JUNE 2018 INVESTOR PRESENTATION
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, expected Permian Basin production, expectations about future cost inflation, and the expected benefits from joint venture arrangements. 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 discussed 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
SM ENERGY PREMIER OPERATOR OF TOP TIER ASSETS FOCUSED ON TWO BASINS IN TEXAS • Market capitalization: ~$3.0B (1) • Production: ~113 MBoe/d; 42% oil, 41% natural gas, 17% MIDLAND BASIN ▪ ~82,500 net acres NGLs (1Q18) ▪ 8 Rigs / 4 Frac Crews • Proved Reserves: 468 MMBoe; EAGLE FORD ▪ ~165,000 net acres 46% proved developed (YE17) ~ 35 % ▪ 2 Rigs / 1 Frac Crew • Expected 2018 Capital Spend: $1.27 billion (1) As of May 31, 2018 3
2017-2019 DRIVING DIFFERENTIAL VALUE OFF TO A GREAT START IN 2018 “ 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 4
FIRST QUARTER 2018 HIGHLIGHTS Cash flow growth, up 30% sequentially • Rapid margin expansion, highest in 14 quarters • Big Midland production growth Operational execution: New wells outperforming expectations • 19 new RockStar wells average 1,440 Boe/d peak 30-day IP rates (88% oil) Significant reduction in net debt • Non-core asset sales year-to-date reduce net debt and core up portfolio $792 million $1.6 billion Non-core asset sales (1) Liquidity (2) (1) Non-core asset sales in the Powder River Basin, North Dakota and Texas completed through May 2018 (2) As of March 31, 2018; commitment amount as of May 30, 2018 5
MIDLAND BASIN EXECUTING ON OUR PLAN Midland Basin ~82,500 net acres • 17 net completions in 1Q18 - 15 in RockStar area RockStar • 8 rigs currently • 4 frac fleets operating at high efficiency • ~36 net completions expected in 2Q18 Sweetie Peck • Focusing on co-development of intervals 6
MIDLAND BASIN TOP WELL RESULTS SM RANKS #1 IN REVENUE PER WELL & REVENUE PER LATERAL FOOT (1) (1) Baird Equity Research 3/28/18 – Joseph Allman 7
2017-2019 PERMIAN HIGH RATE OF CHANGE EXPECTED BIG PERMIAN PRODUCTION GROWTH & MARGIN EXPANSION • Permian projected production growth up ~135% 2017-2019 • Company projected cash operating margin up over 45% 2017-2019 Production (MBoe) 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18e 3Q18e 4Q18e Note: 2018 estimated Permian Basin production by quarter based on February 2018 plan, updated for Halff East divestiture. 8
ROCKSTAR NEW WELL RESULTS GREAT RESULTS IN MULTIPLE INTERVALS ACROSS ACREAGE POSITION NEW WELLS AVERAGE 1,440 BOE /D, 88% OIL (10,200’ LATERAL LENGTH) Fezzik A 2443WA Fezzik A 2444WA 30 Day Avg Peak Rate: Guitar North 2850WA 1,536 Boe/d Guitar North 2851WA (89% oil) Guitar North 2852WA Guitar North 2867WB Guitar North 2868WB Wiley Bob A 2351WA 30 Day Avg Peak Rate: Wiley Bob 2352WA (1) 1,607 Boe/d 30 Day Avg Peak Rate: (87% oil) 941 Boe/d (90% oil) (1) 7,708’ lateral length Lumbergh 2547WA Lumbergh 2548WA Lumbergh 2565WB 30 Day Avg Peak Rate: 1,623 Boe/d Berlinda Ann 2341WA (85% oil) Berlinda Ann 2342WA Berlinda Ann 2361WB Whitaker 22-27 Unit 2251WA Lumbergh 2527LS Whitaker 22-27 Unit 2252WA Lumbergh 2528LS 30 Day Avg Peak Rate: 30 Day Avg Peak Rate: 1,305 Boe/d 1,485 Boe/d (90% oil) (87% oil) 9
ROCKSTAR NEW WELL RESULTS NEW WELLS CONTINUE OUTPERFORMANCE TREND 300,000 250,000 Cumulative Production (BOE) 200,000 150,000 100,000 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 April 26, 2018 (1) Previously Reported Well Average includes all (36) previously reported SM operated wells on production since 11/3/2016. (2) New Well Average includes 19 new wells that have not been previously reported. 10
MIDLAND BASIN INFRASTRUCTURE WATER MANAGEMENT INVESTING $70MM IN FRESH AND PRODUCED WATER INFRASTRUCTURE IN 2018 Currently 95%+ Midland water on pipe Expected cost Accelerates System savings development control (LOE + Capital) 11
MIDLAND BASIN INFRASTRUCTURE REGIONAL SAND POSITIVE ARRANGEMENT WITH US SILICA & SANDBOX LOGISTICS New sand mines close to SM operations ~55 miles (1) >$400K ~48 miles (1) expected capital savings per well Lamesa (3Q18) Crane (1Q18) (1) Road miles 12
MIDLAND BASIN INFRASTRUCTURE TAKEAWAY MULTIPLE PURCHASERS WITH FT ASSURE RELIABLE SM TAKEAWAY High quality WTI Multiple purchasers Sales at wellhead; used by TX with FT; excellent ~90% of oil on pipe gathering is firm refineries; SM oil relationships 37-41 gravity Permian Basin Oil Takeaway 13
EAGLE FORD ENHANCING VALUE OF INVENTORY Eagle Ford ~165,000 net acres • Up-spacing to improve returns • Assessing new intervals • Optimizing completions JV Area • Running 2 rigs and 1 frac fleet • Expect to complete 9 net wells in 2Q18 14
BALANCE SHEET OFFERS FINANCIAL FLEXIBILITY LIQUIDITY OF $1.6B, INCLUDING $643MM CASH ON HAND (1) • Rapidly reducing net debt with $792MM non-core asset sales year-to-date • Net debt:TTM Adjusted EBITDAX 3.3 times at 3/31/18; below 3.0 times projected year-end • No bond maturities until 2021 • Senior Secured Debt:TTM Adjusted EBITDAX at 0.0 times; max ratio allowed 2.75 times • TTM Adjusted EBITDAX:Interest at ~4.1 times; minimum ratio required 2.0 times Debt Maturities (1) (in millions) $1,500 $1,250 Borrowing Base: $1.27B (2) $1,000 Commitments: $1.0B (2) $750 $500 $172.5 $562 $500 $500 $500 $250 $395 $345 $0 drawn $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 1.500% Coupon 6.125% 6.500% 5.000% 5.625% 6.750% 6.500% Yield to worst (3) 5.41% 5.41% 5.79% 6.26% 6.48% 6.63% Initial call date 11/2016 11/2018 7/2017 7/2018 6/2020 9/2021 Initial call price 103.25% 103.06% 103.25% 102.50% 102.81% 103.38% (1) As of March 31, 2018; borrowing base and commitment amount as of May 30, 2018 15 (2) Borrowing base updated for Divide County asset sale; commitments unchanged (3) As of May 29, 2018
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