECTOR RELATIVE TOP TIER PER DEBT PERFORMANCE” ASSETS ~ 35 % ADJUSTED SHARE (1) – Credit Suisse 12/11/17 (2) (1) See Appendix for Cash Flow per Debt Adjusted Share definition (2) Betty Jiang and William Featherston, Credit Suisse 3
SM ENERGY: A TRANSFORMED PORTFOLIO FOCUSED ON TWO BASINS IN TEXAS MIDLAND BASIN ▪ ~82,500 net acres ▪ 7 Rigs / 3 Frac Crews EAGLE FORD ▪ ~165,000 net acres ~ 35 % ▪ 2 Rigs / 1 Frac Crew 4
RAPID IMPROVEMENT PRODUCTION UP, LEVERAGE DOWN Cash flow growth, up ~60% year over year (1) • Big Midland production growth • Rapid margin expansion; highest in 15 quarters Operational execution: New wells outperforming • Record RockStar wells; 24 new RockStar wells average 1,330 Boe/d peak 30-day IP rates (87% oil) • Increasing returns through efficiencies Significant reduction/restructuring of long-term debt • Redeemed $345MM 6.5% Senior Notes • Refinancing ~$480 MM in earlier maturities to 2027 $345 million ~$42/Boe Debt Reduction Permian Operating Margin (2) (1) 2Q18 / 2Q17 (2) 2Q18 Permian Basin regional production margin of $44.55 less corporate G&A per Boe. 5
MIDLAND BASIN EXECUTING ON OUR PLAN Midland Basin ~82,500 net acres • 38 net completions in 2Q18 - 30 in RockStar area RockStar • 7 rigs currently; expected to reduce to 6 in 3Q18 • 3 frac fleets operating at high efficiency • ~37 net completions expected in 3Q18; ~11 net completions expected in 4Q18 Sweetie Peck • Focusing on co-development of intervals 6
MIDLAND BASIN PRODUCTION GROWTH TRAJECTORY FASTER PACED D&C + WELL PERFORMANCE DRIVE PRODUCTION BEATS • Expected Permian production growth up ~90% 2018/2017 • Production outperformance drives margin growth • 2019 kicks off with 25-well Merlin-Maximus development expected to start 1Q19 Outperformance v. original plan Production (MBoe) 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18e 4Q18e Outperformance v. original plan Note: 2018 estimated Permian Basin production by quarter based on current plan. 7
MIDLAND BASIN TOP WELL RESULTS SM RANKS #1 IN REVENUE PER WELL (1) (1) Baird Equity Research 8/13/18 – Joseph Allman 8
MIDLAND BASIN ROCKSTAR NEW WELL RESULTS GREAT RESULTS - MULTIPLE INTERVALS - ACROSS ACREAGE NEW WELLS AVERAGE 1,330 BOE /D, 87% OIL (10,180’ LATERAL LENGTH) Spackler 3326LS Big Daddy A 1844WA Spackler 3346WA Big Daddy B 1845WA Farva B 4845WA Spackler 3372WB 30 Day Avg Peak Rate: Farva A 4844WA Spackler 3364WB 1,070 Boe/d 30 Day Avg Peak Rate: 30 Day Avg Peak Rate: (90% oil) 1,735 Boe/d 1,070 Boe/d (88% oil) (90% oil) O’Hagen 2047WA O’Hagen 2048WA Kramer A 4841WA 30 Day Avg Peak Rate: Kramer B 4842WA 909 Boe/d Kramer A 4861WB (90% oil) 30 Day Avg Peak Rate: 1,385 Boe/d (87% oil) Costanza B 4846WA Costanza A 4863WB Costanza C 4864WB 30 Day Avg Peak Rate: Michael Scott 1741WA 1,266 Boe/d Michael Scott 1742WA (85% oil) Michael Scott 1743WA Kramer C 4843WA Michael Scott 1761WB Kramer D 4844WA Michael Scott 1762WB Kramer C 4862WB 30 Day Avg Peak Rate: 30 Day Avg Peak Rate: 1,198 Boe/d 1,467 Boe/d (86% oil) (85% oil) 9
MIDLAND BASIN ROCKSTAR NEW WELL RESULTS NEW WELLS AT TIGHTER AVERAGE SPACING 250,000 200,000 Cumulative Production (BOE) 150,000 100,000 50,000 0 0 30 60 90 120 150 180 210 240 270 300 330 360 Days on Production (1) (2) Previously Reported Well Avg New Well Avg PEER 1MMBOE Note: Monthly data normalized to days on production; as of July 23, 2018 (1) Previously Reported Well Average includes all (55) previously reported SM operated wells on production since 11/3/2016. (2) New Well Average includes 24 new wells that have not been previously reported. 10
MIDLAND BASIN DRIVING CAPITAL EFFICIENCY LOCAL SAND ARRANGEMENT WITH US SILICA & SANDBOX LOGISTICS New sand mines close to SM operations ~55 miles (1) Substantial ~48 miles (1) capital savings per well Lamesa (3Q18) Crane (1Q18) (1) Road miles 11
MIDLAND BASIN DRIVING CAPITAL EFFICIENCY COMPLETIONS EFFICIENCY AND LOCAL SAND USAGE Current Sand Costs (1) Percent Improvement in Stages Pumped Per Day Since 3Q16 Indexed to January 2018 1.1 120% Indexed to Northern White – Jan 18 100% Percent Improvement 1.0 80% Sand Cost Index 60% 0.9 40% 20% 0.8 0% 0.7 -20% Jan Feb Mar Apr May Jun Jul 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 (1) Excludes last mile logistics 12
MIDLAND BASIN WATER MANAGEMENT INFRASTRUCTURE BACKBONE OF INFRASTRUCTURE IN PLACE Currently 95%+ Midland water on pipe Expected cost Accelerates System savings development control (LOE + Capital) 13
PERMIAN OIL TAKEAWAY AND PRICING TAKEAWAY COMMITMENTS + PRICING PROTECTION Takeaway commitments • Firm sales agreements in place with multiple purchasers that cover current and projected oil production over the next year Midland – Cushing Oil Basis Swaps • 2H18: 6,345 MBbls of Permian oil production covered by basis hedges at an average price differential of $1.07 • 2019: 11,216 MBbls of Permian oil production covered by basis hedges at an average price differential of $3.36 14
EAGLE FORD ENHANCING INVENTORY VALUE Eagle Ford ~165,000 net acres • Up-spacing • Assessing new intervals • Optimizing completions • Running 2 rigs and 1 frac fleet in August • Expect to complete 4 net wells in 3Q18; 7 net completions expected in 4Q18 15
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