DENVER, Feb. 19, 2020 /PRNewswire/ -- SM Energy Company
(the "Company") (NYSE: SM) today announced operating and financial
results for the fourth quarter and full year 2019, year-end
reserves and the 2020 operating plan. Highlights include:
2019 Results:
- Production beat. Fourth quarter 2019 production was 12.8
MMBoe (138.8 MBoe/d) at 48% oil, which exceeded the midpoint of
fourth quarter guidance by 5% and was driven by 13% sequential
growth in Midland Basin production. Full year 2019 production was
48.3 MMBoe (132.3 MBoe/d) at 45% oil.
- Solid earnings, cash flows. Fourth quarter 2019 net
loss was ($102.1) million; net cash
provided by operating activities was $242.0
million; Adjusted EBITDAX was $286.2
million; and free cash flow was $68.8
million. Free cash flow for the second half of 2019 was
$28.8 million. (Adjusted EBITDAX and
free cash flow are non-GAAP measures defined and reconciled
below.)
- Capital on target. For the fourth quarter and full year
2019, costs incurred in oil and gas activities were $178.8 million and $1.04
billion, respectively, and total capital spend (a non-GAAP
measure defined and reconciled below) was $184.9 million and $1.025
billion, respectively, in-line with expectations. Continued
drilling and completion efficiencies during the fourth quarter
allowed for more completions by year-end within the expected
capital budget.
- Net debt-to-Adjusted EBITDAX drops to 2.8 times. Full
year 2019 cash provided by operating activities was $823.6 million and Adjusted EBITDAX was
$993.4 million. Net debt at
December 31, 2019 was $2.77 billion. (Net debt-to-Adjusted EBITDAX is a
non-GAAP measure defined and reconciled below.)
- Strong reserve adds. Net reserve additions before
revisions for 2019 were 101.5 MMBoe. Year-end reserves were 462
MMBoe, 40% oil.
2020 Outlook:
- Oil production growth of 5%-10%. This supports higher
cash margins and cash flow.
- Free cash flow. Nearly 20% lower capital budget
year-over-year, at $825-850
million.
- Improved net debt-to-Adjusted EBITDAX ratio. Free
cash flow applied to absolute debt reduction.
President and Chief Executive Officer Jay Ottoson comments: "Our operations team
delivered outstanding results throughout 2019, culminating in
year-over-year Midland Basin production growth of 25% for both the
fourth quarter and full year. We achieved a key milestone by
generating free cash flow in the second half of the year, and we
met or exceeded our objectives in every meaningful metric of our
business, including top quartile industry benchmarks for
environmental, health and safety performance. We were also
successful in proving up additional investment opportunities on our
existing acreage.
"This is an exciting time for our Company as we believe we are
now on a positive trajectory of growing free cash flow and reducing
debt, after a three-year program to transition our portfolio to top
tier assets. Our 2020 operating plan prioritizes free cash flow and
improved leverage metrics while positioning our Company to generate
sustainable, moderate production growth within cash flow beyond
2020. Our organization and cost structure have been stream-lined to
facilitate accomplishment of our strategic objectives, and our
compensation plan design reinforces our focus on achieving high
returns and outstanding safety and emissions performance. We
believe that we are a premier operator of top tier assets, and that
we will create differential value for our shareholders going
forward."
2019 IN REVIEW
MIDLAND BASIN - TOP TIER EXECUTION
During 2019, the Company's continued focus on optimizing capital
efficiency, operating costs and well performance in the Midland
Basin led to top tier returns. Well performance supported
production growth of 25% compared with planned growth of 20%.
Capital efficiency is highlighted by 2019 average well costs of
approximately $690 per lateral foot,
supported by a 15% increase in lateral feet drilled per day and 47%
increase in lateral feet completed per day, compared with
2018. Focus on operating costs delivered an average 2019 cash
production margin of $36.45 per Boe
in the Midland Basin (cash production margin is an operating
metric that provides the region-specific cash operating margin
before allocation of general and administrative expenses).
AUSTIN CHALK, SOUTH TEXAS - NEW RESULTS
During the fourth quarter, the Company brought on production an
additional Austin Chalk test well with a completed 6,500 foot
lateral that achieved a 30-day peak IP rate of 2,635 Boe/d 3-stream
(61% oil) in the northern portion of the Company's acreage
position. The five wells that the Company has completed to
date in the Austin Chalk have averaged 30-day peak IP rates of
2,580 Boe/d with an average of 34% oil. Given the strong rates
encountered to date, a capital program focused on the oilier Austin
Chalk would be expected to deliver highly competitive returns.
FOURTH QUARTER AND FULL YEAR RESULTS
PRODUCTION BY REGION
|
Fourth Quarter
2019
|
|
Full Year
2019
|
|
Midland
Basin
|
South
Texas
|
Total
|
|
Midland
Basin
|
South
Texas
|
Total
|
Oil -
MMBbl
|
5.8
|
0.4
|
6.2
|
|
20.5
|
1.3
|
21.9
|
Natural gas -
Bcf
|
9.9
|
18.2
|
28.1
|
|
34.4
|
75.4
|
109.8
|
NGLs -
MMBbl
|
nm
|
1.9
|
1.9
|
|
nm
|
8.1
|
8.1
|
Total -
MMBoe
|
7.4
|
5.3
|
12.8
|
|
26.3
|
22.0
|
48.3
|
Total -
MBoe/d
|
80.8
|
57.9
|
138.8
|
|
72.0
|
60.3
|
132.3
|
|
Note: Totals may not
calculate due to rounding
|
Fourth quarter:
- Midland Basin volumes were up 25% year-over-year and 13%
sequentially, demonstrating continued strength in Midland Basin
well performance. Total Company production was up 10%
year-over-year, including flat production volumes in South Texas.
- Total production was 48% oil reflecting substantial growth in
the Midland Basin, as well as sequential growth in
South Texas where certain new
wells have higher oil content.
- Higher than projected production resulted from better than
expected well performance in both the Midland Basin and
South Texas and additional well
completions that came on-line late in the quarter, partially offset
by certain shut-ins related to offset well completion activity and
other impacts that slightly exceeded Company expectations.
REALIZED PRICES BY REGION
Fourth Quarter
2019:
|
|
|
Midland
Basin
|
South
Texas
|
Totals
Pre/Post-Hedge
|
Oil/$Bbl
|
$56.88
|
$45.03
|
$56.09/$55.22
|
Natural
gas/$Mcf
|
2.62
|
2.32
|
2.42/2.75
|
NGLs/$Bbl
|
nm
|
17.84
|
17.84/23.93
|
Per Boe
|
$47.70
|
$17.69
|
$35.17/$36.38
|
|
Full Year
2019:
|
|
|
Midland
Basin
|
South
Texas
|
Totals
Pre/Post-Hedge
|
Oil/$Bbl
|
$54.52
|
$47.58
|
$54.10/$53.20
|
Natural
gas/$Mcf
|
2.21
|
2.47
|
2.39/2.60
|
NGLs/$Bbl
|
nm
|
17.26
|
17.26/21.69
|
Per Boe
|
$45.51
|
$17.72
|
$32.84/$33.65
|
Fourth quarter:
- Benchmark pricing for the quarter included NYMEX WTI at
$56.96/Bbl, NYMEX Henry Hub natural
gas at $2.50/MMBtu and Hart Composite
NGLs at $21.96/Bbl.
- The average realized price per Boe of $35.17 is before the effect of hedges. Including
the effect of realized hedges, the average price was $36.38, resulting in approximately $15.4 million of realized net hedge gains for the
quarter.
- The Company's Midland Basin average realized price per Boe is
among the highest in the region, reflecting the high oil content of
the Company's production.
For additional regional detail on operating metrics, please see
the accompanying 4Q19 Earnings and 2020 Operating Plan slide
deck.
EARNINGS/NET LOSS, EARNINGS/LOSS PER SHARE AND NET CASH PROVIDED
BY OPERATING ACTIVITIES
Full year 2019 GAAP net loss was ($187.0)
million, or ($1.66) per
diluted common share, and fourth quarter 2019 GAAP net loss was
($102.1) million, or ($0.90) per diluted common share. This compared
with GAAP earnings in the prior year periods of $508.4 million, or $4.48 per diluted common share, and $309.7 million, or $2.73 per diluted common share, respectively.
Full year 2019 GAAP net cash provided by operating activities
was $823.6 million, and fourth
quarter 2019 GAAP net cash provided by operating activities was
$242.0 million. This compared
favorably with the prior year periods of $720.6 million and $179.5
million, respectively.
ADJUSTED EBITDAX, ADJUSTED NET INCOME AND NET-DEBT-TO- ADJUSTED
EBITDAX
The following paragraphs discuss non-GAAP measures including
Adjusted EBITDAX, adjusted net income (loss), adjusted net income
(loss) per diluted common share and net debt-to-Adjusted EBITDAX.
Please reference the definitions and reconciliations of these
measures to the most directly comparable GAAP financial measures at
the end of this release.
Full year Adjusted EBITDAX was $993.4
million, up 10% from $900.4
million in 2018. Fourth quarter Adjusted EBITDAX was
$286.2 million up 37% from
$209.2 million in the prior year
period. The increase in Adjusted EBITDAX for the full year 2019 is
predominantly driven by a 10% increase in total production that
included 17% growth in oil production. Higher oil production, which
carries a higher margin, supported a slightly increased cash
operating margin per Boe (including the effects of hedges), despite
significant declines in benchmark commodity prices in 2019 versus
2018 for each of oil, natural gas and NGLs. The significant
increase in Adjusted EBITDAX for the fourth quarter 2019, compared
with the prior year period, was similarly driven by a 13% increase
in total production and a 22% increase in oil production.
Full year adjusted net loss was ($53.5)
million and fourth quarter adjusted net loss was
($5.0) million. This compared to
adjusted earnings of $3.3 million for
full year 2018 and adjusted net loss of ($20.0) million in the fourth quarter of 2018.
For the full year, the benefit of higher Adjusted EBITDAX was
offset by higher depletion, depreciation, amortization and
accretion expense, associated with both a higher per unit rate and
higher production.
Leverage improved during 2019, ending the year with
net-debt-to-Adjusted EBITDAX at 2.8 times.
FINANCIAL POSITION, LIQUIDITY, COSTS INCURRED AND TOTAL CAPITAL
SPEND
On December 31, 2019, the
outstanding principal amount of the Company's long-term debt was
$2.5 billion in senior notes, plus
$172.5 million in senior convertible
notes, plus $122.5 million drawn on
the Company's senior secured credit facility. The cash balance was
approximately zero. Liquidity was $1.1
billion.
Costs incurred in oil and gas activities for the fourth quarter
of 2019 was $178.8 million. Total
capital spend (a non-GAAP measure defined and reconciled below) for
the quarter was $184.9 million. For
the full year 2019, costs incurred in oil and gas activities was
$1.040 billion and total capital
spend was $1.025 billion. During the
fourth quarter, the Company drilled 33 net wells and completed 34
net wells, reflecting slightly accelerated timing on certain wells
turned-in-line before year-end. For the full year, the Company
drilled 124 net wells and completed 131 net wells.
PROVED RESERVES AT YEAR-END 2019
Proved reserves were 462 MMBoe with 40% oil, 44% natural gas and
16% NGLs. Reserves were 53% PD and 47% PUD.
- Reserve additions through drilling and acquisitions net of
dispositions were 101.5 MMBoe.
- Oil reserves increased from 35% to 40% of total reserves, as
higher oil content Midland Basin reserves increased
year-over-year.
- SEC pricing was $55.69 Bbl oil,
$2.58 Mcf natural gas and
$22.68 Bbl NGLs. Prices were down
15%, 17% and 32% for oil, gas and NGLs, respectively, from 2018 SEC
pricing. Pricing revisions reduced year-end reserves by 70 MMBoe,
almost entirely related to South
Texas assets that are predominantly natural gas and
NGLs.
|
|
MMBoe
|
Proved reserves
year-end 2018
|
|
503.4
|
Reserve
additions
|
|
98.4
|
Acquisitions net of
divestitures
|
|
3.1
|
Net reserve additions before
revisions
|
|
101.5
|
Revisions (5-year
rule, price and performance)
|
|
(94.7)
|
Production
|
|
(48.3)
|
Proved reserves
year-end 2019
|
|
462.0
|
|
Note: Total does not
sum due to rounding
|
STANDARDIZED MEASURE AND PRE-TAX PV-10 AT YEAR-END 2019
The standardized measure of discounted future net cash flows
from proved reserves was $4.1 billion
at year-end 2019, down from $4.7
billion at year-end 2018. The decline in the standardized
measure is primarily due to the reduction in SEC pricing used in
the calculation for NGLs and natural gas, which were down 32% and
17% respectively. Pre-tax PV-10 is a non-GAAP measure (defined and
reconciled at the end of this release) that considers the
standardized measure calculation before the effect of taxes.
Pre-tax PV10 was $4.4 billion at
year-end 2019 compared with $5.1
billion at year-end 2018. The approximate $741 million decrease in pre-tax PV-10 reflects
an $860 million decrease in the value
of South Texas proved reserves due
to the significant decline in SEC pricing year-over-year,
specifically for natural gas and NGLs, partially offset by an
$119 million increase in the value of
Midland Basin proved reserves, despite a 15% decline in SEC oil
pricing.
2020 OPERATING PLAN AND GUIDANCE
Discussion in this release of the 2020 operating plan and
guidance include total capital spend, discretionary cash flow, free
cash flow and net debt-to-Adjusted EBITDAX, which are non-GAAP
measures. The Company is unable to provide reconciliations of these
forward-looking measures because components of the calculations are
inherently unpredictable (such as future expenditures to acquire
properties, changes to current assets and liabilities) and
estimating future GAAP measures with the precision necessary to
provide a meaningful reconciliation is extremely difficult and
could not be accomplished without unreasonable effort.
A key Company objective is generating profitable growth in cash
flow from operations (a return metric tied to the Company's
long-term incentive plan).
2020 GOALS:
Consistent with long-term objectives
- Generate positive full year free cash flow.
- Reduce year-end net debt-to-Adjusted EBITDAX.
STRATEGIC PRIORITIES:
- Allocate capital to further improve operating margins and cash
flow, which the Company expects to be driven by growth in oil
production.
- Optimize total capital spend to generate moderate growth and
deliver free cash flow. The 2020 plan reduces total capital spend
by nearly 20% from 2019, moderating oil production growth to
5%-10%.
- Continue to optimize well design to best manage capital and
operating costs.
- Maintain top quartile environmental, health and safety
performance.
- Continue efforts to increase inventory and inventory value
through testing new intervals and optimizing spacing, drilling and
completion designs.
KEY ASSUMPTIONS:
- Price deck: $50.00 Bbl WTI;
$2.20 MMBtu natural gas; $20.00 Bbl NGLs.
- Hedging: currently approximately 80% of oil production at an
average swap price of $58 Bbl WTI and
collars at $55-63/Bbl WTI; and,
approximately 35% of natural gas production. NGL hedges are by
individual component of the barrel; refer to the accompanying slide
deck for detail.
- Total capital spend of approximately $825-850 million. Drilling and completion costs
make-up approximately 90% of total capital spend.
-
- Midland Basin: Anticipate drilling approximately 80 net wells
and completing approximately 85 net wells. Midland Basin activity
will continue to co-develop zones and will include activity across
the RockStar position as well as in Sweetie Peck.
- South Texas: Anticipate
drilling approximately 16 net wells and completing approximately 9
net wells. Activity will be focused in higher oil content areas and
in the Austin Chalk, which are expected to be economically
competitive with the Midland Basin program.
GUIDANCE FULL YEAR 2020:
- Production: 45-48 MMBoe or 123-131 MBoe/d; assumes ethane
rejection for full year.
- Oil growth and percentage of total production: approximately
50% oil production; up 5%-10% year-over-year.
- Production costs: LOE $5.25-$5.50/Boe,
which reflects increased oil production and planned workover
activity; transportation $3.20-$3.45/Boe
reflecting lower total South Texas
natural gas volumes that carry higher per unit costs.
- G&A: ~$125 million, which
includes $4.0-$5.0 million non-recurring charges associated
with the Company's 2019 reorganization and approximately
$20 million in non-cash charges.
- Exploration/Capitalized overhead: ~$50
million.
- DD&A: $18-$20/Boe.
GUIDANCE FIRST QUARTER 2020:
- Production: 11.9-12.4 MMBoe or 131-136 MBoe/d.
- Total capital spend: $180-$200
million.
- Net completions: approximately 20 in the Midland Basin and one
in South Texas.
UPCOMING EVENTS
EARNINGS Q&A WEBCAST AND CONFERENCE CALL
February 19, 2020 - In conjunction
with the release, the Company posts to its website a pre-recorded
webcast discussion, a written transcript of the webcast, and an
associated IR presentation. Please visit ir.sm-energy.com.
February 20, 2020 - Please join SM
Energy management at 8:00 a.m. Mountain
time/10:00 a.m. Eastern time
for the fourth quarter and full year 2019 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 at:
- Live (conference ID 6836199) - Domestic toll
free/International: 844-343-4183/647-689-5129
- Replay (conference ID 6836199) - Domestic toll
free/International: 800-585-8367/416-621-4642
The call replay will be available approximately one hour after
the call and until February 27,
2020.
CONFERENCE PARTICIPATION
- February 24, 2020 - JP Morgan
Leveraged Finance Conference. Executive Vice President and Chief
Financial Officer Wade Pursell will
present at 2:40 p.m. Eastern time.
The presentation will not be webcast. An investor presentation for
this event will be posted to the Company's website before market
open on February 24, 2020.
- March 3, 2020 - Credit Suisse
25th Annual Energy Summit. President and Chief Executive
Officer Jay Ottoson will present at
8:05 a.m. Mountain time. The
presentation will be webcast, accessible from the Company's website
and available for replay for a limited time. An investor
presentation for this event will be posted to the Company's website
before market open on March 2,
2020.
DISCLOSURES
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of securities laws. The words "assumes,"
"anticipate," "estimate," "expect," "forecast," "guidance,"
"implied," "plan," "project," "objectives," "outlook," "target,"
"will" and similar expressions are intended to identify
forward-looking statements. Forward-looking statements in
this release include, among other things, guidance for the full
year and first quarter 2020, including production volumes, oil
production growth, operating and general and administrative costs,
DD&A, and total capital spend; the Company's 2020 strategic
priorities, including: improved operating margins and cash flow,
the allocation of capital across the Company's assets, oil mix as a
percentage of production, delivery of free cash flow, maintaining
top quartile environmental, health and safety performance, and
increasing inventory and inventory value; the Company's 2020 goals,
including: reducing leverage and generating full-year 2020 free
cash flow; and the number of wells the Company plans to drill and
complete. 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, 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 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.
RESERVE DISCLOSURE
The SEC requires oil and natural gas companies, in their filings
with the SEC, to disclose proved reserves, which are those
quantities of oil, natural gas and NGLs, that, by analysis of
geoscience and engineering data, can be estimated with reasonable
certainty to be economically producible-from a given date forward,
from known reservoirs and under existing economic conditions (using
the trailing 12-month average first-day-of-the-month prices),
operating methods and government regulations-prior to the time at
which contracts providing the right to operate expire, unless
evidence indicates that renewal is reasonably certain, regardless
of whether deterministic or probabilistic methods are used for the
estimation. The SEC also permits the disclosure of separate
estimates of probable or possible reserves that meet SEC
definitions for such reserves; however, the Company currently does
not disclose probable or possible reserves in its SEC filings.
Proved reserves attributable to the Company at December 31, 2019, are estimated utilizing SEC
reserve recognition standards and pricing assumptions based on the
trailing 12-month average first-day-of-the-month prices of
$55.69 per Bbl of oil, $2.58 per MMBtu of natural gas, and $22.68 per Bbl of NGLs. At least 80% of the PV-10
of the Company's estimate of its total proved reserves at
December 31, 2019, was audited by
Ryder Scott Company, L.P.
ABOUT THE COMPANY
SM Energy Company is an independent energy company engaged in
the acquisition, exploration, development, and production of crude
oil, natural 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 CONTACT
Jennifer Martin Samuels,
jsamuels@sm-energy.com, 303-864-2507
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
Production
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
December 31,
|
|
For the Twelve
Months Ended
December 31,
|
|
2019
|
|
2018
|
|
Percent
Change
|
|
2019
|
|
2018
|
|
Percent
Change
|
Realized sales
price (before the effects of derivative
settlements):
|
|
|
|
|
|
|
|
|
|
|
|
Oil (per
Bbl)
|
$
|
56.09
|
|
|
$
|
49.29
|
|
|
14
|
%
|
|
$
|
54.10
|
|
|
$
|
56.80
|
|
|
(5)
|
%
|
Gas (per
Mcf)
|
$
|
2.42
|
|
|
$
|
3.71
|
|
|
(35)
|
%
|
|
$
|
2.39
|
|
|
$
|
3.43
|
|
|
(30)
|
%
|
NGL (per
Bbl)
|
$
|
17.84
|
|
|
$
|
24.01
|
|
|
(26)
|
%
|
|
$
|
17.26
|
|
|
$
|
27.22
|
|
|
(37)
|
%
|
Per Boe
|
$
|
35.17
|
|
|
$
|
34.74
|
|
|
1
|
%
|
|
$
|
32.84
|
|
|
$
|
37.27
|
|
|
(12)
|
%
|
Realized sales
price (including the effects of derivative
settlements):
|
|
|
|
|
|
|
|
|
|
|
|
Oil (per
Bbl)
|
$
|
55.22
|
|
|
$
|
47.94
|
|
|
15
|
%
|
|
$
|
53.20
|
|
|
$
|
53.13
|
|
|
—
|
%
|
Gas (per
Mcf)
|
$
|
2.75
|
|
|
$
|
3.01
|
|
|
(9)
|
%
|
|
$
|
2.60
|
|
|
$
|
3.31
|
|
|
(21)
|
%
|
NGL (per
Bbl)
|
$
|
23.93
|
|
|
$
|
19.36
|
|
|
24
|
%
|
|
$
|
21.69
|
|
|
$
|
20.44
|
|
|
6
|
%
|
Equivalent (per
Boe)
|
$
|
36.38
|
|
|
$
|
31.74
|
|
|
15
|
%
|
|
$
|
33.65
|
|
|
$
|
34.18
|
|
|
(2)
|
%
|
Net production
volumes: (1)
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MMBbls)
|
6.2
|
|
|
5.1
|
|
|
22
|
%
|
|
21.9
|
|
|
18.8
|
|
|
17
|
%
|
Gas (Bcf)
|
28.1
|
|
|
25.5
|
|
|
10
|
%
|
|
109.8
|
|
|
103.2
|
|
|
6
|
%
|
NGL
(MMBbls)
|
1.9
|
|
|
2.0
|
|
|
(4)
|
%
|
|
8.1
|
|
|
7.9
|
|
|
2
|
%
|
MMBoe
|
12.8
|
|
|
11.3
|
|
|
13
|
%
|
|
48.3
|
|
|
43.9
|
|
|
10
|
%
|
Average net daily
production: (1)
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MBbls/d)
|
67.3
|
|
|
55.3
|
|
|
22
|
%
|
|
59.9
|
|
|
51.4
|
|
|
17
|
%
|
Gas
(MMcf/d)
|
305.7
|
|
|
277.0
|
|
|
10
|
%
|
|
300.8
|
|
|
282.7
|
|
|
6
|
%
|
NGL
(MBbls/d)
|
20.5
|
|
|
21.3
|
|
|
(4)
|
%
|
|
22.2
|
|
|
21.8
|
|
|
2
|
%
|
MBoe/d
|
138.8
|
|
|
122.8
|
|
|
13
|
%
|
|
132.3
|
|
|
120.3
|
|
|
10
|
%
|
Per Boe
Data:
|
|
|
|
|
|
|
|
|
|
|
|
Realized price
(before the effects of derivative settlements)
|
$
|
35.17
|
|
|
$
|
34.74
|
|
|
1
|
%
|
|
$
|
32.84
|
|
|
$
|
37.27
|
|
|
(12)
|
%
|
Lease operating
expense
|
4.67
|
|
|
4.98
|
|
|
(6)
|
%
|
|
4.67
|
|
|
4.74
|
|
|
(1)
|
%
|
Transportation
costs
|
3.46
|
|
|
4.19
|
|
|
(17)
|
%
|
|
3.88
|
|
|
4.36
|
|
|
(11)
|
%
|
Production
taxes
|
1.48
|
|
|
1.19
|
|
|
24
|
%
|
|
1.35
|
|
|
1.52
|
|
|
(11)
|
%
|
Ad valorem tax
expense
|
0.37
|
|
|
0.39
|
|
|
(5)
|
%
|
|
0.48
|
|
|
0.48
|
|
|
—
|
%
|
General and
administrative (2)
|
2.92
|
|
|
2.69
|
|
|
8
|
%
|
|
2.75
|
|
|
2.65
|
|
|
4
|
%
|
Operating margin
(before the effects of derivative settlements)
|
22.27
|
|
|
21.30
|
|
|
5
|
%
|
|
19.71
|
|
|
23.52
|
|
|
(16)
|
%
|
Derivative settlement
gain (loss)
|
1.20
|
|
|
(3.00)
|
|
|
140
|
%
|
|
0.81
|
|
|
(3.09)
|
|
|
126
|
%
|
Operating margin
(including the effects of derivative settlements)
|
$
|
23.47
|
|
|
$
|
18.30
|
|
|
28
|
%
|
|
$
|
20.52
|
|
|
$
|
20.43
|
|
|
—
|
%
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
$
|
17.91
|
|
|
$
|
16.10
|
|
|
11
|
%
|
|
$
|
17.06
|
|
|
$
|
15.15
|
|
|
13
|
%
|
|
(1)
Amounts and percentage changes may not calculate due to
rounding.
|
(2) Includes non-cash stock-based
compensation expense per Boe of $0.38 and $0.42 for the three
months ended December 31, 2019, and 2018, respectively, and $0.41
and $0.42 for the twelve months ended December 31, 2019, and 2018,
respectively.
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
Consolidated
Balance Sheets
|
|
|
|
(in thousands, except
share data)
|
December
31,
|
ASSETS
|
2019
|
|
2018
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
10
|
|
|
$
|
77,965
|
|
Accounts
receivable
|
184,732
|
|
|
167,536
|
|
Derivative
assets
|
55,184
|
|
|
175,130
|
|
Prepaid expenses and
other
|
12,708
|
|
|
8,632
|
|
Total current
assets
|
252,634
|
|
|
429,263
|
|
Property and
equipment (successful efforts method):
|
|
|
|
Proved oil and gas
properties
|
8,934,020
|
|
|
7,278,362
|
|
Accumulated
depletion, depreciation, and amortization
|
(4,177,876)
|
|
|
(3,417,953)
|
|
Unproved oil and gas
properties
|
1,005,887
|
|
|
1,581,401
|
|
Wells in
progress
|
118,769
|
|
|
295,529
|
|
Other property and
equipment, net of accumulated depreciation of $64,032 and $57,102,
respectively
|
72,848
|
|
|
93,826
|
|
Total property and
equipment, net
|
5,953,648
|
|
|
5,831,165
|
|
Noncurrent
assets:
|
|
|
|
Derivative
assets
|
20,624
|
|
|
58,499
|
|
Other noncurrent
assets
|
65,326
|
|
|
33,935
|
|
Total noncurrent
assets
|
85,950
|
|
|
92,434
|
|
Total
assets
|
$
|
6,292,232
|
|
|
$
|
6,352,862
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
402,008
|
|
|
$
|
403,199
|
|
Derivative
liabilities
|
50,846
|
|
|
62,853
|
|
Other current
liabilities
|
19,189
|
|
|
—
|
|
Total current
liabilities
|
472,043
|
|
|
466,052
|
|
Noncurrent
liabilities:
|
|
|
|
Revolving credit
facility
|
122,500
|
|
|
—
|
|
Senior Notes, net of
unamortized deferred financing costs
|
2,453,035
|
|
|
2,448,439
|
|
Senior Convertible
Notes, net of unamortized discount and deferred financing
costs
|
157,263
|
|
|
147,894
|
|
Asset retirement
obligations
|
84,134
|
|
|
91,859
|
|
Deferred income
taxes
|
189,386
|
|
|
223,278
|
|
Derivative
liabilities
|
3,444
|
|
|
12,496
|
|
Other noncurrent
liabilities
|
61,433
|
|
|
42,522
|
|
Total noncurrent
liabilities
|
3,071,195
|
|
|
2,966,488
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.01
par value - authorized: 200,000,000 shares; issued and outstanding:
112,987,952 and 112,241,966 shares, respectively
|
1,130
|
|
|
1,122
|
|
Additional paid-in
capital
|
1,791,596
|
|
|
1,765,738
|
|
Retained
earnings
|
967,587
|
|
|
1,165,842
|
|
Accumulated other
comprehensive loss
|
(11,319)
|
|
|
(12,380)
|
|
Total stockholders'
equity
|
2,748,994
|
|
|
2,920,322
|
|
Total liabilities
and stockholders' equity
|
$
|
6,292,232
|
|
|
$
|
6,352,862
|
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
Consolidated
Statements of Operations
|
(in thousands, except
per share data)
|
For the Three
Months
Ended December 31,
|
|
For the Twelve
Months
Ended December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Operating revenues
and other income:
|
|
|
|
|
|
|
|
Oil, gas, and NGL
production revenue
|
$
|
449,001
|
|
|
$
|
392,531
|
|
|
$
|
1,585,750
|
|
|
$
|
1,636,357
|
|
Net gain on
divestiture activity
|
539
|
|
|
1,261
|
|
|
862
|
|
|
426,917
|
|
Other operating
revenues
|
2,146
|
|
|
400
|
|
|
3,493
|
|
|
3,798
|
|
Total operating
revenues and other income
|
451,686
|
|
|
394,192
|
|
|
1,590,105
|
|
|
2,067,072
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Oil, gas, and NGL
production expense
|
127,312
|
|
|
121,450
|
|
|
500,709
|
|
|
487,367
|
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
228,597
|
|
|
181,970
|
|
|
823,798
|
|
|
665,313
|
|
Exploration
(1)
|
17,649
|
|
|
14,322
|
|
|
51,500
|
|
|
55,166
|
|
Impairment of oil and
gas properties
|
8,750
|
|
|
23,274
|
|
|
33,842
|
|
|
49,889
|
|
General and
administrative (1)
|
37,213
|
|
|
30,438
|
|
|
132,797
|
|
|
116,504
|
|
Net derivative (gain)
loss (2)
|
101,002
|
|
|
(411,136)
|
|
|
97,539
|
|
|
(161,832)
|
|
Other operating
expenses, net
|
19,466
|
|
|
4,109
|
|
|
19,888
|
|
|
18,328
|
|
Total operating
expenses
|
539,989
|
|
|
(35,573)
|
|
|
1,660,073
|
|
|
1,230,735
|
|
Income (loss) from
operations
|
(88,303)
|
|
|
429,765
|
|
|
(69,968)
|
|
|
836,337
|
|
Interest
expense
|
(40,911)
|
|
|
(38,056)
|
|
|
(159,102)
|
|
|
(160,906)
|
|
Loss on
extinguishment of debt
|
—
|
|
|
(18)
|
|
|
—
|
|
|
(26,740)
|
|
Other non-operating
income (expense), net
|
(547)
|
|
|
69
|
|
|
(1,974)
|
|
|
3,086
|
|
Income (loss)
before income taxes
|
(129,761)
|
|
|
391,760
|
|
|
(231,044)
|
|
|
651,777
|
|
Income tax (expense)
benefit
|
27,706
|
|
|
(82,028)
|
|
|
44,043
|
|
|
(143,370)
|
|
Net income
(loss)
|
$
|
(102,055)
|
|
|
$
|
309,732
|
|
|
$
|
(187,001)
|
|
|
$
|
508,407
|
|
|
|
|
|
|
|
|
|
Basic
weighted-average common shares outstanding
|
112,847
|
|
|
112,138
|
|
|
112,544
|
|
|
111,912
|
|
Diluted
weighted-average common shares outstanding
|
112,847
|
|
|
113,286
|
|
|
112,544
|
|
|
113,502
|
|
Basic net income
(loss) per common share
|
$
|
(0.90)
|
|
|
$
|
2.76
|
|
|
$
|
(1.66)
|
|
|
$
|
4.54
|
|
Diluted net income
(loss) per common share
|
$
|
(0.90)
|
|
|
$
|
2.73
|
|
|
$
|
(1.66)
|
|
|
$
|
4.48
|
|
|
|
|
|
|
|
|
|
(1) Non-cash stock-based compensation
component included in:
|
|
|
|
|
|
|
|
Exploration
expense
|
$
|
724
|
|
|
$
|
1,463
|
|
|
$
|
4,505
|
|
|
$
|
5,539
|
|
General and
administrative expense
|
4,836
|
|
|
4,765
|
|
|
19,813
|
|
|
18,369
|
|
Total non-cash
stock-based compensation
|
$
|
5,560
|
|
|
$
|
6,228
|
|
|
$
|
24,318
|
|
|
$
|
23,908
|
|
|
|
|
|
|
|
|
|
(2) The net derivative (gain) loss
line item consists of the following:
|
|
|
|
|
|
|
|
Settlement (gain)
loss
|
$
|
(15,379)
|
|
|
$
|
33,892
|
|
|
$
|
(39,222)
|
|
|
$
|
135,803
|
|
(Gain) loss on fair
value changes
|
116,381
|
|
|
(445,028)
|
|
|
136,761
|
|
|
(297,635)
|
|
Total net derivative
(gain) loss
|
$
|
101,002
|
|
|
$
|
(411,136)
|
|
|
$
|
97,539
|
|
|
$
|
(161,832)
|
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
Consolidated
Statements of Stockholders' Equity
|
|
|
|
|
|
|
|
|
(in thousands, except
share data and dividends per share)
|
|
Additional
Paid-in
Capital
|
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Retained
Earnings
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balances, December
31, 2017
|
111,687,016
|
|
|
$
|
1,117
|
|
|
$
|
1,741,623
|
|
|
$
|
665,657
|
|
|
$
|
(13,789)
|
|
|
$
|
2,394,608
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
508,407
|
|
|
—
|
|
|
508,407
|
|
Other comprehensive
income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,378
|
|
|
4,378
|
|
Cash dividends, $0.10
per share
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,191)
|
|
|
—
|
|
|
(11,191)
|
|
Issuance of common
stock under Employee Stock Purchase Plan
|
199,464
|
|
|
2
|
|
|
3,185
|
|
|
—
|
|
|
—
|
|
|
3,187
|
|
Issuance of common
stock upon vesting of RSUs, net of shares used for tax
withholdings
|
291,745
|
|
|
3
|
|
|
(2,978)
|
|
|
—
|
|
|
—
|
|
|
(2,975)
|
|
Stock-based
compensation expense
|
63,741
|
|
|
—
|
|
|
23,908
|
|
|
—
|
|
|
—
|
|
|
23,908
|
|
Cumulative effect of
accounting change
|
—
|
|
|
—
|
|
|
—
|
|
|
2,969
|
|
|
(2,969)
|
|
|
—
|
|
Balances, December
31, 2018
|
112,241,966
|
|
|
$
|
1,122
|
|
|
$
|
1,765,738
|
|
|
$
|
1,165,842
|
|
|
$
|
(12,380)
|
|
|
$
|
2,920,322
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(187,001)
|
|
|
—
|
|
|
(187,001)
|
|
Other comprehensive
income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,061
|
|
|
1,061
|
|
Cash dividends
declared, $0.10 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,254)
|
|
|
—
|
|
|
(11,254)
|
|
Issuance of common
stock under Employee Stock Purchase Plan
|
314,868
|
|
|
3
|
|
|
3,206
|
|
|
—
|
|
|
—
|
|
|
3,209
|
|
Issuance of common
stock upon vesting of RSUs, net of shares used for tax
withholdings
|
334,399
|
|
|
4
|
|
|
(1,665)
|
|
|
—
|
|
|
—
|
|
|
(1,661)
|
|
Stock-based
compensation expense
|
96,719
|
|
|
1
|
|
|
24,317
|
|
|
—
|
|
|
—
|
|
|
24,318
|
|
Balances, December
31, 2019
|
112,987,952
|
|
|
$
|
1,130
|
|
|
$
|
1,791,596
|
|
|
$
|
967,587
|
|
|
$
|
(11,319)
|
|
|
$
|
2,748,994
|
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
(in
thousands)
|
For the Three
Months
|
|
For the Twelve
Months
|
|
Ended December
31,
|
|
Ended December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(102,055)
|
|
|
$
|
309,732
|
|
|
$
|
(187,001)
|
|
|
$
|
508,407
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Net gain on
divestiture activity
|
(539)
|
|
|
(1,261)
|
|
|
(862)
|
|
|
(426,917)
|
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
228,597
|
|
|
181,970
|
|
|
823,798
|
|
|
665,313
|
|
Impairment of oil and
gas properties
|
8,750
|
|
|
23,274
|
|
|
33,842
|
|
|
49,889
|
|
Stock-based
compensation expense
|
5,560
|
|
|
6,228
|
|
|
24,318
|
|
|
23,908
|
|
Net derivative (gain)
loss
|
101,002
|
|
|
(411,136)
|
|
|
97,539
|
|
|
(161,832)
|
|
Derivative settlement
gain (loss)
|
15,379
|
|
|
(33,892)
|
|
|
39,222
|
|
|
(135,803)
|
|
Amortization of debt
discount and deferred financing costs
|
3,920
|
|
|
3,716
|
|
|
15,474
|
|
|
15,258
|
|
Loss on
extinguishment of debt
|
—
|
|
|
18
|
|
|
—
|
|
|
26,740
|
|
Deferred income
taxes
|
(28,215)
|
|
|
81,036
|
|
|
(41,835)
|
|
|
141,708
|
|
Other, net
|
4,511
|
|
|
2,371
|
|
|
2,220
|
|
|
287
|
|
Changes in current
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
(38,922)
|
|
|
13,709
|
|
|
(39,556)
|
|
|
(20,775)
|
|
Prepaid expenses and
other
|
9,019
|
|
|
7,234
|
|
|
6,130
|
|
|
(729)
|
|
Accounts payable and
accrued expenses
|
34,974
|
|
|
(3,547)
|
|
|
50,278
|
|
|
35,175
|
|
Net cash provided
by operating activities
|
241,981
|
|
|
179,452
|
|
|
823,567
|
|
|
720,629
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Net proceeds from the
sale of oil and gas properties
|
539
|
|
|
5,310
|
|
|
13,059
|
|
|
748,509
|
|
Capital
expenditures
|
(235,127)
|
|
|
(270,600)
|
|
|
(1,023,769)
|
|
|
(1,303,188)
|
|
Acquisition of proved
and unproved oil and gas properties
|
—
|
|
|
(8,684)
|
|
|
(2,581)
|
|
|
(33,255)
|
|
Net cash used in
investing activities
|
(234,588)
|
|
|
(273,974)
|
|
|
(1,013,291)
|
|
|
(587,934)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Proceeds from credit
facility
|
464,500
|
|
|
—
|
|
|
1,589,000
|
|
|
—
|
|
Repayment of credit
facility
|
(471,000)
|
|
|
—
|
|
|
(1,466,500)
|
|
|
—
|
|
Net proceeds from
Senior Notes
|
—
|
|
|
—
|
|
|
—
|
|
|
492,079
|
|
Cash paid to
repurchase Senior Notes, including premium
|
—
|
|
|
(18)
|
|
|
—
|
|
|
(845,002)
|
|
Net proceeds from
sale of common stock
|
1,250
|
|
|
1,306
|
|
|
3,209
|
|
|
3,187
|
|
Dividends
paid
|
(5,642)
|
|
|
(5,607)
|
|
|
(11,254)
|
|
|
(11,191)
|
|
Other, net
|
(2)
|
|
|
—
|
|
|
(2,686)
|
|
|
(7,746)
|
|
Net cash provided
by (used in) financing activities
|
(10,894)
|
|
|
(4,319)
|
|
|
111,769
|
|
|
(368,673)
|
|
|
|
|
|
|
|
|
|
Net change in cash,
cash equivalents, and restricted cash
|
(3,501)
|
|
|
(98,841)
|
|
|
(77,955)
|
|
|
(235,978)
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
3,511
|
|
|
176,806
|
|
|
77,965
|
|
|
313,943
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
10
|
|
|
$
|
77,965
|
|
|
$
|
10
|
|
|
$
|
77,965
|
|
DEFINITIONS OF NON-GAAP MEASURES AS CALCULATED BY THE
COMPANY
The following non-GAAP measures are presented in addition to
financial statements as the Company believes these metrics and
performance measures are widely used by the investment community,
including investors, research analysts and others, to evaluate and
compare investments among upstream oil and gas companies in making
investment decisions or recommendations. These measures, as
presented, may have differing calculations among companies and
investment professionals and may not be directly comparable to the
same measures provided by others. A non-GAAP measure should
not be considered in isolation or as a substitute for the related
GAAP measure or any other measure of a company's financial or
operating performance presented in accordance with GAAP. A
reconciliation of each of these non-GAAP measures to the most
directly comparable GAAP measure or measures 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, including 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 presents because management believes it
provides useful additional information to investors and analysts,
as a performance measure, for analysis of our ability to internally
generate funds for development, exploration, acquisitions, and to
service debt. Adjusted EBITDAX is also important as it is
considered among financial covenants under the Company's Credit
Agreement, a material source of liquidity for the Company.
Please reference the Company's 2019 Form 10-K for discussion of the
Credit Agreement and its covenants.
Adjusted net income (loss): Adjusted net
income (loss) 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. Adjusted net income (loss) is
presented because management believes it provides useful additional
information to investors for analysis of the Company's fundamental
business on a recurring basis. In addition, management
believes that adjusted net income (loss) attributable to common
shareholders is widely used by professional research analysts and
others in the valuation, comparison, and investment recommendations
of upstream oil and gas companies.
Total capital spend: Total capital spend is
calculated as costs incurred from oil and gas producing activities,
less asset retirement obligations ("ARO"), capitalized interest and
acquisitions. Total capital spend is presented because
management believes that it provides useful information to
investors in the analysis of SM Energy Company and is widely used
by professional research analysts and others in the valuation,
comparison and investment recommendations of companies in the oil
and gas exploration and production industry. Total capital
spend should not be used in isolation or as a substitute to costs
incurred or other capital spending measures prepared under
GAAP.
Discretionary cash flow: Discretionary cash flow is
calculated as net cash provided by operating activities excluding
changes in current assets and current liabilities, and exploration
expense (net of stock-based compensation expense).
Exploration expense (net of stock-based compensation expense) is
added back in the calculation because, for peer comparison
purposes, this number is included in our total capital spend. The
Company believes this measure is important to investors because it
provides useful additional information to investors for analysis of
the Company's ability to generate cash to fund exploration and
development, and to service indebtedness. In addition,
management believes that discretionary cash flow is widely used by
professional research analysts and others in the valuation,
comparison, and investment recommendations of upstream oil and gas
companies.
Free cash flow: Free cash flow is calculated as
Discretionary cash flow (defined above) less Total capital spend
(defined above). The Company believes that this is an
important measure because it represents the cash from operations,
in excess of capital expenditures, available to operate the Company
and fund discretionary obligations.
Free cash flow yield: Free cash flow yield is
calculated as Free cash flow (defined above) divided by market
capitalization.
Net Debt: The total principal value of outstanding senior
notes, senior convertible notes plus amounts drawn on the revolving
credit facility (also referred to as total funded debt) less cash
and cash equivalents. The Company presents this metric to help
evaluate its capital structure and financial leverage and believes
that it is widely used by professional research analysts, including
credit analysts, and others in the evaluation of total
leverage.
Net debt to Adjusted EBITDAX: Net debt to Adjusted
EBITDAX is calculated as Net Debt (defined above) divided by
Adjusted EBITDAX (defined above). The Company presents this metric
to show trends that investors may find useful in understanding the
Company's ability to service its debt. This metric is widely
used by professional research analysts, including credit analysts,
in the valuation and comparison of companies in the oil and gas
exploration and production industry. A variation of this
calculation is a financial covenant under the Company's Credit
Agreement for its revolving credit facility beginning in the fourth
quarter of 2018.
Pre-Tax PV-10: Pre-Tax PV-10 is the present value
of estimated future revenue to be generated from the production of
estimated net proved reserves, net of estimated production and
future development costs, based on prices used in estimating the
proved reserves and costs in effect as of the date indicated
(unless such costs are subject to change pursuant to contractual
provisions), without giving effect to non-property related expenses
such as general and administrative expenses, debt service, future
income tax expenses, or depreciation, depletion, and amortization,
discounted using an annual discount rate of 10 percent. While
this measure does not include the effect of income taxes as it
would in the use of the standardized measure of discounted future
net cash flows calculation, it does provide an indicative
representation of the relative value of the Company on a
comparative basis to other companies and from period to period.
This measure is presented because management believes it provides
useful information to investors for analysis of SM Energy's
fundamental business on a recurring basis. In addition,
management believes that Pre-Tax PV-10 is widely used by
professional research analysts and others in the valuation,
comparison, and investment recommendations of companies in the oil
and gas exploration and production industry, and many investors use
the published research of industry research analysts in making
investment decisions. Pre-Tax PV-10 should not be considered
in isolation or as a substitute for other measures prepared under
GAAP.
FORWARD-LOOKING NON-GAAP MEASURES
The Company is unable to present a reconciliation of
forward-looking Total Capital Spend because components of the
calculation, such as potential acquisitions, are inherently
unpredictable (such as future expenditures to acquire properties,
changes to current assets and liabilities). Moreover,
estimating the most directly comparable GAAP measures with the
required precision necessary to provide a meaningful reconciliation
is extremely difficult and could not be accomplished without
unreasonable effort.
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
Adjusted EBITDAX
Reconciliation (1)
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net
income (loss) (GAAP) and net cash provided by operating activities
(GAAP) to adjusted EBITDAX (non-GAAP)
|
For the Three
Months
|
|
For the Twelve
Months
|
Ended December
31,
|
|
Ended December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income (loss)
(GAAP)
|
$
|
(102,055)
|
|
|
$
|
309,732
|
|
|
$
|
(187,001)
|
|
|
$
|
508,407
|
|
Interest
expense
|
40,911
|
|
|
38,056
|
|
|
159,102
|
|
|
160,906
|
|
Income tax expense
(benefit)
|
(27,706)
|
|
|
82,028
|
|
|
(44,043)
|
|
|
143,370
|
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
228,597
|
|
|
181,970
|
|
|
823,798
|
|
|
665,313
|
|
Exploration
(2)
|
16,925
|
|
|
12,859
|
|
|
46,995
|
|
|
49,627
|
|
Impairment of oil and
gas properties
|
8,750
|
|
|
23,274
|
|
|
33,842
|
|
|
49,889
|
|
Stock-based
compensation expense
|
5,560
|
|
|
6,228
|
|
|
24,318
|
|
|
23,908
|
|
Net derivative (gain)
loss
|
101,002
|
|
|
(411,136)
|
|
|
97,539
|
|
|
(161,832)
|
|
Derivative settlement
gain (loss)
|
15,379
|
|
|
(33,892)
|
|
|
39,222
|
|
|
(135,803)
|
|
Net (gain) loss on
divestiture activity
|
(539)
|
|
|
(1,261)
|
|
|
(862)
|
|
|
(426,917)
|
|
Loss on
extinguishment of debt
|
—
|
|
|
18
|
|
|
—
|
|
|
26,740
|
|
Other, net
|
(648)
|
|
|
1,305
|
|
|
481
|
|
|
(3,214)
|
|
Adjusted EBITDAX
(non-GAAP)
|
$
|
286,176
|
|
|
$
|
209,181
|
|
|
$
|
993,391
|
|
|
$
|
900,394
|
|
Interest
expense
|
(40,911)
|
|
|
(38,056)
|
|
|
(159,102)
|
|
|
(160,906)
|
|
Income tax (expense)
benefit
|
27,706
|
|
|
(82,028)
|
|
|
44,043
|
|
|
(143,370)
|
|
Exploration
(2)
|
(16,925)
|
|
|
(12,859)
|
|
|
(46,995)
|
|
|
(49,627)
|
|
Amortization of debt
discount and deferred financing costs
|
3,920
|
|
|
3,716
|
|
|
15,474
|
|
|
15,258
|
|
Deferred income
taxes
|
(28,215)
|
|
|
81,036
|
|
|
(41,835)
|
|
|
141,708
|
|
Other, net
|
5,159
|
|
|
1,066
|
|
|
1,739
|
|
|
3,501
|
|
Changes in current
assets and liabilities
|
5,071
|
|
|
17,396
|
|
|
16,852
|
|
|
13,671
|
|
Net cash provided
by operating activities (GAAP)
|
$
|
241,981
|
|
|
$
|
179,452
|
|
|
$
|
823,567
|
|
|
$
|
720,629
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
(2) Stock-based compensation expense
is a component of exploration expense and general and
administrative expense on the accompanying consolidated statements
of operations. Therefore, the exploration line items shown in
the reconciliation above will vary from the amount shown on the
Company's accompanying consolidated statements of operations for
the component of stock-based compensation expense recorded to
exploration expense.
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
Adjusted Net
Income (Loss) Reconciliation (1)
|
|
|
|
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
Reconciliation of net
income (loss) (GAAP) to adjusted net income (loss)
(non-GAAP):
|
For the Three
Months
|
|
For the Twelve
Months
|
Ended December
31,
|
|
Ended December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income (loss)
(GAAP)
|
$
|
(102,055)
|
|
|
$
|
309,732
|
|
|
$
|
(187,001)
|
|
|
$
|
508,407
|
|
Total net derivative
(gain) loss
|
101,002
|
|
|
(411,136)
|
|
|
97,539
|
|
|
(161,832)
|
|
Derivative settlement
gain (loss)
|
15,379
|
|
|
(33,892)
|
|
|
39,222
|
|
|
(135,803)
|
|
Net gain on
divestiture activity
|
(539)
|
|
|
(1,261)
|
|
|
(862)
|
|
|
(426,917)
|
|
Impairment of oil and
gas properties
|
8,750
|
|
|
23,274
|
|
|
33,842
|
|
|
49,889
|
|
Loss on
extinguishment of debt
|
—
|
|
|
18
|
|
|
—
|
|
|
26,740
|
|
Other, net
(2)
|
(647)
|
|
|
1,901
|
|
|
700
|
|
|
2,777
|
|
Tax effect of
adjustments (3)
|
(26,896)
|
|
|
91,378
|
|
|
(36,986)
|
|
|
139,997
|
|
Adjusted net
income (loss) (non-GAAP)
|
$
|
(5,006)
|
|
|
$
|
(19,986)
|
|
|
$
|
(53,546)
|
|
|
$
|
3,258
|
|
|
|
|
|
|
|
|
|
Diluted net income
(loss) per common share (GAAP)
|
$
|
(0.90)
|
|
|
$
|
2.73
|
|
|
$
|
(1.66)
|
|
|
$
|
4.48
|
|
Total net derivative
(gain) loss
|
0.90
|
|
|
(3.63)
|
|
|
0.87
|
|
|
(1.43)
|
|
Derivative settlement
gain (loss)
|
0.14
|
|
|
(0.30)
|
|
|
0.35
|
|
|
(1.20)
|
|
Net gain on
divestiture activity
|
—
|
|
|
(0.01)
|
|
|
(0.01)
|
|
|
(3.76)
|
|
Impairment of oil and
gas properties
|
0.08
|
|
|
0.21
|
|
|
0.30
|
|
|
0.44
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
0.24
|
|
Other, net
(2)
|
(0.01)
|
|
|
0.02
|
|
|
0.01
|
|
|
0.02
|
|
Tax effect of
adjustments (3)
|
(0.25)
|
|
|
0.80
|
|
|
(0.34)
|
|
|
1.24
|
|
Adjusted net
income (loss) per diluted common share (non-GAAP)
|
$
|
(0.04)
|
|
|
$
|
(0.18)
|
|
|
$
|
(0.48)
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
Basic
weighted-average shares outstanding (GAAP)
|
112,847
|
|
|
112,138
|
|
|
112,544
|
|
|
111,912
|
|
Diluted
weighted-average shares outstanding (GAAP)
|
112,847
|
|
|
113,286
|
|
|
112,544
|
|
|
113,502
|
|
|
|
|
|
|
|
|
|
Note: Amounts
and percentage changes may not calculate due to
rounding.
|
|
|
|
|
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
(2) For the three month period ended
December 31, 2019, the adjustment relates to impairments on
materials inventory and other property, and the change in Net
Profits Plan liability. For the twelve month period ended
December 31, 2019, the adjustment relates to bad debt expense,
impairments on materials inventory and other property, and the
change in Net Profits Plan liability. For the three month
period ended December 31, 2018, the adjustment relates to
impairment on materials inventory, the change in Net Profits Plan
liability, and bad debt expense. For the twelve month period
ended December 31, 2018, the adjustment relates to impairment on
materials inventory, the change in Net Profits Plan liability, bad
debt expense and an accrual for a non-recurring matter. These
items are included in other operating expenses, net on the
Company's condensed consolidated statements of
operations.
|
(3) The tax effect of adjustments for
the three and twelve month periods ended December 31, 2019, and
2018, was calculated using a tax rate of 21.7%. This rate
approximates the Company's statutory tax rate, as adjusted for
ordinary permanent differences.
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
|
|
|
|
|
|
|
Regional proved
oil and gas reserve quantities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midland
Basin
|
|
South
Texas
|
|
Total
|
Year-end 2019
proved reserves
|
|
|
|
|
|
|
Oil
(MMBbl)
|
|
167.5
|
|
16.6
|
|
184.1
|
Gas (Bcf)
|
|
398.8
|
|
824.4
|
|
1,223.2
|
NGL
(MMBbl)
|
|
0.1
|
|
73.9
|
|
74.0
|
Total
(MMBoe)
|
|
234.1
|
|
227.8
|
|
462.0
|
% Proved
developed
|
|
49%
|
|
58%
|
|
53%
|
|
|
|
|
|
|
|
Note: Amounts may not
calculate due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Tax PV-10
Reconciliation (1)
|
|
|
(in
millions)
|
|
|
|
|
As of December
31,
|
Reconciliation of
standardized measure (GAAP) to PV-10 (non-GAAP)
|
2019
|
|
2018
|
Standardized
measure of discounted future net cash flows (GAAP):
|
$
|
4,104.0
|
|
|
$
|
4,654.4
|
|
Add: 10 percent
annual discount, net of income taxes
|
2,955.3
|
|
|
3,847.1
|
|
Add: future
undiscounted income taxes
|
579.8
|
|
|
1,012.2
|
|
Pre-tax undiscounted
future net cash flows
|
7,639.1
|
|
|
9,513.7
|
|
Less: 10 percent
annual discount without tax effect
|
(3,276.3)
|
|
|
(4,409.4)
|
|
Pre-Tax PV-10
(non-GAAP):
|
$
|
4,362.8
|
|
|
$
|
5,104.3
|
|
|
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
|
|
Reconciliation of
Net Debt (1)
|
|
(in
thousands)
|
|
|
As
of December 31,
2019
|
Senior Notes
(principal value from Note 5 of Form 10-K)
|
$
|
2,476,796
|
|
Senior Convertible
Notes (principal value from Note 5 of Form 10-K)
|
172,500
|
|
Revolving credit
facility
|
122,500
|
|
Total funded
debt
|
2,771,796
|
|
Less: Cash and cash
equivalents
|
(10)
|
|
Net
Debt
|
$
|
2,771,786
|
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
|
|
|
|
Discretionary Cash
Flow Reconciliation (1)
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
Reconciliation of net
cash provided by operating activities (GAAP) to discretionary cash
flow (Non-GAAP)
|
For the Three
Months Ended December
31, 2019
|
|
For the Twelve
Months Ended
December 31, 2019
|
Net cash provided
by operating activities (GAAP):
|
$
|
242.0
|
|
|
$
|
823.6
|
|
Net change in working
capital
|
(5.1)
|
|
|
(16.9)
|
|
Exploration
(2)(3)
|
16.9
|
|
|
47.0
|
|
Discretionary cash
flow (non-GAAP):
|
$
|
253.7
|
|
|
$
|
853.7
|
|
|
|
|
|
Note: Amounts may not
calculate due to rounding.
|
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
(2)
Exploration expense is added back in the calculation of
discretionary cash flow because, for peer comparison purposes, this
number is included in our reported total capital spend.
|
(3) Stock-based compensation expense
is a component of exploration expense and general and
administrative expense on the statements of operations. Therefore,
the exploration line items shown in the reconciliation above will
vary from the amount shown on the consolidated statements of
operations for the component of stock-based compensation expense
recorded to exploration expense.
|
|
Total Capital
Spend Reconciliation (1)
|
(in
millions)
|
|
|
|
|
|
|
|
Reconciliation of
costs incurred in oil & gas activities (GAAP) to total capital
spend (non-GAAP)
|
For the Three
Months Ended
December 31, 2019
|
|
For the Twelve
Months Ended
December 31, 2019
|
Costs incurred in
oil and gas activities (GAAP):
|
$
|
178.8
|
|
|
$
|
1,040.2
|
|
Asset retirement
obligations
|
11.0
|
|
|
9.9
|
|
Capitalized
interest
|
(4.4)
|
|
|
(18.5)
|
|
Proved property
acquisitions (2)
|
—
|
|
|
0.3
|
|
Unproved property
acquisitions (2)
|
—
|
|
|
(2.9)
|
|
Other
|
(0.5)
|
|
|
(3.9)
|
|
Total capital
spend (non-GAAP):
|
$
|
184.9
|
|
|
$
|
1,025.1
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
(2) The Company completed several
non-monetary acreage trades in the Midland Basin during 2019
totaling $73.4 million of value attributed to the properties
surrendered. This non-monetary consideration is not reflected
in the costs incurred or capital spend amounts presented
above.
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS
|
December 31,
2019
|
|
|
|
|
|
|
Discretionary Cash
Flow Reconciliation (1)
|
|
|
(in
millions)
|
|
|
|
|
|
|
For the Year
Ended
|
|
For the Six Months
Ended
|
Reconciliation of net
cash provided by operating activities (GAAP) to discretionary cash
flow (Non-GAAP)
|
December 31,
2019
|
|
June 30,
2019
|
|
December 31,
2019
|
Net cash provided
by operating activities (GAAP):
|
$
|
823.6
|
|
|
$
|
378.4
|
|
|
$
|
445.2
|
|
Net change in working
capital
|
(16.9)
|
|
|
(21.5)
|
|
|
4.6
|
|
Exploration
(2)(3)
|
47.0
|
|
|
19.7
|
|
|
27.3
|
|
Discretionary cash
flow (non-GAAP):
|
$
|
853.7
|
|
|
$
|
376.6
|
|
|
$
|
477.1
|
|
|
|
|
|
|
|
Note: Amounts may not
calculate due to rounding.
|
|
|
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
(2)
Exploration expense is added back in the calculation of
discretionary cash flow because, for peer comparison purposes, this
number is included in our reported total capital spend.
|
(3) Stock-based compensation expense
is a component of exploration expense and general and
administrative expense on the statements of operations. Therefore,
the exploration line items shown in the reconciliation above will
vary from the amount shown on the consolidated statements of
operations for the component of stock-based compensation expense
recorded to exploration expense.
|
|
Total Capital
Spend Reconciliation (1)
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
For the Year
Ended
|
|
For the Six Months
Ended
|
Reconciliation of
costs incurred in oil & gas activities (GAAP) to total capital
spend (non-GAAP)
|
December 31,
2019
|
|
June 30,
2019
|
|
December 31,
2019
|
Costs incurred in
oil and gas activities (GAAP):
|
$
|
1,040.2
|
|
|
$
|
590.5
|
|
|
$
|
449.7
|
|
Asset retirement
obligations
|
9.9
|
|
|
(0.8)
|
|
|
10.7
|
|
Capitalized
interest
|
(18.5)
|
|
|
(9.9)
|
|
|
(8.6)
|
|
Proved property
acquisitions (2)
|
0.3
|
|
|
0.3
|
|
|
—
|
|
Unproved property
acquisitions (2)
|
(2.9)
|
|
|
—
|
|
|
(2.9)
|
|
Other
|
(3.9)
|
|
|
(3.4)
|
|
|
(0.5)
|
|
Total capital
spend (non-GAAP):
|
$
|
1,025.1
|
|
|
$
|
576.8
|
|
|
$
|
448.3
|
|
|
|
|
|
|
|
Note: Amounts may not
calculate due to rounding.
|
|
|
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
(2) The Company completed several
non-monetary acreage trades in the Midland Basin during 2019
totaling $73.4 million of value attributed to the properties
surrendered. This non-monetary consideration is not reflected
in the costs incurred or capital spend amounts presented
above.
|
|
|
Free Cash Flow and
Free Cash Flow Yield (1)
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
For the Six Months
Ended
|
|
|
December 31,
2019
|
|
December 31,
2019
|
Discretionary cash
flow
|
|
$
|
253.7
|
|
|
$
|
477.1
|
|
Total capital
spend
|
|
184.9
|
|
|
448.3
|
|
Free cash
flow:
|
|
$
|
68.8
|
|
|
$
|
28.8
|
|
|
|
|
|
|
Market capitalization
at 12/31/19
|
|
$
|
1,270.0
|
|
|
$
|
1,270.0
|
|
Free cash flow
yield:
|
|
5%
|
|
|
2%
|
|
|
(1) See "Definitions of non-GAAP
Measures as Calculated by the Company" above.
|
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SOURCE SM Energy Company