SM ENERGY REPORTS THIRD QUARTER 2022 RESULTS; RETURN OF CAPITAL PROGRAM IS INITIATED
DENVER, Nov. 3, 2022 /PRNewswire/ -- SM Energy Company (the "Company") (NYSE: SM) today announced operating and financial results for the third quarter 2022 and provided certain fourth quarter and full year 2022 guidance. Highlights include:
- Driving profitability. Net income in the third quarter and for the first nine months of 2022 was $481.2 million, or $3.87 per diluted common share, and $853.5 million, or $6.87 per diluted common share, respectively. Adjusted net income(1) in the third quarter and for the first nine months of 2022 was $1.82 and $6.00 per diluted common share, respectively. Net cash provided by operating activities in the third quarter and for the first nine months of 2022 was $513.4 million and $1.40 billion, respectively. Adjusted EBITDAX(1) in the third quarter and for the first nine months was $460.2 million and $1.54 billion, respectively.
- Further improving the leverage ratio. Net-debt-to-adjusted EBITDAX(1) was reduced to 0.6 times at third quarter end.
- Initiating return of capital program through share buybacks and increased fixed dividend. As announced on September 7, 2022, the Company launched a return of capital program that includes an increase in the fixed dividend to $0.60 per share annually, to be paid in quarterly increments of $0.15 per share, and authorization for share repurchases of up to $500.0 million. The Company initiated the program by repurchasing approximately 453,000 shares during the quarter and scheduling the first $0.15 quarterly dividend for payment on November 7, 2022.
- Generating noteworthy performance from new wells. In South Texas, five new Austin Chalk wells reached peak IP 30 in the northern portion of the Company's position. The wells averaged approximately 1,300 Boe/d at 72% oil and 89% liquids and are expected to payout in approximately 8 months. In the Midland Basin, the Company recently completed three, high performing new wells in Sweetie Peck that are expected to reach peak IP 30 in November, proving-up an area along the western flank of the position.
- Keeping capital expenditures on track. Third quarter capital expenditures of $226.1 million, adjusted for an increase in capital accruals of $12.8 million totaled $238.9 million.(1) For the full year 2022, capital expenditures (net of the change in capital accruals) are expected to range between $870.0 and $900.0 million, unchanged from earlier guidance.
- Applying new technology to further reduce emissions. The Company initiated its program to conduct monthly flyovers of the majority of its operated facilities in the Midland Basin for enhanced methane detection. In conjunction with this program, the Company designed an automated data integration system that concurrently pulls the data onto internal dashboards, enabling better accuracy and faster response times.
President and Chief Executive Officer Herb Vogel comments: "This is a very exciting time for our Company as we enhance our return of capital to shareholders with a solid, sustainable increase in the annual fixed dividend and a robust share buyback program. We believe that SM Energy has among the highest quality and longest life inventories in our space, and we consider ourselves to be among the top operators in terms of efficiency and organic inventory replacement. Over the past 12 months we have generated more than $1 billion in adjusted free cash flow.(1) We believe we have established the foundation for sustainable and repeatable return of capital through the cycle and provided for upside flexibility during periods of strong commodity prices."
PRODUCTION BY OPERATING AREA | |||
Midland Basin | South Texas | Total | |
Oil (MBbl / MBbl/d) | 4,497 / 48.9 | 1,179 / 12.8 | 5,676 / 61.7 |
Natural Gas (MMcf / MMcf/d) | 16,082 / 174.8 | 14,872 / 161.7 | 30,954 / 336.5 |
NGLs (MBbl / MBbl/d) | 9 / - | 1,836 / 20.0 | 1,845 / 20.1 |
Total (MBoe / MBoe/d) | 7,186 / 78.1 | 5,493 / 59.7 | 12,679 / 137.8 |
Note: Totals may not calculate due to rounding. | |||
As previously reported, third quarter production volumes were 12.7 MMBoe, or 137.8 MBoe/d. Volumes were approximately 57% from the Midland Basin and 43% from South Texas and were 45% oil.
REALIZED PRICES BY OPERATING AREA | |||
Midland Basin | South Texas | Total (Pre/Post-hedge)(1) | |
Oil ($/Bbl) | $93.59 | $89.12 | $92.66 / $71.44 |
Natural Gas ($/Mcf) | $7.71 | $7.44 | $7.58 / $5.58 |
NGLs ($/Bbl) | nm | $36.37 | $36.36 / $34.25 |
Per Boe | $75.85 | $51.42 | $65.27 / $50.58 |
Note: Totals may not calculate due to rounding.
As previously reported, the third quarter average realized price before the effect of hedges was $65.27 per Boe and the average realized price after the effect of hedges (post-hedge) was $50.58 per Boe.(1)
- Benchmark pricing for the quarter included NYMEX WTI at $91.56/Bbl, NYMEX Henry Hub natural gas at $8.20/MMBtu and Hart Composite NGLs at $42.47/Bbl.
- The effect of commodity derivative settlements for the third quarter was a loss of $14.69 per Boe, or $186.3 million.
- The realized price for natural gas was negatively affected by lower realizations in the Midland Basin where NGL revenue is incorporated into the realized natural gas price. The Company expects realizations to remain lower in this region into the fourth quarter due to widened differentials at the regional Waha trading hub.
For additional operating metrics and regional detail, please see the Financial Highlights section below and the accompanying slide deck.
NET INCOME (LOSS), NET INCOME (LOSS) PER SHARE AND NET CASH PROVIDED BY OPERATING ACTIVITIES
Third quarter 2022 net income was $481.2 million, or $3.87 per diluted common share, compared with net income of $85.6 million, or $0.69 per diluted common share, for the same period in 2021. The current year period included a 10% increase in total oil, gas, and NGL production revenue and other income due to a 23% increase in the average commodity price per Boe as compared to the same period in 2021. The current year period also benefited from a net derivative gain of $137.6 million, a 19% decline in DD&A per Boe and lower interest expense as compared to the same period in 2021. This was partially offset by an income tax expense of $119.4 million versus a negligible amount in the third quarter 2021. For the first nine months of 2022, net income was $853.5 million, or $6.87 per diluted common share, compared with a net loss of $388.7 million, or $3.29 per diluted common share, for the same period in 2021.
Third quarter 2022 net cash provided by operating activities of $513.4 million before net change in working capital of $(96.5) million totaled $416.9 million,(1) which was up $109.9 million, or 36%, from the same period in 2021 with net cash provided by operating activities of $328.1 million before net change in working capital of $(21.1) million totaling $307.0 million.(1) The increase in net cash provided by operating activities before net change in working capital for the third quarter 2022 compared with the same period in 2021 was primarily due to the increase in realized prices, lower realized derivative settlement losses and lower interest expense. For the first nine months of 2022, net cash provided by operating activities of $1,398.0 million before net change in working capital of $13.3 million totaled $1,411.3 million, which was up $733.3 million from the same period in 2021. The increase in net cash provided by operating activities before net change in working capital for the first nine months of 2022 compared with the same period in 2021 was primarily due to the increases in both production volumes and realized prices.
ADJUSTED EBITDAX,(1) ADJUSTED NET INCOME,(1) AND NET DEBT-TO-ADJUSTED EBITDAX(1)
Third quarter 2022 Adjusted EBITDAX(1) was $460.2 million, up $113.5 million, or 33%, from $346.7 million for the same period in 2021. For the first nine months of 2022 Adjusted EBITDAX(1) was $1.5 billion compared with $818.5 million for the same period in 2021.
Third quarter 2022 Adjusted net income(1) was $226.0 million, or $1.82 per diluted common share, which compares with Adjusted net income(1) of $91.5 million, or $0.74 per diluted common share, for the same period in 2021. For the first nine months of 2022, Adjusted net income(1) was $744.8 million, or $6.00 per diluted common share, compared with an Adjusted net income(1) of $86.7 million, or $0.73 per diluted common share, for the same period in 2021.
At September 30, 2022, Net debt-to-Adjusted EBITDAX(1) was 0.6 times.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL EXPENDITURES
On September 30, 2022, the outstanding principal amount of the Company's long-term debt was $1.6 billion with zero drawn on the Company's senior secured revolving credit facility, and cash and cash equivalents of $498.4 million. Net debt(1) was $1.1 billion.
Third quarter 2022 capital expenditures of $226.1 million adjusted for increased capital accruals of $12.8 million were $238.9 million(1), coming in below guidance of $250-270 million. During the third quarter 2022, the Company drilled 18 net wells, of which 8 were in South Texas and 10 were in the Midland Basin, and added 31 net flowing completions, of which 17 were in South Texas and 14 were in the Midland Basin.
COMMODITY DERIVATIVES
As entered into as of October 31, 2022, commodity derivative positions for the fourth quarter of 2022 include:
- Oil - Approximately 52% of expected oil production is hedged to WTI at an average price of $56.01/Bbl (weighted-average of collar ceilings and swaps).
- Oil, Midland Basin differential - Approximately 2,500 MBbls are hedged to the local price point at a positive $1.15/Bbl basis.
- Natural gas - Approximately 48% of expected natural gas production is hedged. 7,000 BBtu is hedged to HSC at a weighted-average price of $2.47/MMBtu, and 3,100 BBtu is hedged to Waha at a weighted-average price of $2.22/MMBtu.
- NGL hedges are by individual product and include propane swaps and collars.
The Company expects to hedge less than 30% of 2023 production.
A detailed schedule of these and other derivative positions are provided in the 3Q22 accompanying slide deck.
2022 OPERATING PLAN AND GUIDANCE
The Company is unable to provide a reconciliation of forward-looking non-GAAP capital expenditures because components of the calculation are inherently unpredictable, such as changes to, and timing of, capital accruals. The inability to project certain components of the calculation would significantly affect the accuracy of a reconciliation.
GUIDANCE FULL YEAR AND FOURTH QUARTER 2022:
- Capital expenditures (net of the change in capital accruals): Full year $870-900 million, unchanged. Fourth quarter $228-258 million. For the full year 2022, the Company expects to complete approximately 81 net wells.
- Production: 52.5-53.0 MMBoe or 144-145 MBoe/d, as previously reported, at ~46% oil. Fourth quarter 12.7-13.2 MMBoe, or 138-143 MBoe/d, at ~44% oil.
- LOE: $5.10-$5.15/Boe, reflecting higher second half inflation. Fourth quarter ~$5.60/Boe.
- Transportation: ~$3.00/Boe, unchanged. Fourth quarter ~$3.25/Boe.
- Production and ad valorem taxes: ~$3.90/Boe, increased due to higher mid-year commodity prices and higher property tax assessments, respectively. Fourth quarter ~$3.50/Boe.
- DD&A: ~$11.50/Boe, unchanged: Fourth quarter ~$11.50/Boe.
- Exploration expense: ~$55 million, up slightly.
- G&A: ~$110 million, unchanged.
UPCOMING EVENTS
EARNINGS Q&A WEBCAST AND CONFERENCE CALL
November 4, 2022 – Please join SM Energy management at 8:00 a.m. Mountain time/10:00 a.m. Eastern time for the third quarter 2022 financial and operating results Q&A session. This discussion will be accessible via webcast (available live and for replay) on the Company's website at ir.sm-energy.com or by telephone. To join the live conference call, please register at the link below for dial-in information.
- Live Conference Call Registration: https://conferencingportals.com/event/pAjDSntN
- Replay (conference ID 11299) - Domestic toll free/International: 888-330-2434/240-789-2725
The call replay will be available approximately one hour after the call and until November 18, 2022.
CONFERENCE PARTICIPATION
- November 29, 2022 - Bank of America Energy Credit Conference. Chief Financial Officer Wade Pursell will present at 10:50 am Eastern time. The event will be webcast, accessible from the Company's website and available for replay for a limited period. The Company will post an investor presentation to its website the morning of the event.
- December 6, 2022 - 17th Annual Capital One Energy Conference. President and Chief Executive Officer Herb Vogel will participate in investor meetings at the event.
DISCLOSURES
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the meaning of securities laws. The words "estimate," "expect," "goal," "generate," "plan," "target," "believes," and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this release include, among other things, projections for the full year and fourth quarter 2022, including guidance for capital expenditures, production, production costs, DD&A, exploration expense and G&A; the timing of expected payout and to reach IP 30 rates for certain new wells; the quality and life of our inventory; expectations for future natural gas realized prices; the percent of future production to be hedged, and the number of wells the Company plans to complete in 2022. 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, specifically the third quarter 2022 Form 10-Q and the 2021 Form 10-K. 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) | |||
September 30, 2022 | |||
Condensed Consolidated Balance Sheets | |||
(in thousands, except share data) | September 30, | December 31, | |
ASSETS | 2022 | 2021 | |
Current assets: | |||
Cash and cash equivalents | $ 498,435 | $ 332,716 | |
Accounts receivable | 258,003 | 247,201 | |
Derivative assets | 42,207 | 24,095 | |
Prepaid expenses and other | 9,133 | 9,175 | |
Total current assets | 807,778 | 613,187 | |
Property and equipment (successful efforts method): | |||
Proved oil and gas properties | 9,914,261 | 9,397,407 | |
Accumulated depletion, depreciation, and amortization | (6,054,796) | (5,634,961) | |
Unproved oil and gas properties | 579,261 | 629,098 | |
Wells in progress | 276,298 | 148,394 | |
Other property and equipment, net of accumulated depreciation of $62,950 and $62,359, | 31,831 | 36,060 | |
Total property and equipment, net | 4,746,855 | 4,575,998 | |
Noncurrent assets: | |||
Derivative assets | 36,048 | 239 | |
Other noncurrent assets | 60,832 | 44,553 | |
Total noncurrent assets | 96,880 | 44,792 | |
Total assets | $ 5,651,513 | $ 5,233,977 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable and accrued expenses | $ 631,984 | $ 563,306 | |
Derivative liabilities | 174,717 | 319,506 | |
Other current liabilities | 7,316 | 6,515 | |
Total current liabilities | 814,017 | 889,327 | |
Noncurrent liabilities: | |||
Revolving credit facility | — | — | |
Senior Notes, net | 1,571,429 | 2,081,164 | |
Asset retirement obligations | 97,724 | 97,324 | |
Deferred income taxes | 212,470 | 9,769 | |
Derivative liabilities | 14,506 | 25,696 | |
Other noncurrent liabilities | 73,705 | 67,566 | |
Total noncurrent liabilities | 1,969,834 | 2,281,519 | |
Stockholders' equity: | |||
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: | 1,228 | 1,219 | |
Additional paid-in capital | 1,810,352 | 1,840,228 | |
Retained earnings | 1,068,385 | 234,533 | |
Accumulated other comprehensive loss | (12,303) | (12,849) | |
Total stockholders' equity | 2,867,662 | 2,063,131 | |
Total liabilities and stockholders' equity | $ 5,651,513 | $ 5,233,977 | |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||
September 30, 2022 | |||||||
Condensed Consolidated Statements of Operations | |||||||
(in thousands, except per share data) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||
2022 | 2021 | 2022 | 2021 | ||||
Operating revenues and other income: | |||||||
Oil, gas, and NGL production revenue | $ 827,558 | $ 759,813 | $ 2,676,656 | $ 1,745,547 | |||
Other operating income | 7,893 | 426 | 10,673 | 22,387 | |||
Total operating revenues and other income | 835,451 | 760,239 | 2,687,329 | 1,767,934 | |||
Operating expenses: | |||||||
Oil, gas, and NGL production expense | 159,961 | 135,745 | 470,245 | 362,131 | |||
Depletion, depreciation, amortization, and asset retirement | 145,865 | 202,701 | 460,169 | 574,375 | |||
Exploration (1) | 14,203 | 8,709 | 44,117 | 26,746 | |||
Impairment | 1,077 | 8,750 | 6,466 | 26,250 | |||
General and administrative (1) | 28,428 | 25,530 | 81,715 | 74,883 | |||
Net derivative (gain) loss (2) | (137,577) | 209,146 | 385,180 | 924,183 | |||
Other operating expense, net | 1,213 | 43,401 | 2,614 | 44,654 | |||
Total operating expenses | 213,170 | 633,982 | 1,450,506 | 2,033,222 | |||
Income (loss) from operations | 622,281 | 126,257 | 1,236,823 | (265,288) | |||
Interest expense | (22,825) | (40,861) | (97,708) | (120,268) | |||
Gain (loss) on extinguishment of debt | — | 5 | (67,605) | (2,139) | |||
Other non-operating income (expense), net | 1,163 | 153 | 930 | (1,071) | |||
Income (loss) before income taxes | 600,619 | 85,554 | 1,072,440 | (388,766) | |||
Income tax (expense) benefit | (119,379) | 39 | (218,951) | 95 | |||
Net income (loss) | $ 481,240 | $ 85,593 | $ 853,489 | $ (388,671) | |||
Basic weighted-average common shares outstanding | 123,195 | 121,457 | 122,318 | 118,224 | |||
Diluted weighted-average common shares outstanding | 124,279 | 123,851 | 124,233 | 118,224 | |||
Basic net income (loss) per common share | $ 3.91 | $ 0.70 | $ 6.98 | $ (3.29) | |||
Diluted net income (loss) per common share | $ 3.87 | $ 0.69 | $ 6.87 | $ (3.29) | |||
Dividends per common share | $ 0.15 | $ 0.01 | $ 0.16 | $ 0.02 | |||
(1) Non-cash stock-based compensation included in: | |||||||
Exploration expense | $ 1,000 | $ 908 | $ 2,965 | $ 3,004 | |||
General and administrative expense | 4,105 | 3,590 | 10,893 | 11,187 | |||
Total non-cash stock-based compensation | $ 5,105 | $ 4,498 | $ 13,858 | $ 14,191 | |||
(2) The net derivative (gain) loss line item consists of the following: | |||||||
Derivative settlement loss | $ 186,299 | $ 213,555 | $ 595,080 | $ 480,262 | |||
(Gain) loss on fair value changes | (323,876) | (4,409) | (209,900) | 443,921 | |||
Total net derivative (gain) loss | $ (137,577) | $ 209,146 | $ 385,180 | $ 924,183 | |||
SM ENERGY COMPANY | |||||||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||
September 30, 2022 | |||||||||||
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, 2021 | 121,862,248 | $ 1,219 | $ 1,840,228 | $ 234,533 | $ (12,849) | $ 2,063,131 | |||||
Net income | — | — | — | 48,764 | — | 48,764 | |||||
Other comprehensive income | — | — | — | — | 182 | 182 | |||||
Cash dividends declared, $0.01 per share | — | — | — | (1,218) | — | (1,218) | |||||
Issuance of common stock upon vesting | 1,929 | — | (24) | — | — | (24) | |||||
Stock-based compensation expense | — | — | 4,274 | — | — | 4,274 | |||||
Balances, March 31, 2022 | 121,864,177 | $ 1,219 | $ 1,844,478 | $ 282,079 | $ (12,667) | $ 2,115,109 | |||||
Net income | — | — | — | 323,485 | — | 323,485 | |||||
Other comprehensive income | — | — | — | — | 182 | 182 | |||||
Issuance of common stock under | 65,634 | 1 | 1,644 | — | — | 1,645 | |||||
Stock-based compensation expense | 29,471 | — | 4,479 | — | — | 4,479 | |||||
Balances, June 30, 2022 | 121,959,282 | $ 1,220 | $ 1,850,601 | $ 605,564 | $ (12,485) | $ 2,444,900 | |||||
Net income | — | — | — | 481,240 | — | 481,240 | |||||
Other comprehensive income | — | — | — | — | 182 | 182 | |||||
Cash dividends declared, $0.15 per share | — | — | — | (18,419) | — | (18,419) | |||||
Issuance of common stock upon vesting | 1,289,498 | 13 | (25,118) | (25,105) | |||||||
Stock-based compensation expense | — | — | 5,105 | — | — | 5,105 | |||||
Purchase of shares under Stock | (452,734) | (5) | (20,236) | — | — | (20,241) | |||||
Balances, September 30, 2022 | 122,796,046 | $ 1,228 | $ 1,810,352 | $ 1,068,385 | $ (12,303) | $ 2,867,662 | |||||
SM ENERGY COMPANY | |||||||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||
September 30, 2022 | |||||||||||
Condensed Consolidated Statements of Stockholders' Equity (Continued) | |||||||||||
(in thousands, except share data and dividends per share) | |||||||||||
Additional | Accumulated | Total | |||||||||
Common Stock | Retained | ||||||||||
Shares | Amount | ||||||||||
Balances, December 31, 2020 | 114,742,304 | $ 1,147 | $ 1,827,914 | $ 200,697 | $ (13,598) | $ 2,016,160 | |||||
Net loss | — | — | — | (251,269) | — | (251,269) | |||||
Other comprehensive income | — | — | — | — | 191 | 191 | |||||
Cash dividends declared, $0.01 per share | — | — | — | (1,147) | — | (1,147) | |||||
Stock-based compensation expense | — | — | 5,737 | — | — | 5,737 | |||||
Balances, March 31, 2021 | 114,742,304 | $ 1,147 | $ 1,833,651 | $ (51,719) | $ (13,407) | $ 1,769,672 | |||||
Net loss | — | — | — | (222,995) | — | (222,995) | |||||
Other comprehensive income | — | — | — | — | 592 | 592 | |||||
Cash dividends, $0.01 per share | — | — | — | (31) | — | (31) | |||||
Issuance of common stock under | 252,665 | 3 | 1,312 | — | — | 1,315 | |||||
Stock-based compensation expense | 57,795 | 1 | 3,955 | — | — | 3,956 | |||||
Issuance of common stock through | 5,918,089 | 59 | (59) | — | — | — | |||||
Balances, June 30, 2021 | 120,970,853 | $ 1,210 | $ 1,838,859 | $ (274,745) | $ (12,815) | $ 1,552,509 | |||||
Net income | — | — | — | 85,593 | — | 85,593 | |||||
Other comprehensive income | — | — | — | — | 246 | 246 | |||||
Cash dividends declared, $0.01 per share | — | — | — | (1,215) | — | (1,215) | |||||
Issuance of common stock upon vesting | 502,937 | 5 | (4,737) | — | — | (4,732) | |||||
Stock-based compensation expense | — | — | 4,498 | — | — | 4,498 | |||||
Balances, September 30, 2021 | 121,473,790 | $ 1,215 | $ 1,838,620 | $ (190,367) | $ (12,569) | $ 1,636,899 | |||||
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||
September 30, 2022 | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(in thousands) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||
2022 | 2021 | 2022 | 2021 | ||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ 481,240 | $ 85,593 | $ 853,489 | $ (388,671) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depletion, depreciation, amortization, and asset retirement | 145,865 | 202,701 | 460,169 | 574,375 | |||
Impairment | 1,077 | 8,750 | 6,466 | 26,250 | |||
Stock-based compensation expense | 5,105 | 4,498 | 13,858 | 14,191 | |||
Net derivative (gain) loss | (137,577) | 209,146 | 385,180 | 924,183 | |||
Derivative settlement loss | (186,299) | (213,555) | (595,080) | (480,262) | |||
Amortization of debt discount and deferred financing costs | 1,303 | 3,905 | 8,910 | 13,350 | |||
(Gain) loss on extinguishment of debt | — | (5) | 67,605 | 2,139 | |||
Deferred income taxes | 110,048 | (68) | 202,996 | (282) | |||
Other, net | (3,910) | 6,076 | 7,668 | (7,301) | |||
Net change in working capital | 96,518 | 21,078 | (13,230) | 52,170 | |||
Net cash provided by operating activities | 513,370 | 328,119 | 1,398,031 | 730,142 | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (226,101) | (180,088) | (591,846) | (550,265) | |||
Other, net | (596) | 5,293 | (596) | 5,514 | |||
Net cash used in investing activities | (226,697) | (174,795) | (592,442) | (544,751) | |||
Cash flows from financing activities: | |||||||
Proceeds from revolving credit facility | — | 705,500 | — | 1,649,500 | |||
Repayment of revolving credit facility | — | (758,000) | — | (1,742,500) | |||
Net proceeds from Senior Notes | — | (812) | — | 392,771 | |||
Cash paid to repurchase Senior Notes | — | (65,480) | (584,946) | (450,776) | |||
Repurchase of common stock | (20,241) | — | (20,241) | — | |||
Net proceeds from sale of common stock | — | — | 1,645 | 1,315 | |||
Dividends paid | — | — | (1,218) | (1,178) | |||
Other, net | (35,086) | (4,732) | (35,110) | (4,733) | |||
Net cash used in financing activities | (55,327) | (123,524) | (639,870) | (155,601) | |||
Net change in cash, cash equivalents, and restricted cash | 231,346 | 29,800 | 165,719 | 29,790 | |||
Cash, cash equivalents, and restricted cash at beginning of period | 267,089 | — | 332,716 | 10 | |||
Cash, cash equivalents, and restricted cash at end of period | $ 498,435 | $ 29,800 | $ 498,435 | $ 29,800 | |||
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||
September 30, 2022 | |||||||
Condensed Consolidated Statements of Cash Flows (Continued) | |||||||
(in thousands) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||
2022 | 2021 | 2022 | 2021 | ||||
Supplemental schedule of additional cash flow information and | |||||||
Operating activities: | |||||||
Cash paid for interest, net of capitalized interest | $ (34,793) | $ (51,364) | $ (125,668) | $ (126,228) | |||
Investing activities: | |||||||
Increase (decrease) in capital expenditure accruals and other | $ 12,810 | $ (20,102) | $ 50,590 | $ 8,885 | |||
Other information: | |||||||
Net cash paid for income taxes | $ (4) | $ (181) | $ (10,506) | $ (802) | |||
DEFINITIONS OF NON-GAAP MEASURES AND METRICS AS CALCULATED BY THE COMPANY
To supplement the presentation of its financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides certain non-GAAP measures and metrics, which are used by management and the investment community to assess the Company's financial condition, results of operations, and cash flows, as well as compare performance from period to period and across the Company's peer group. The Company believes these measures and metrics are widely used by the investment community, including investors, research analysts and others, to evaluate and compare recurring financial results among upstream oil and gas companies in making investment decisions or recommendations. These measures and metrics, as presented, may have differing calculations among companies and investment professionals and may not be directly comparable to the same measures and metrics provided by others. A non-GAAP measure should not be considered in isolation or as a substitute for the most directly comparable GAAP measure or any other measure of a company's financial or operating performance presented in accordance with GAAP. A reconciliation of the Company's non-GAAP measures to the most directly comparable GAAP measure is presented below. These measures may not be comparable to similarly titled measures of other companies.
Adjusted EBITDAX: Adjusted EBITDAX is calculated as net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items. Adjusted EBITDAX excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. The Company believes that Adjusted EBITDAX provides useful information for internal analysis and for investors and analysts, as a performance and liquidity measure, to evaluate 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 third quarter 2022 Form 10-Q for discussion of the Credit Agreement and its covenants.
Adjusted net income (loss) and adjusted net income (loss) per diluted common share: Adjusted net income (loss) and adjusted net income (loss) per diluted common share excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. These items include non-cash and other adjustments, such as derivative gains and losses net of settlements, impairments, net (gain) loss on divestiture activity, gains and losses on extinguishment of debt, and accruals for non-recurring matters. The Company uses these measures to evaluate the comparability of the Company's ongoing operational results and trends and believes these measures provide useful information to investors for analysis of the Company's fundamental business on a recurring basis.
Adjusted free cash flow: Adjusted free cash flow is calculated as net cash provided by operating activities before net change in working capital less capital expenditures before increase (decrease) in capital expenditure accruals and other. The Company uses this measure as representative of the cash from operations, in excess of capital expenditures that provides liquidity to fund discretionary obligations such as debt reduction, returning cash to shareholders or expanding the business.
Net debt: Net debt is calculated as the total principal amount of outstanding senior unsecured notes plus amounts drawn on the revolving credit facility less cash and cash equivalents (also referred to as total funded debt). The Company uses net debt as a measure of financial position and believes this measure provides useful additional information to investors to evaluate the Company's capital structure and financial leverage.
Net debt-to-Adjusted EBITDAX: Net debt-to-Adjusted EBITDAX is calculated as Net Debt (defined above) divided by Adjusted EBITDAX (defined above) for the trailing twelve-month period (also referred to as leverage ratio). A variation of this calculation is a financial covenant under the Company's Credit Agreement. The Company and the investment community may use this metric in understanding the Company's ability to service its debt and identify trends in its leverage position. The Company reconciles the two non-GAAP measure components of this calculation.
Post-hedge: Post-hedge is calculated as the average realized price after the effects of commodity derivative settlements. The Company believes this metric is useful to management and the investment community to understand the effects of commodity derivative settlements on average realized price.
SM ENERGY COMPANY | ||||||||||||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | ||||||||||||||||
September 30, 2022 | ||||||||||||||||
Production Data | ||||||||||||||||
For the Three Months Ended | Percent Change | For the Nine Months Ended | Percent | |||||||||||||
September 30, | June 30, | September 30, | 3Q22 & | 3Q22 & | September 30, | September 30, | ||||||||||
2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Realized sales price (before the effect of derivative settlements): | ||||||||||||||||
Oil (per Bbl) | $ 92.66 | $ 108.64 | $ 69.30 | (15) % | 34 % | $ 98.52 | $ 64.50 | 53 % | ||||||||
Gas (per Mcf) | $ 7.58 | $ 7.66 | $ 5.12 | (1) % | 48 % | $ 6.88 | $ 4.24 | 62 % | ||||||||
NGLs (per Bbl) | $ 36.36 | $ 42.08 | $ 36.87 | (14) % | (1) % | $ 39.04 | $ 31.19 | 25 % | ||||||||
Equivalent (per Boe) | $ 65.27 | $ 74.23 | $ 53.02 | (12) % | 23 % | $ 67.23 | $ 47.43 | 42 % | ||||||||
Realized sales price (including the effect of derivative settlements): | ||||||||||||||||
Oil (per Bbl) | $ 71.44 | $ 79.45 | $ 50.17 | (10) % | 42 % | $ 75.05 | $ 47.40 | 58 % | ||||||||
Gas (per Mcf) | $ 5.58 | $ 5.96 | $ 3.89 | (6) % | 43 % | $ 5.37 | $ 3.09 | 74 % | ||||||||
NGLs (per Bbl) | $ 34.25 | $ 37.96 | $ 20.22 | (10) % | 69 % | $ 34.99 | $ 18.75 | 87 % | ||||||||
Equivalent (per Boe) | $ 50.58 | $ 56.20 | $ 38.12 | (10) % | 33 % | $ 52.28 | $ 34.38 | 52 % | ||||||||
Net production volumes: (1) | ||||||||||||||||
Oil (MMBbl) | 5.7 | 6.1 | 8.1 | (8) % | (30) % | 18.3 | 20.2 | (9) % | ||||||||
Gas (Bcf) | 31.0 | 31.5 | 29.1 | (2) % | 6 % | 93.8 | 77.1 | 22 % | ||||||||
NGLs (MMBbl) | 1.8 | 1.9 | 1.4 | (5) % | 30 % | 5.9 | 3.8 | 56 % | ||||||||
Equivalent (MMBoe) | 12.7 | 13.3 | 14.3 | (5) % | (12) % | 39.8 | 36.8 | 8 % | ||||||||
Average net daily production: (1) | ||||||||||||||||
Oil (MBbls per day) | 61.7 | 67.5 | 87.6 | (9) % | (30) % | 66.9 | 73.9 | (9) % | ||||||||
Gas (MMcf per day) | 336.5 | 346.3 | 316.3 | (3) % | 6 % | 343.7 | 282.5 | 22 % | ||||||||
NGLs (MBbls per day) | 20.1 | 21.4 | 15.5 | (6) % | 30 % | 21.6 | 13.9 | 56 % | ||||||||
Equivalent (MBoe per day) | 137.8 | 146.6 | 155.8 | (6) % | (12) % | 145.8 | 134.8 | 8 % | ||||||||
Per Boe data: | ||||||||||||||||
Lease operating expense | $ 5.64 | $ 5.11 | $ 4.20 | 10 % | 34 % | $ 4.98 | $ 4.46 | 12 % | ||||||||
Transportation costs | $ 2.87 | $ 2.87 | $ 2.41 | — % | 19 % | $ 2.82 | $ 2.75 | 3 % | ||||||||
Production taxes | $ 3.17 | $ 3.75 | $ 2.49 | (15) % | 27 % | $ 3.28 | $ 2.18 | 50 % | ||||||||
Ad valorem tax expense | $ 0.93 | $ 0.69 | $ 0.38 | 35 % | 145 % | $ 0.73 | $ 0.44 | 66 % | ||||||||
General and administrative (2) | $ 2.24 | $ 2.12 | $ 1.78 | 6 % | 26 % | $ 2.05 | $ 2.03 | 1 % | ||||||||
Derivative settlement loss | $ (14.69) | $ (18.03) | $ (14.90) | 19 % | 1 % | $ (14.95) | $ (13.05) | (15) % | ||||||||
Depletion, depreciation, | $ 11.50 | $ 11.60 | $ 14.14 | (1) % | (19) % | $ 11.56 | $ 15.61 | (26) % | ||||||||
(1) Amounts and percentage changes may not calculate due to rounding. | ||||||||||||||||
(2) Includes non-cash stock-based compensation expense per Boe of $0.32, $0.26, and $0.25 for the three months ended September 30, 2022, June 30, | ||||||||||||||||
SM ENERGY COMPANY | |||||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||
September 30, 2022 | |||||||||
Adjusted EBITDAX Reconciliation (1) | |||||||||
(in thousands) | |||||||||
Reconciliation of net income (loss) (GAAP) and net | For the Three Months | For the Nine Months | Trailing Twelve | ||||||
2022 | 2021 | 2022 | 2021 | 2022 | |||||
Net income (loss) (GAAP) | $ 481,240 | $ 85,593 | $ 853,489 | $ (388,671) | $ 1,278,389 | ||||
Interest expense | 22,825 | 40,861 | 97,708 | 120,268 | 137,793 | ||||
Income tax expense (benefit) | 119,379 | (39) | 218,951 | (95) | 228,984 | ||||
Depletion, depreciation, amortization, and asset | 145,865 | 202,701 | 460,169 | 574,375 | 660,180 | ||||
Exploration (2) | 13,203 | 7,801 | 41,152 | 23,742 | 52,756 | ||||
Impairment | 1,077 | 8,750 | 6,466 | 26,250 | 15,216 | ||||
Stock-based compensation expense | 5,105 | 4,498 | 13,858 | 14,191 | 18,486 | ||||
Net derivative (gain) loss | (137,577) | 209,146 | 385,180 | 924,183 | 362,656 | ||||
Derivative settlement loss | (186,299) | (213,555) | (595,080) | (480,262) | (863,776) | ||||
(Gain) loss on extinguishment of debt | — | (5) | 67,605 | 2,139 | 67,605 | ||||
Other, net | (4,663) | 905 | (5,064) | 2,407 | (6,964) | ||||
Adjusted EBITDAX (non-GAAP) | $ 460,155 | $ 346,656 | $ 1,544,434 | $ 818,527 | $ 1,951,325 | ||||
Interest expense | (22,825) | (40,861) | (97,708) | (120,268) | (137,793) | ||||
Income tax (expense) benefit | (119,379) | 39 | (218,951) | 95 | (228,984) | ||||
Exploration (2)(3) | (11,993) | (7,801) | (27,959) | (23,742) | (39,563) | ||||
Amortization of debt discount and deferred financing | 1,303 | 3,905 | 8,910 | 13,350 | 12,835 | ||||
Deferred income taxes | 110,048 | (68) | 202,996 | (282) | 212,843 | ||||
Other, net | (457) | 5,171 | (461) | (9,708) | 4,987 | ||||
Net change in working capital | 96,518 | 21,078 | (13,230) | 52,170 | 52,011 | ||||
Net cash provided by operating activities (GAAP) | $ 513,370 | $ 328,119 | $ 1,398,031 | $ 730,142 | $ 1,827,661 | ||||
(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 accompanying unaudited | |||||||||
(3) For the three and nine months ended September 30, 2022, amounts are net of certain capital expenditures related to unsuccessful exploration efforts outside of our core | |||||||||
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||
September 30, 2022 | |||||||
Adjusted Net Income Reconciliation (1) | |||||||
(in thousands, except per share data) | |||||||
Reconciliation of net income (loss) (GAAP) to adjusted net income | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||
2022 | 2021 | 2022 | 2021 | ||||
Net income (loss) (GAAP) | $ 481,240 | $ 85,593 | $ 853,489 | $ (388,671) | |||
Net derivative (gain) loss | (137,577) | 209,146 | 385,180 | 924,183 | |||
Derivative settlement loss | (186,299) | (213,555) | (595,080) | (480,262) | |||
Impairment | 1,077 | 8,750 | 6,466 | 26,250 | |||
(Gain) loss on extinguishment of debt | — | (5) | 67,605 | 2,139 | |||
Other, net | (3,117) | 1,525 | (2,984) | 3,108 | |||
Tax effect of adjustments (2) | 70,724 | (1,272) | 30,122 | (103,166) | |||
Valuation allowance on deferred tax assets | — | 1,272 | — | 103,166 | |||
Adjusted net income (non-GAAP) | $ 226,048 | $ 91,454 | $ 744,798 | $ 86,747 | |||
Diluted net income (loss) per common share (GAAP) | $ 3.87 | $ 0.69 | $ 6.87 | $ (3.29) | |||
Net derivative (gain) loss | (1.11) | 1.69 | 3.10 | 7.82 | |||
Derivative settlement loss | (1.50) | (1.72) | (4.79) | (4.06) | |||
Impairment | 0.01 | 0.07 | 0.05 | 0.22 | |||
(Gain) loss on extinguishment of debt | — | — | 0.54 | 0.02 | |||
Other, net | (0.02) | 0.01 | (0.01) | 0.02 | |||
Tax effect of adjustments (2) | 0.57 | (0.01) | 0.24 | (0.87) | |||
Valuation allowance on deferred tax assets | — | 0.01 | — | 0.87 | |||
Adjusted net income per diluted common share (non-GAAP) | $ 1.82 | $ 0.74 | $ 6.00 | $ 0.73 | |||
Basic weighted-average common shares outstanding | 123,195 | 121,457 | 122,318 | 118,224 | |||
Diluted weighted-average common shares outstanding | 124,279 | 123,851 | 124,233 | 118,224 | |||
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 and nine months ended September 30, 2022, and 2021, was calculated using a tax rate of 21.7%. This rate | |||||||
SM ENERGY COMPANY | |
FINANCIAL HIGHLIGHTS (UNAUDITED) | |
September 30, 2022 | |
Reconciliation of Total Principal Amount of Debt to Net Debt (1) | |
(in thousands) | |
As of September 30, 2022 | |
Principal amount of Senior Unsecured Notes (2) | $ 1,585,144 |
Revolving credit facility (2) | — |
Total principal amount of debt (GAAP) | 1,585,144 |
Less: Cash and cash equivalents | 498,435 |
Net Debt (non-GAAP) | $ 1,086,709 |
(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 September 30, 2022. | |
Adjusted Free Cash Flow (1) | ||||||||||
(in thousands) | ||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | Trailing Twelve | ||||||||
2022 | 2021 | 2022 | 2021 | 2022 | ||||||
Net cash provided by operating activities | $ 513,370 | $ 328,119 | $ 1,398,031 | $ 730,142 | $ 1,827,661 | |||||
Net change in working capital | (96,518) | (21,078) | 13,230 | (52,170) | (52,011) | |||||
Cash flow from operations before net change in | 416,852 | 307,041 | 1,411,261 | 677,972 | 1,775,650 | |||||
Capital expenditures (GAAP) | 226,101 | 180,088 | 591,846 | 550,265 | 716,422 | |||||
Increase (decrease) in capital expenditure | 12,810 | (20,102) | 50,590 | 8,885 | 30,879 | |||||
Capital expenditures before accruals and other | 238,911 | 159,986 | 642,436 | 559,150 | 747,301 | |||||
Adjusted free cash flow (non-GAAP) | $ 177,941 | $ 147,055 | $ 768,825 | $ 118,822 | $ 1,028,349 | |||||
(1) See "Definitions of non-GAAP Measures and Metrics as Calculated by the Company" above. | ||||||||||
SOURCE SM Energy Company
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