DENVER, May 2, 2024 /PRNewswire/ -- SM Energy Company (the "Company") (NYSE: SM) today announced operating and financial results for the first quarter 2024 and provided certain full year and second quarter 2024 guidance.
Excellent operational execution drove a great start to 2024. First quarter 2024 highlights include:
- Net production was 13.2 MMBoe, or 145.1 MBoe/d, at 44% oil or 63.7 MBbls/d, which exceeded guidance. Higher than expected production was driven largely from South Texas through better performance from new wells and accelerated turn-in-lines due to faster drilling and completion times versus expectations.
- Early year performance and capital efficiencies support increasing full year guidance for net production to 57-60 MMBoe (156-164 MBoe/d) and lowering full year guidance for capital expenditures to $1.14 - $1.18 billion.
- The Company entered into an agreement providing it the option to increase its South Texas Austin Chalk acreage position by approximately 8,000 net acres through a drill-to-earn arrangement. The expanded position is located in a high oil/liquids content area.
- Eleven new wells located in the high-liquids area of South Texas are demonstrating noteworthy early results. The peak 30-day initial production rate from one pad having three wells averaged 1,973 Boe/d per well with 46% oil and 70% liquids and from a 3-pad group having eight wells averaged 2,020 Boe/d per well with 49% oil and 77% liquids.
- Net income was $131.2 million, or $1.13 per diluted common share, Adjusted net income(1) was $1.41 per diluted common share, net cash provided by operating activities was $276.0 million and Adjusted EBITDAX(1) was $409.0 million, all of which benefited from strong oil production and higher than expected oil and NGL prices.
- Return of capital to stockholders during the quarter totaled $53.6 million through the repurchase of 712,235 shares of common stock in combination with the Company's $0.18 per share quarterly dividend paid on February 5, 2024. Since announcing the return of capital program in September 2022, the Company has repurchased approximately 9.0 million shares, or 7% of shares then outstanding, and returned $428.8 million to stockholders, inclusive of dividends and common stock repurchases. Approximately $182.1 million remains available for repurchases under the Company's stock repurchase program.
- Net cash provided by operating activities of $276.0 million before net change in working capital of $97.7 million totaled $373.7 million (1) and capital expenditures of $332.4 million adjusted for a decrease in capital accruals of $(26.6) million were $305.8 million.(1) The Company completed 27 net wells compared to guidance of approximately 20 net wells.
- Adjusted free cash flow(1) was $67.9 million, up 35% from the first quarter 2023.
- Leverage remained low with the Net debt-to-Adjusted EBITDAX(1) ratio of 0.6 at quarter-end.
- The Company received a Leadership level score of A- from the CDP for Supplier Engagement based on the CDP Climate Change Questionnaire 2023. This places SM Energy among the top 5% of companies in its CDP peer group for best practices to incentivize environmental change through supplier engagement.
President and Chief Executive Officer Herb Vogel comments: "Top-tier assets and excellent operational execution delivered strong financial results and kicked-off another great year. Seventy-nine percent of first quarter Adjusted free cash flow(1) was returned to stockholders while we maintained low leverage of 0.6 times. We are very well positioned to deliver on all of our 2024 objectives to create long term value as we focus on operational execution, successfully work to expand our top tier inventory and continue to prioritize a strong balance sheet."
NET PRODUCTION BY OPERATING AREA | |||
First Quarter 2024 | |||
Midland Basin | South Texas | Total | |
Oil (MBbl / MBbl/d) | 4,363 / 47.9 | 1,431 / 15.7 | 5,795 / 63.7 |
Natural Gas (MMcf / MMcf/d) | 14,475 / 159.1 | 16,670 / 183.2 | 31,145 / 342.3 |
NGLs (MBbl / MBbl/d) | 3 / - | 2,214 / 24.3 | 2,217 / 24.4 |
Total (MBoe / MBoe/d) | 6,779 / 74.5 | 6,423 / 70.6 | 13,203 / 145.1 |
Note: Totals may not calculate due to rounding. | |||
- First quarter net production volumes were 13.2 MMBoe (145.1 MBoe/d), and were 44% oil (63.7 MBbls/d). Volumes were 51% from the Midland Basin and 49% from South Texas.
- First quarter net production exceeded expectations due to strong performance and early completion of new wells in South Texas.
REALIZED PRICES BY OPERATING AREA | |||
First Quarter 2024 | |||
Midland Basin | South Texas | Total (Pre/Post-hedge)(1) | |
Oil ($/Bbl) | $76.13 | $75.94 | $76.09 / $76.52 |
Natural Gas ($/Mcf) | $2.80 | $1.64 | $2.18 / $2.57 |
NGLs ($/Bbl) | nm | $22.94 | $22.94 / $22.28 |
Per Boe | $54.99 | $29.08 | $42.39 / $43.40 |
Note: Totals may not calculate due to rounding. | |||
- First quarter average realized price before the effect of hedges was $42.39 per Boe, and average realized price after the effect of hedges was $43.40 per Boe.(1)
- First quarter benchmark pricing included NYMEX WTI at $76.96 /Bbl, NYMEX Henry Hub natural gas at $2.24 /MMBtu and OPIS Composite NGLs at $29.28 /Bbl.
- The effect of commodity net derivative settlements for the first quarter was a gain of $1.01 per Boe, or $13.3 million.
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 2024 net income was $131.2 million, or $1.13 per diluted common share, compared with net income of $198.6 million, or $1.62 per diluted common share, for the same period in 2023. Production and realized pricing after the effect of net derivative settlements were similar in the year-over-year periods with the primary variance in net income attributable to a non-cash derivative gain in the prior year period compared with a non-cash net derivative loss in the current year period. The current year period also had slightly higher per unit DD&A costs.
First quarter 2024 net cash provided by operating activities of $276.0 million before net change in working capital of $97.7 million totaled $373.7 million(1) compared with net cash provided by operating activities of $331.6 million before net change in working capital of $26.2 million that totaled $357.9 million(1) for the same period in 2023. The $15.8 million, or 4%, increase in the current year period is primarily due to lower cash production costs and net interest, plus a tax refund.
ADJUSTED EBITDAX,(1) ADJUSTED NET INCOME,(1) AND NET DEBT-TO-ADJUSTED EBITDAX(1)
First quarter 2024 Adjusted EBITDAX(1) was $409.0 million, up $7.7 million, or 2%, from $401.4 million for the same period in 2023.
For the first three months of 2024, Adjusted net income(1) was $164.1 million, or $1.41 per diluted common share, compared with an Adjusted net income(1) of $162.2 million, or $1.33 per diluted common share, for the same period in 2023.
At March 31, 2024, Net debt-to-Adjusted EBITDAX(1) was 0.6 times.
FINANCIAL POSITION, LIQUIDITY, CAPITAL EXPENDITURES AND ADJUSTED FREE CASH FLOW(1)
On March 31, 2024, the outstanding principal amount of the Company's long-term debt was $1.59 billion, with zero drawn on the Company's senior secured revolving credit facility, and cash and cash equivalents were $506.3 million. Net debt(1) was $1.08 billion. Subsequent to quarter-end, the Company's borrowing base and commitments under its senior secured revolving credit facility were reaffirmed at $2.50 billion and $1.25 billion, respectively, and combined with the quarter-end cash and cash equivalents balance, provided $1.75 billion in available liquidity.
First quarter 2024 capital expenditures of $332.4 million adjusted for decreased capital accruals of $(26.6) million totaled $305.8 million.(1) Capital activity during the quarter included drilling 29 net wells, of which 12 were in South Texas and 17 were in the Midland Basin, and adding 27 net flowing completions, of which 16 were in South Texas and 11 were in the Midland Basin.
First quarter 2024 cash flow from operations before net change in working capital totaled $373.7 million,(1) and capital expenditures before changes in accruals totaled $305.8 million,(1) delivering Adjusted free cash flow of $67.9 million.(1)
COMMODITY DERIVATIVES
As of April 25, 2024, commodity derivative positions for the second through fourth quarters of 2024 include:
SWAPS:
- Oil: Approximately 5,870 MBbls, or approximately 30% of expected 2Q-4Q 2024 net oil production, is hedged to benchmark prices at an average price of $69.31 /Bbl (weighted-average of collar floors and swaps) to $81.91 /Bbl (weighted-average of collar ceilings and swaps), excluding basis swaps.
- Natural gas: Approximately 25,050 BBtu, or approximately 25% of expected 2Q-4Q 2024 net natural gas production, is hedged to benchmark prices at an average price of $3.41 /MMBtu (weighted-average of collar floors and swaps, excluding basis swaps).
BASIS SWAPS:
- Oil, Midland Basin differential: Approximately 3,660 MBbls of expected 2Q-4Q 2024 net oil production are hedged to the local price point at a positive weighted-average price of $1.21 /Bbl basis.
- Gas, WAHA differential: Approximately 15,870 BBtu of expected 2Q-4Q 2024 net natural gas production are hedged to WAHA at a weighted-average price of ($0.93) /MMBtu basis.
- Gas, HSC differential: Approximately 12,490 BBtu of expected 2Q-4Q 2024 net natural gas production are hedged to HSC at a weighted-average price of ($0.35) /MMBtu basis.
A detailed schedule of these and additional derivative positions are provided in the 1Q24 accompanying slide deck.
2024 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.
UPDATED GUIDANCE FULL YEAR 2024:
- Full year guidance for net production is increased 2% at the mid-point to 57-60 MMBoe or 156-164 MBoe/d at ~44% oil.
- Full year guidance for capital expenditures (net of the change in capital accruals),(1) excluding acquisitions, is reduced 2% at the mid-point to $1.14 - $1.18 billion.
- Full year guidance for transportation expense per Boe is reduced 9% at the mid-point to $2.10 -2.20 per Boe.
- Other line items remain unchanged.
GUIDANCE SECOND QUARTER 2024:
- Capital expenditures (net of the change in capital accruals),(1) excluding acquisitions: approximately $315 - $325 million. In the second quarter of 2024, the Company expects to drill approximately 31 net wells, of which 9 are planned for South Texas and 22 are planned for the Midland Basin, and turn-in-line approximately 38 net wells, of which 10 are planned for South Texas and 28 are planned for the Midland Basin.
- Production: Approximately 14.1-14.3 MMBoe or 155-157 MBoe/d, at approximately 44% oil and 60% liquids.
UPCOMING EVENTS
EARNINGS Q&A WEBCAST AND CONFERENCE CALL
May 3, 2024 - Please join SM Energy management at 8:00 a.m. Mountain time / 10:00 a.m. Eastern time for the first quarter 2024 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 sm-energy.com/investors (replay accessible approximately 1 hour after the live call); or
- Telephone - join the live conference call by registering at http://event.choruscall.com/mediaframe/webcast.html?webcastid=ySnEXvkM. Dial-in for domestic toll free/International is 877-407-6050 / +1 201-689-8022.
CONFERENCE PARTICIPATION
June 4, 2024 - RBCCM 2024 Global Energy, Power and Infrastructure Conference. Chief Financial Officer Wade Pursell will host a breakout session at 12:00 p.m. Mountain time / 2:00 p.m. Eastern time and will also meet with investors in one-on-one settings. The event will not be webcast. The Company will post an investor presentation to its website the morning of the event.
June 5 - 6, 2024 - BofA Securities 2024 Energy Credit Conference. 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 "anticipate," "deliver," "demonstrate," "establish," "estimate," "expects," "goal," "generate," "maintain," "objectives," "optimize," "plan," "target," 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 2024, including guidance for capital expenditures, production, transportation expense, the number of wells expected to be drilled and completed in each of our operating areas, and the percent of future production to be hedged. 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, [email protected] , 303-864-2507
SM ENERGY COMPANY | |||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||
March 31, 2024 | |||
Condensed Consolidated Balance Sheets | |||
(in thousands, except share data) | March 31, | December 31, | |
ASSETS | 2024 | 2023 | |
Current assets: | |||
Cash and cash equivalents | $ 506,252 | $ 616,164 | |
Accounts receivable | 241,731 | 231,165 | |
Derivative assets | 33,913 | 56,442 | |
Prepaid expenses and other | 11,149 | 12,668 | |
Total current assets | 793,045 | 916,439 | |
Property and equipment (successful efforts method): | |||
Proved oil and gas properties | 11,756,523 | 11,477,358 | |
Accumulated depletion, depreciation, and amortization | (6,994,005) | (6,830,253) | |
Unproved oil and gas properties, net of valuation allowance of $34,934 and $35,362, respectively | 335,755 | 335,620 | |
Wells in progress | 380,419 | 358,080 | |
Other property and equipment, net of accumulated depreciation of $60,606 and $59,669, respectively | 34,905 | 35,615 | |
Total property and equipment, net | 5,513,597 | 5,376,420 | |
Noncurrent assets: | |||
Derivative assets | 7,198 | 8,672 | |
Other noncurrent assets | 84,618 | 78,454 | |
Total noncurrent assets | 91,816 | 87,126 | |
Total assets | $ 6,398,458 | $ 6,379,985 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable and accrued expenses | $ 496,361 | $ 611,598 | |
Derivative liabilities | 24,108 | 6,789 | |
Other current liabilities | 15,615 | 15,425 | |
Total current liabilities | 536,084 | 633,812 | |
Noncurrent liabilities: | |||
Revolving credit facility | - | - | |
Senior Notes, net | 1,576,115 | 1,575,334 | |
Asset retirement obligations | 124,085 | 118,774 | |
Net deferred tax liabilities | 397,296 | 369,903 | |
Derivative liabilities | 1,369 | 1,273 | |
Other noncurrent liabilities | 65,258 | 65,039 | |
Total noncurrent liabilities | 2,164,123 | 2,130,323 | |
Stockholders' equity: | |||
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: | 1,150 | 1,157 | |
Additional paid-in capital | 1,536,929 | 1,565,021 | |
Retained earnings | 2,162,771 | 2,052,279 | |
Accumulated other comprehensive loss | (2,599) | (2,607) | |
Total stockholders' equity | 3,698,251 | 3,615,850 | |
Total liabilities and stockholders' equity | $ 6,398,458 | $ 6,379,985 | |
SM ENERGY COMPANY | |||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||
March 31, 2024 | |||
Condensed Consolidated Statements of Operations | |||
(in thousands, except per share data) | For the Three Months Ended March 31, | ||
2024 | 2023 | ||
Operating revenues and other income: | |||
Oil, gas, and NGL production revenue | $ 559,596 | $ 570,778 | |
Other operating income | 274 | 2,727 | |
Total operating revenues and other income | 559,870 | 573,505 | |
Operating expenses: | |||
Oil, gas, and NGL production expense | 137,375 | 142,348 | |
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 166,188 | 154,189 | |
Exploration (1) | 18,581 | 18,428 | |
General and administrative (1) | 30,178 | 27,669 | |
Net derivative (gain) loss(2) | 28,145 | (51,329) | |
Other operating expense, net | 1,008 | 10,153 | |
Total operating expenses | 381,475 | 301,458 | |
Income from operations | 178,395 | 272,047 | |
Interest expense | (21,873) | (22,459) | |
Interest income | 6,770 | 4,702 | |
Other non-operating expense | (24) | (232) | |
Income before income taxes | 163,268 | 254,058 | |
Income tax expense | (32,069) | (55,506) | |
Net income | $ 131,199 | $ 198,552 | |
Basic weighted-average common shares outstanding | 115,642 | 121,671 | |
Diluted weighted-average common shares outstanding | 116,456 | 122,294 | |
Basic net income per common share | $ 1.13 | $ 1.63 | |
Diluted net income per common share | $ 1.13 | $ 1.62 | |
Net dividends declared per common share | $ 0.18 | $ 0.15 | |
(1) Non-cash stock-based compensation included in: | |||
Exploration expense | $ 1,125 | $ 951 | |
General and administrative expense | 3,893 | 3,367 | |
Total non-cash stock-based compensation | $ 5,018 | $ 4,318 | |
(2) The net derivative (gain) loss line item consists of the following: | |||
Net derivative settlement gain | $ (13,274) | $ (5,076) | |
Net (gain) loss on fair value changes | 41,419 | (46,253) | |
Total net derivative (gain) loss | $ 28,145 | $ (51,329) | |
SM ENERGY COMPANY | |||||||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||
March 31, 2024 | |||||||||||
Condensed Consolidated Statements of Stockholders' Equity | |||||||||||
(in thousands, except share data and dividends per share) | |||||||||||
Additional | Retained | Accumulated | Total | ||||||||
Common Stock | |||||||||||
Shares | Amount | ||||||||||
Balances, December 31, 2023 | 115,745,393 | $ 1,157 | $ 1,565,021 | $ 2,052,279 | $ (2,607) | $ 3,615,850 | |||||
Net income | - | - | - | 131,199 | - | 131,199 | |||||
Other comprehensive income | - | - | - | - | 8 | 8 | |||||
Net cash dividends declared, $0.18 per share | - | - | - | (20,707) | - | (20,707) | |||||
Issuance of common stock upon vesting | 1,147 | - | (22) | - | - | (22) | |||||
Stock-based compensation expense | 1,839 | - | 5,018 | - | - | 5,018 | |||||
Purchase of shares under Stock Repurchase Program | (712,235) | (7) | (33,088) | - | - | (33,095) | |||||
Balances, March 31, 2024 | 115,036,144 | $ 1,150 | $ 1,536,929 | $ 2,162,771 | $ (2,599) | $ 3,698,251 | |||||
Additional | Accumulated | Total | |||||||||
Common Stock | Retained | ||||||||||
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 | |||||
Net 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 | |||||
SM ENERGY COMPANY | |||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||
March 31, 2024 | |||
Condensed Consolidated Statements of Cash Flows | |||
(in thousands) | For the Three Months Ended March 31, | ||
2024 | 2023 | ||
Cash flows from operating activities: | |||
Net income | $ 131,199 | $ 198,552 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 166,188 | 154,189 | |
Stock-based compensation expense | 5,018 | 4,318 | |
Net derivative (gain) loss | 28,145 | (51,329) | |
Net derivative settlement gain | 13,274 | 5,076 | |
Amortization of deferred financing costs | 1,371 | 1,371 | |
Deferred income taxes | 27,391 | 49,968 | |
Other, net | 1,102 | (4,295) | |
Net change in working capital | (97,688) | (26,216) | |
Net cash provided by operating activities | 276,000 | 331,634 | |
Cash flows from investing activities: | |||
Capital expenditures | (332,365) | (240,712) | |
Other, net | 77 | 307 | |
Net cash used in investing activities | (332,288) | (240,405) | |
Cash flows from financing activities: | |||
Repurchase of common stock | (32,768) | (40,068) | |
Dividends paid | (20,834) | (18,290) | |
Net share settlement from issuance of stock awards | (22) | - | |
Net cash used in financing activities | (53,624) | (58,358) | |
Net change in cash, cash equivalents, and restricted cash | (109,912) | 32,871 | |
Cash, cash equivalents, and restricted cash at beginning of period | 616,164 | 444,998 | |
Cash, cash equivalents, and restricted cash at end of period | $ 506,252 | $ 477,869 | |
Supplemental schedule of additional cash flow information: | |||
Operating activities: | |||
Cash paid for interest, net of capitalized interest | $ (32,986) | $ (33,882) | |
Net cash refunded (paid) for income taxes | $ 3,292 | $ (50) | |
Investing activities: | |||
Changes in capital expenditure accruals | $ (26,569) | $ 66,873 | |
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. Reconciliations 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 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 2024 Form 10-Q and the most recent Annual Report on Form 10-K for discussion of the Credit Agreement and its covenants.
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 changes in accruals. 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.
Adjusted net income and Adjusted net income per diluted common share: Adjusted net income and Adjusted net income 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.
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 net derivative settlements. The Company believes this metric is useful to management and the investment community to understand the effects of commodity net derivative settlements on average realized price.
SM ENERGY COMPANY | |||||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||
March 31, 2024 | |||||||||
Production Data | |||||||||
For the Three Months Ended | Percent Change Between | ||||||||
March 31, | December 31, | March 31, | 1Q24 & | 1Q24 & | |||||
2024 | 2023 | 2023 | |||||||
Realized sales price (before the effect of net derivative settlements): | |||||||||
Oil (per Bbl) | $ 76.09 | $ 77.41 | $ 74.31 | (2) % | 2 % | ||||
Gas (per Mcf) | $ 2.18 | $ 2.47 | $ 2.91 | (12) % | (25) % | ||||
NGLs (per Bbl) | $ 22.94 | $ 21.92 | $ 26.24 | 5 % | (13) % | ||||
Equivalent (per Boe) | $ 42.39 | $ 42.99 | $ 43.31 | (1) % | (2) % | ||||
Realized sales price (including the effect of net derivative settlements): | |||||||||
Oil (per Bbl) | $ 76.52 | $ 76.31 | $ 73.21 | - % | 5 % | ||||
Gas (per Mcf) | $ 2.57 | $ 2.81 | $ 3.26 | (9) % | (21) % | ||||
NGLs (per Bbl) | $ 22.28 | $ 22.57 | $ 26.24 | (1) % | (15) % | ||||
Equivalent (per Boe) | $ 43.40 | $ 43.45 | $ 43.70 | - % | (1) % | ||||
Net production volumes: (1) | |||||||||
Oil (MMBbl) | 5.8 | 6.1 | 5.7 | (5) % | 2 % | ||||
Gas (Bcf) | 31.1 | 33.5 | 32.2 | (7) % | (3) % | ||||
NGLs (MMBbl) | 2.2 | 2.5 | 2.1 | (10) % | 3 % | ||||
Equivalent (MMBoe) | 13.2 | 14.1 | 13.2 | (6) % | - % | ||||
Average net daily production: (1) | |||||||||
Oil (MBbl per day) | 63.7 | 66.0 | 62.9 | (4) % | 1 % | ||||
Gas (MMcf per day) | 342.3 | 364.1 | 358.1 | (6) % | (4) % | ||||
NGLs (MBbl per day) | 24.4 | 26.7 | 23.8 | (9) % | 2 % | ||||
Equivalent (MBoe per day) | 145.1 | 153.5 | 146.4 | (5) % | (1) % | ||||
Per Boe data: | |||||||||
Lease operating expense | $ 5.54 | $ 5.31 | $ 5.16 | 4 % | 7 % | ||||
Transportation costs | $ 2.07 | $ 2.08 | $ 2.81 | - % | (26) % | ||||
Production taxes | $ 1.90 | $ 1.97 | $ 2.02 | (4) % | (6) % | ||||
Ad valorem tax expense | $ 0.89 | $ 0.37 | $ 0.81 | 141 % | 10 % | ||||
General and administrative (2) | $ 2.29 | $ 2.60 | $ 2.10 | (12) % | 9 % | ||||
Net derivative settlement gain | $ 1.01 | $ 0.46 | $ 0.39 | 120 % | 159 % | ||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | $ 12.59 | $ 13.39 | $ 11.70 | (6) % | 8 % | ||||
(1) Amounts and percentage changes may not calculate due to rounding. | |||||||||
(2) Includes non-cash stock-based compensation expense per Boe of $0.29, $0.33, and $0.26 for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively. | |||||||||
SM ENERGY COMPANY | |||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||
March 31, 2024 | |||||
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 | For the Trailing | |||
2024 | 2023 | 2024 | |||
Net income (GAAP) | $ 131,199 | $ 198,552 | $ 750,527 | ||
Interest expense | 21,873 | 22,459 | 91,044 | ||
Interest income | (6,770) | (4,702) | (21,922) | ||
Income tax expense | 32,069 | 55,506 | 72,885 | ||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 166,188 | 154,189 | 702,480 | ||
Exploration (2) | 17,456 | 17,477 | 55,312 | ||
Stock-based compensation expense | 5,018 | 4,318 | 20,950 | ||
Net derivative (gain) loss | 28,145 | (51,329) | 11,320 | ||
Net derivative settlement gain | 13,274 | 5,076 | 35,119 | ||
Other, net | 597 | (152) | 2,246 | ||
Adjusted EBITDAX (non-GAAP) | $ 409,049 | $ 401,394 | $ 1,719,961 | ||
Interest expense | (21,873) | (22,459) | (91,044) | ||
Interest income | 6,770 | 4,702 | 21,922 | ||
Income tax expense | (32,069) | (55,506) | (72,885) | ||
Exploration (2)(3) | (9,539) | (8,181) | (47,825) | ||
Amortization of deferred financing costs | 1,371 | 1,371 | 5,486 | ||
Deferred income taxes | 27,391 | 49,968 | 65,679 | ||
Other, net | (7,412) | (13,439) | (6,511) | ||
Net change in working capital | (97,688) | (26,216) | (76,023) | ||
Net cash provided by operating activities (GAAP) | $ 276,000 | $ 331,634 | $ 1,518,760 | ||
(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 periods presented, amounts exclude certain capital expenditures related to unsuccessful exploration activity. |
SM ENERGY COMPANY | |||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||
March 31, 2024 | |||
Reconciliation of Net Income to Adjusted Net Income (1) | |||
(in thousands, except per share data) | |||
For the Three Months Ended March 31, | |||
2024 | 2023 | ||
Net income (GAAP) | $ 131,199 | $ 198,552 | |
Net derivative (gain) loss | 28,145 | (51,329) | |
Net derivative settlement gain | 13,274 | 5,076 | |
Other, net | 597 | (152) | |
Tax effect of adjustments (2) | (9,117) | 10,070 | |
Adjusted net income (non-GAAP) | $ 164,098 | $ 162,217 | |
Diluted net income per common share (GAAP) | $ 1.13 | $ 1.62 | |
Net derivative (gain) loss | 0.24 | (0.42) | |
Net derivative settlement gain | 0.11 | 0.04 | |
Other, net | 0.01 | 0.01 | |
Tax effect of adjustments (2) | (0.08) | 0.08 | |
Adjusted net income per diluted common share (non-GAAP) | $ 1.41 | $ 1.33 | |
Basic weighted-average common shares outstanding | 115,642 | 121,671 | |
Diluted weighted-average common shares outstanding | 116,456 | 122,294 | |
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, 2024, and 2023, 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, 2024 | |
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 | 506,252 |
Net Debt (non-GAAP) | $ 1,078,892 |
(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, 2024. |
SM ENERGY COMPANY | |||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||
March 31, 2024 | |||
Adjusted Free Cash Flow (1) | |||
(in thousands) | |||
For the Three Months Ended March 31, | |||
2024 | 2023 | ||
Net cash provided by operating activities (GAAP) | $ 276,000 | $ 331,634 | |
Net change in working capital | 97,688 | 26,216 | |
Cash flow from operations before net change in working capital (non-GAAP) | 373,688 | 357,850 | |
Capital expenditures (GAAP) | 332,365 | 240,712 | |
Changes in capital expenditure accruals | (26,569) | 66,873 | |
Capital expenditures before changes in accruals (non-GAAP) | 305,796 | 307,585 | |
Adjusted free cash flow (non-GAAP) | $ 67,892 | $ 50,265 | |
(1) See "Definitions of non-GAAP Measures and Metrics as Calculated by the Company" above. |
SOURCE SM Energy Company
