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      SM ENERGY REPORTS THIRD QUARTER 2023 RESULTS AND ANNOUNCES 20% INCREASE IN FIXED DIVIDEND

      SM Logo

      News provided by

      SM Energy Company

      Nov 02, 2023, 16:15 ET

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      DENVER, Nov. 2, 2023 /PRNewswire/ -- SM Energy Company (the "Company") (NYSE: SM) today announced operating and financial results for the third quarter 2023 and provided certain full year and fourth quarter 2023 guidance.

      Highlights include:

      Increased capital returns to stockholders -  

      • The Company's Board of Directors approved a 20% increase in the fixed dividend policy, pursuant to which the Company intends to pay $0.72 per share annually, in quarterly increments of $0.18 per share, beginning in the first quarter of 2024. The increased dividend underscores the Company's confidence in its high-quality and long-term asset base and balance sheet strength, while sustainably returning capital to investors with a predictable yield. The dividend provides an approximate 1.8% yield to current market capitalization.
      • The Company increased its total capital return to stockholders in the third quarter to $114.1 million, up 31% from the previous quarter. This included the repurchase and retirement of 2,351,642 shares of its common stock and the $0.15 per share quarterly dividend paid August 7, 2023. Since announcing the return of capital program in September 2022, the Company has repurchased approximately 7.7 million shares, or approximately 6% of shares outstanding, at an average price of $34.15 per share and returned approximately $335 million to stockholders, inclusive of dividends and common stock repurchases. Approximately $238 million remains available for repurchases under the Company's stock repurchase program.

      Growing profitability -

      • In the third quarter 2023, net income was $222.3 million, or $1.88 per diluted common share, adjusted net income(1) was $1.73 per diluted common share, net cash provided by operating activities was $383.0 million and Adjusted EBITDAX(1) was $475.6 million, all of which exceeded expectations, benefiting from strong oil production, sequentially increased commodity prices and lower production costs.
      • In the third quarter 2023, net cash provided by operating activities of $383.0 million before net change in working capital of $52.9 million totaled $435.9 million and capital expenditures before changes in accruals and other(1) were $228.2 million, resulting in Adjusted free cash flow(1) of $207.7 million, up 119% from the second quarter 2023.

      Continued focus on operational execution, well performance and ESG -

      • Production for the third quarter 2023 was 14.1 MMBoe, or 153.7 MBoe/d, at 44% oil, which exceeded guidance and was driven largely by accelerated new wells in South Texas as a result of faster drilling and completion times.
      • In the third quarter, the Company successfully completed an asset exchange in the Sweetie Peck area that includes added interest in nine DUC wells (increasing the Company's working interest from approximately 42% to nearly 100%), boosting expected net production when the wells come on line in early 2024. This asset exchange complements the Company's strategy to drive capital efficiency by blocking-up acreage and maintaining high working interests.
      • SM Energy developed a centralized Operations Surveillance Room ("OSR"), empowering our operations team with leading technologies. The OSR is manned 24/7/365 by Operations Specialists. In addition to driving operations efficiencies and cost savings, the host of technologies employed monitor, communicate and automate responses that serve to mitigate emissions and reduce spill volumes. Beyond the Company's operations, the OSR has identified local brush fires, theft, and spill management, better serving the communities in which we live and work.

      President and Chief Executive Officer Herb Vogel comments: "We are pleased to announce the 20% increase in our annual fixed dividend policy. Our capital return framework is intended to deliver a sustainable dividend, augmented by the potential for share price appreciation realized through stock repurchases. For the first nine months of 2023, we have allocated 74% of Adjusted free cash flow to capital returns to stockholders while maintaining leverage at 0.7 times and adding more than 29,000 net acres in the Midland Basin. Our keen focus on operational execution, building our top tier inventory and maintaining and improving our balance sheet strength, position us to continue to create long-term value."

      THIRD QUARTER PRODUCTION BY OPERATING AREA





      Midland Basin

      South Texas

      Total

      Oil (MBbl / MBbl/d)

      4,549 / 49.4

      1,618 / 17.6

      6,167 / 67.0

      Natural Gas (MMcf / MMcf/d)

      15,389 / 167.3

      17,543 / 190.7

      32,931 / 357.9

      NGLs (MBbl / MBbl/d)

      7 / -

      2,478 / 26.9

      2,485 / 27.0

      Total (MBoe / MBoe/d)

      7,120 / 77.4

      7,020 / 76.3

      14,140 / 153.7

      Note: Totals may not calculate due to rounding.



      Third quarter production volumes were 14.1 MMBoe, or 153.7 MBoe/d. Volumes were 50% from the Midland Basin and 50% from South Texas, and were 44% oil. South Texas production slightly exceeded expectations with the faster completion of three wells originally scheduled for the fourth quarter that came on production early.

      THIRD QUARTER PRICES BY OPERATING AREA






      Midland Basin

      South Texas

      Total
      (Pre/Post-hedge)(1)

      Oil ($/Bbl)

      $81.31

      $79.94

      $80.95 / $78.77

      Natural Gas ($/Mcf)

      $2.94

      $2.09

      $2.48 / $2.84

      NGLs ($/Bbl)

      nm

      $23.60

      $23.61 / $24.21

      Per Boe

      $58.32

      $31.97

      $45.24 / $45.22

      Note: Totals may not calculate due to rounding.



      The third quarter average realized price before the effect of hedges was $45.24 per Boe, and the average realized price after the effect of hedges was $45.22 per Boe.(1)

      • Benchmark pricing for the quarter included NYMEX WTI at $82.26/Bbl, NYMEX Henry Hub natural gas at $2.55/MMBtu and OPIS Composite NGLs at $27.81/Bbl.
      • The effect of commodity derivative settlements for the third quarter was a loss of $0.02 per Boe, or $0.3 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

      Third quarter 2023 net income was $222.3 million, or $1.88 per diluted common share, compared with net income of $481.2 million, or $3.87 per diluted common share, for the same period in 2022. The current year period included a 12% increase in production that was more than offset by an 11% decline in the average realized price per Boe after derivative settlements, a (non-cash) net derivative loss (versus a non-cash derivative gain), and increased DD&A. In conjunction with the Company's long-standing emphasis on innovation, the current year period also included a tax credit related to research and development efforts.  For the first nine months of 2023, net income was $570.8 million, or $4.75 per diluted common share, compared with net income of $853.5 million, or $6.87 per diluted common share, for the same period in 2022.

      Third quarter 2023 net cash provided by operating activities of $383.0 million before net change in working capital of $52.9 million totaled $435.9 million(1) compared with net cash provided by operating activities of $513.4 million before net change in working capital of $(96.5) million that totaled $416.9 million(1) for the same period in 2022. The $19.0 million, or 5%, increase in the current year period is primarily due to the 12% increase in production volumes largely offset by the decreased realized commodity prices after the effect of derivative settlements. For the first nine months of 2023, net cash provided by operating activities of $1,097.9 million before net change in working capital of $57.3 million totaled $1,155.2 million,(1) which decreased from $1,411.3 million(1) for the same period in 2022.

      ADJUSTED EBITDAX,(1) ADJUSTED NET INCOME,(1) AND NET DEBT-TO-ADJUSTED EBITDAX(1)

      Third quarter 2023 Adjusted EBITDAX(1) was $475.6 million, up $15.4 million, or 3%, from $460.2 million for the same period in 2022. For the first nine months of 2023, Adjusted EBITDAX(1) was $1,267.2 million compared with $1,544.4 million for the same period in 2022.

      Third quarter 2023 Adjusted net income(1) was $205.0 million, or $1.73 per diluted common share, which compares with Adjusted net income(1) of $226.0 million, or $1.82 per diluted common share, for the same period in 2022. Adjusted net income removes the benefit of the research and development tax credit carryover related to tax years prior to 2023. For the first nine months of 2023, Adjusted net income(1) was $521.0 million, or $4.34 per diluted common share, compared with an Adjusted net income(1) of $744.8 million, or $6.00 per diluted common share, for the same period in 2022.

      At September 30, 2023, Net debt-to-Adjusted EBITDAX(1) was 0.7 times.

      FINANCIAL POSITION, LIQUIDITY, CAPITAL EXPENDITURES AND ADJUSTED FREE CASH FLOW(1)

      On September 30, 2023, 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 were $402.0 million. Net debt(1) was $1.2 billion.

      Third quarter 2023 capital expenditures before changes in accruals and other were $228.2 million.(1) Capital activity during the quarter included drilling 24 net wells, of which 13 were in South Texas and 11 were in the Midland Basin, and adding 30 net flowing completions, of which 13 were in South Texas and 17 were in the Midland Basin. Capital expenditures included approximately $17 million for well completion capital associated with the increased working interest gained in the Sweetie Peck acreage exchange that was not previously considered in guidance. The overall lower capital expenditures before changes in accruals and other compared to guidance were related to faster drill times in South Texas and overall timing of certain costs pushed into the fourth quarter.

      Third quarter 2023 cash flow from operations before net change in working capital totaled $435.9 million,(1) and capital expenditures before changes in accruals and other totaled $228.2 million,(1) delivering Adjusted free cash flow of $207.7 million.(1)

      COMMODITY DERIVATIVES

      As of October 26, 2023, commodity derivative positions for the fourth quarter of 2023 include:

      SWAPS:

      • Oil: Approximately 30% of expected fourth quarter 2023 oil production is hedged at an average price of $76.69/Bbl (excludes basis swaps).
      • Natural gas: Approximately 30% of expected fourth quarter 2023 natural gas production is hedged at an average price of $3.95/MMBtu (weighted-average of collar floors, excludes basis swaps).

      BASIS SWAPS:

      • Oil, Midland Basin differential: Approximately 1,300 MBbls are hedged to the local price point at a weighted-average $0.88/Bbl basis.
      • Gas, WAHA differential: Approximately 2,300 BBtu are hedged to WAHA at a weighted-average ($1.01)/MMBtu basis.

      The Company expects to enter 2024 with approximately 25-30% of 2024 production hedged.

      A detailed schedule of these and additional derivative positions are provided in the 3Q23 accompanying slide deck.

      2023 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 2023:

      • Production: 55.1-55.4 MMBoe, or 151-152 MBoe/d at 42-43% oil, narrowed at the top end.
      • Capital expenditures (net of the change in capital accruals and other),(1) excluding acquisitions: approximately $1.1 billion. This reflects the Company's previous guidance of approximately $1,050 million plus approximately $50 million associated with the increased working interest in nine 15,000 foot lateral DUC wells gained in the Sweetie Peck asset exchange.
      • LOE: reduced to $5.20-$5.25 per Boe.
      • Unchanged: Transportation per Boe at ~$2.50; production and ad valorem taxes per Boe at $2.90-$3.00; G&A ~$120 million, including $15-20 million for non-cash compensation; exploration expense ~$60 million; and, DD&A $12-$13 per Boe.

      GUIDANCE FOURTH QUARTER 2023:

      • Capital expenditures (net of the change in capital accruals),(1) excluding acquisitions: approximately $290-305 million. This includes the timing of certain third quarter costs pushed into the fourth quarter and the increased working interest in certain Sweetie Peck wells. In the fourth quarter of 2023, the Company expects to drill approximately 30 net wells, of which 13 are planned for South Texas and 17 are planned for the Midland Basin, and turn-in-line approximately 11 net wells, all of which are planned for the Midland Basin.
      • Production: Approximately 13.7-14.0 MMBoe or 149-152 MBoe/d, at approximately 42% oil and 60% liquids.
      • LOE: $5.55-$5.65 per Boe.
      • Transportation: ~$2.25 per Boe.

      UPCOMING EVENTS

      EARNINGS Q&A WEBCAST AND CONFERENCE CALL

      November 3, 2023 – Please join SM Energy management at 8:00 a.m. Mountain time/10:00 a.m. Eastern time for the third quarter 2023 financial and operating results Q&A session. This discussion may be accessible via:

      • Webcast (available live and for replay) - on the Company's website at ir.sm-energy.com (replay accessible approximately 1 hour after the live call); or
      • Telephone - join the live conference call by registering at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=e0xcS2rw. Dial-in for domestic toll free/International is 877-407-6050 / +1 201-489-8022.

      CONFERENCE PARTICIPATION

      November 14, 2023 - Stephens Annual Investment Conference. President and Chief Executive Officer Herb Vogel will host a fireside chat at 4:00 p.m. Central time/5:00 p.m. Eastern time and will also meet with investors in one-on-one settings. The event will be webcast, accessible from the Company's website, and available for a limited period. The Company plans to post an investor presentation to its website the morning of the event.

      November 28, 2023 - Bank of America Energy Credit Conference. Chief Financial Officer Wade Pursell will host a fireside chat at 8:50 a.m. Mountain time/10:50 a.m. Eastern time and will also meet with investors in one-on-one settings. The event will be webcast, accessible from the Company's website, and available for a limited period. The Company plans to post an investor presentation to its website the morning of 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: plans to increase the Company's fixed dividend beginning in 2024; projections for the full year and fourth quarter 2023, including guidance for capital expenditures, production, production costs, DD&A, exploration expense and G&A; 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)

      September 30, 2023


      Condensed Consolidated Balance Sheets




      (in thousands, except share data)

      September 30,


      December 31,

      ASSETS

      2023


      2022

      Current assets:




      Cash and cash equivalents

      $            401,980


      $            444,998

      Accounts receivable

      264,511


      233,297

      Derivative assets

      25,524


      48,677

      Prepaid expenses and other

      10,537


      10,231

      Total current assets

      702,552


      737,203

      Property and equipment (successful efforts method):




      Proved oil and gas properties

      11,169,443


      10,258,368

      Accumulated depletion, depreciation, and amortization

      (6,680,485)


      (6,188,147)

      Unproved oil and gas properties, net of valuation allowance of $36,286 and $38,008,
      respectively

      526,085


      487,192

      Wells in progress

      236,234


      287,267

      Other property and equipment, net of accumulated depreciation of $59,133 and $56,512,
      respectively

      41,017


      38,099

      Total property and equipment, net

      5,292,294


      4,882,779

      Noncurrent assets:




      Derivative assets

      5,294


      24,465

      Other noncurrent assets

      78,430


      71,592

      Total noncurrent assets

      83,724


      96,057

      Total assets

      $         6,078,570


      $         5,716,039

      LIABILITIES AND STOCKHOLDERS' EQUITY




      Current liabilities:




      Accounts payable and accrued expenses

      $            540,459


      $            532,289

      Derivative liabilities

      43,152


      56,181

      Other current liabilities

      15,473


      10,114

      Total current liabilities

      599,084


      598,584

      Noncurrent liabilities:




      Revolving credit facility

      —


      —

      Senior Notes, net

      1,574,553


      1,572,210

      Asset retirement obligations

      115,271


      108,233

      Deferred income taxes

      324,440


      280,811

      Derivative liabilities

      4,595


      1,142

      Other noncurrent liabilities

      56,334


      69,601

      Total noncurrent liabilities

      2,075,193


      2,031,997

      Stockholders' equity:




      Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding:
      116,313,887 and 121,931,676 shares, respectively

      1,163


      1,219

      Additional paid-in capital

      1,581,110


      1,779,703

      Retained earnings

      1,826,002


      1,308,558

      Accumulated other comprehensive loss

      (3,982)


      (4,022)

      Total stockholders' equity

      3,404,293


      3,085,458

      Total liabilities and stockholders' equity

      $         6,078,570


      $         5,716,039

      SM ENERGY COMPANY

      FINANCIAL HIGHLIGHTS (UNAUDITED)

      September 30, 2023


      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, 


      2023


      2022


      2023


      2022

      Operating revenues and other income:








      Oil, gas, and NGL production revenue

      $        639,699


      $         827,558


      $      1,757,032


      $      2,676,656

      Other operating income

      1,202


      7,893


      8,128


      10,673

      Total operating revenues and other income

      640,901


      835,451


      1,765,160


      2,687,329

      Operating expenses:








      Oil, gas, and NGL production expense

      138,264


      159,961


      426,200


      470,245

      Depletion, depreciation, amortization, and asset retirement
      obligation liability accretion

      189,353


      145,865


      501,374


      460,169

      Exploration (1)

      10,245


      14,203


      43,633


      44,117

      General and administrative (1)

      29,255


      28,428


      84,424


      81,715

      Net derivative (gain) loss (2)

      75,355


      (137,577)


      12,352


      385,180

      Other operating expense, net

      2,832


      2,290


      20,182


      9,080

      Total operating expenses

      445,304


      213,170


      1,088,165


      1,450,506

      Income from operations

      195,597


      622,281


      676,995


      1,236,823

      Interest expense

      (23,106)


      (22,825)


      (67,713)


      (97,708)

      Interest income

      4,106


      1,546


      13,802


      2,080

      Loss on extinguishment of debt

      —


      —


      —


      (67,605)

      Other non-operating expense, net

      (233)


      (383)


      (696)


      (1,150)

      Income before income taxes

      176,364


      600,619


      622,388


      1,072,440

      Income tax (expense) benefit

      45,979


      (119,379)


      (51,619)


      (218,951)

      Net income

      $        222,343


      $        481,240


      $         570,769


      $         853,489









      Basic weighted-average common shares outstanding

      117,823


      123,195


      119,589


      122,318

      Diluted weighted-average common shares outstanding

      118,328


      124,279


      120,165


      124,233

      Basic net income per common share

      $               1.89


      $               3.91


      $                4.77


      $                6.98

      Diluted net income per common share

      $               1.88


      $               3.87


      $                4.75


      $                6.87

      Dividends declared per common share

      $               0.15


      $               0.15


      $                0.45


      $                0.16









      (1)  Non-cash stock-based compensation included in:








      Exploration expense

      $             1,174


      $             1,000


      $              3,021


      $              2,965

      General and administrative expense

      4,864


      4,105


      11,498


      10,893

      Total non-cash stock-based compensation

      $             6,038


      $             5,105


      $            14,519


      $            13,858









      (2)  The net derivative (gain) loss line item consists of the following:








      Derivative settlement (gain) loss

      $                314


      $        186,299


      $          (20,398)


      $         595,080

      (Gain) loss on fair value changes

      75,041


      (323,876)


      32,750


      (209,900)

      Total net derivative (gain) loss

      $          75,355


      $      (137,577)


      $            12,352


      $         385,180

      SM ENERGY COMPANY

      FINANCIAL HIGHLIGHTS (UNAUDITED)

      September 30, 2023













      Condensed Consolidated Statements of Stockholders' Equity

      (in thousands, except share data and dividends per share)





      Additional
      Paid-in
      Capital


      Retained
      Earnings


      Accumulated
      Other
      Comprehensive
      Loss


      Total
      Stockholders'
      Equity


      Common Stock






      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

      Net income

      —


      —


      —


      149,874


      —


      149,874

      Other comprehensive income

      —


      —


      —


      —


      13


      13

      Net cash dividends declared, $0.15 per
      share

      —


      —


      —


      (17,704)


      —


      (17,704)

      Issuance of common stock under
      Employee Stock Purchase Plan

      68,210


      1


      1,815


      —


      —


      1,816

      Issuance of common stock upon vesting
      of RSUs, net of shares used for tax
      withholdings

      774


      —


      (7)


      —


      —


      (7)

      Stock-based compensation expense

      56,872


      1


      4,162


      —


      —


      4,163

      Purchase of shares under Stock
      Repurchase Program

      (2,550,706)


      (26)


      (69,457)


      —


      —


      (69,483)

      Other

      19,037


      —


      —


      —


      —


      —

      Balances, June 30, 2023

      118,112,105


      $           1,181


      $   1,680,080


      $   1,621,202


      $               (3,996)


      $      3,298,467

      Net income

      —


      —


      —


      222,343


      —


      222,343

      Other comprehensive income

      —


      —


      —


      —


      14


      14

      Net cash dividends declared, $0.15 per
      share

      —


      —


      —


      (17,543)


      —


      (17,543)

      Issuance of common stock under
      Employee Stock Purchase Plan

      (18)


      —


      —


      —


      —


      —

      Issuance of common stock upon vesting
      of RSUs, net of shares used for tax
      withholdings

      553,442


      6


      (7,881)


      —


      —


      (7,875)

      Stock-based compensation expense

      —


      —


      6,038


      —


      —


      6,038

      Purchase of shares under Stock
      Repurchase Program

      (2,351,642)


      (24)


      (97,127)


      —


      —


      (97,151)

      Balances, September 30, 2023

      116,313,887


      $           1,163


      $   1,581,110


      $   1,826,002


      $               (3,982)


      $      3,404,293

      SM ENERGY COMPANY

      FINANCIAL HIGHLIGHTS (UNAUDITED)

      September 30, 2023













      Condensed Consolidated Statements of Stockholders' Equity (Continued)

      (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, 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

      Net cash dividends declared, $0.01 per
      share

      —


      —


      —


      (1,218)


      —


      (1,218)

      Issuance of common stock upon vesting
      of RSUs, net of shares used for tax
      withholdings

      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
      Employee Stock Purchase Plan

      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

      Net cash dividends declared, $0.15 per
      share

      —


      —


      —


      (18,419)


      —


      (18,419)

      Issuance of common stock upon vesting
      of RSUs and settlement of PSUs, net of
      shares used for tax withholdings

      1,289,498


      13


      (25,118)


      —


      —


      (25,105)

      Stock-based compensation expense

      —


      —


      5,105


      —


      —


      5,105

      Purchase of shares under Stock
      Repurchase Program

      (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, 2023


      Condensed Consolidated Statements of Cash Flows







      (in thousands)

      For the Three Months Ended

      September 30,


      For the Nine Months Ended

      September 30,


      2023


      2022


      2023


      2022

      Cash flows from operating activities:








      Net income

      $        222,343


      $        481,240


      $        570,769


      $        853,489

      Adjustments to reconcile net income to net cash provided by operating activities:





      Depletion, depreciation, amortization, and asset retirement
      obligation liability accretion

      189,353


      145,865


      501,374


      460,169

      Stock-based compensation expense

      6,038


      5,105


      14,519


      13,858

      Net derivative (gain) loss

      75,355


      (137,577)


      12,352


      385,180

      Derivative settlement gain (loss)

      (314)


      (186,299)


      20,398


      (595,080)

      Amortization of debt discount and deferred financing costs

      1,371


      1,303


      4,114


      8,910

      Loss on extinguishment of debt

      —


      —


      —


      67,605

      Deferred income taxes

      (51,075)


      110,048


      43,171


      202,996

      Other, net

      (7,184)


      (2,833)


      (11,489)


      14,134

      Net change in working capital

      (52,893)


      96,518


      (57,329)


      (13,230)

      Net cash provided by operating activities

      382,994


      513,370


      1,097,879


      1,398,031









      Cash flows from investing activities:








      Capital expenditures

      (216,710)


      (226,101)


      (766,756)


      (591,846)

      Acquisition of proved and unproved oil and gas properties

      (20,484)


      (7)


      (109,318)


      (7)

      Other, net

      —


      (589)


      657


      (589)

      Net cash used in investing activities

      (237,194)


      (226,697)


      (875,417)


      (592,442)









      Cash flows from financing activities:








      Cash paid to repurchase Senior Notes

      —


      —


      —


      (584,946)

      Repurchase of common stock

      (96,383)


      (20,241)


      (205,246)


      (20,241)

      Net proceeds from sale of common stock

      —


      —


      1,815


      1,645

      Dividends paid

      (17,800)


      —


      (54,167)


      (1,218)

      Other, net

      (7,875)


      (35,086)


      (7,882)


      (35,110)

      Net cash used in financing activities

      (122,058)


      (55,327)


      (265,480)


      (639,870)









      Net change in cash, cash equivalents, and restricted cash

      23,742


      231,346


      (43,018)


      165,719

      Cash, cash equivalents, and restricted cash at beginning of period

      378,238


      267,089


      444,998


      332,716

      Cash, cash equivalents, and restricted cash at end of period

      $        401,980


      $        498,435


      $        401,980


      $        498,435









      Supplemental schedule of additional cash flow information:








      Operating activities:








      Cash paid for interest, net of capitalized interest

      $         (34,834)


      $         (34,793)


      $         (77,514)


      $      (125,668)

      Net cash paid for income taxes

      $                (39)


      $                   (4)


      $           (6,176)


      $         (10,506)

      Investing activities:








      Changes in capital expenditure accruals and other

      $          11,463


      $          12,810


      $          35,683


      $          50,590

      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 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 third quarter 2023 Form 10-Q and the most recent Annual Report on Form 10-K for discussion of the Credit Agreement and its covenants.

      Adjusted net income and adjusted net income 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 changes in 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 stockholders or expanding the business.

      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 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, 2023

















      Production Data

















      For the Three Months Ended


       

      Percent Change
      Between


      For the Nine Months Ended


      Percent
      Change
      Between
      Periods


      September 30,


      June 30,


      September 30,


      3Q23 &
      2Q23


      3Q23 &
      3Q22


      September 30,


      September 30,



      2023


      2023


      2022




      2023


      2022


      Realized sales price (before the effect of derivative settlements):

      Oil (per Bbl)

      $             80.95


      $    72.12


      $             92.66


      12 %


      (13) %


      $             75.90


      $             98.52


      (23) %

      Gas (per Mcf)

      $               2.48


      $      2.07


      $               7.58


      20 %


      (67) %


      $               2.48


      $               6.88


      (64) %

      NGLs (per Bbl)

      $             23.61


      $    20.83


      $             36.36


      13 %


      (35) %


      $             23.40


      $             39.04


      (40) %

      Equivalent (per Boe)

      $             45.24


      $    38.89


      $             65.27


      16 %


      (31) %


      $             42.47


      $             67.23


      (37) %

      Realized sales price (including the effect of derivative settlements):

      Oil (per Bbl)

      $             78.77


      $    72.04


      $             71.44


      9 %


      10 %


      $             74.76


      $             75.05


      — %

      Gas (per Mcf)

      $               2.84


      $      2.50


      $               5.58


      14 %


      (49) %


      $               2.86


      $               5.37


      (47) %

      NGLs (per Bbl)

      $             24.21


      $    21.44


      $             34.25


      13 %


      (29) %


      $             23.83


      $             34.99


      (32) %

      Equivalent (per Boe)

      $             45.22


      $    40.00


      $             50.58


      13 %


      (11) %


      $             42.96


      $             52.28


      (18) %

      Net production volumes: (1)

      Oil (MMBbl)

      6.2


      5.9


      5.7


      5 %


      9 %


      17.7


      18.3


      (3) %

      Gas (Bcf)

      32.9


      33.7


      31.0


      (2) %


      6 %


      98.9


      93.8


      5 %

      NGLs (MMBbl)

      2.5


      2.6


      1.8


      (3) %


      35 %


      7.2


      5.9


      22 %

      Equivalent (MMBoe)

      14.1


      14.1


      12.7


      1 %


      12 %


      41.4


      39.8


      4 %

      Average net daily production: (1)

      Oil (MBbl per day)

      67.0


      64.5


      61.7


      4 %


      9 %


      64.8


      66.9


      (3) %

      Gas (MMcf per day)

      357.9


      370.4


      336.5


      (3) %


      6 %


      362.2


      343.7


      5 %

      NGLs (MBbl per day)

      27.0


      28.2


      20.1


      (4) %


      35 %


      26.3


      21.6


      22 %

      Equivalent (MBoe per day)

      153.7


      154.4


      137.8


      — %


      12 %


      151.5


      145.8


      4 %

      Per Boe data:
















      Lease operating expense

      $               5.08


      $      4.98


      $               5.64


      2 %


      (10) %


      $               5.07


      $               4.98


      2 %

      Transportation costs

      $               2.07


      $      2.89


      $               2.87


      (28) %


      (28) %


      $               2.58


      $               2.82


      (9) %

      Production taxes

      $               1.93


      $      1.66


      $               3.17


      16 %


      (39) %


      $               1.87


      $               3.28


      (43) %

      Ad valorem tax expense

      $               0.70


      $      0.83


      $               0.93


      (16) %


      (25) %


      $               0.78


      $               0.73


      7 %

      General and administrative (2)

      $               2.07


      $      1.96


      $               2.24


      6 %


      (8) %


      $               2.04


      $               2.05


      — %

      Derivative settlement gain (loss)

      $             (0.02)


      $      1.11


      $            (14.69)


      (102) %


      100 %


      $               0.49


      $            (14.95)


      103 %

      Depletion, depreciation,
      amortization, and asset
      retirement obligation liability
      accretion

      $             13.39


      $    11.23


      $             11.50


      19 %


      16 %


      $             12.12


      $             11.56


      5 %

















      (1) Amounts and percentage changes may not calculate due to rounding.

      (2) Includes non-cash stock-based compensation expense per Boe of $0.34, $0.23, and $0.32 for the three months ended September 30, 2023, June
           30, 2023, and September 30, 2022, respectively, and $0.28 and $0.27 for the nine months ended September 30, 2023, and 2022, respectively.

      SM ENERGY COMPANY

      FINANCIAL HIGHLIGHTS (UNAUDITED)

      September 30, 2023




      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
      Ended September 30,


      For the Nine Months
      Ended September 30,


      For the Trailing
      Twelve Months
      Ended September 30,


      2023


      2022


      2023


      2022


      2023

      Net income (GAAP)

      $   222,343


      $   481,240


      $   570,769


      $   853,489


      $                        829,232

      Interest expense

      23,106


      22,825


      67,713


      97,708


      90,351

      Interest income

      (4,106)


      (1,546)


      (13,802)


      (2,080)


      (17,496)

      Income tax expense (benefit)

      (45,979)


      119,379


      51,619


      218,951


      116,486

      Depletion, depreciation, amortization, and asset
      retirement obligation liability accretion

      189,353


      145,865


      501,374


      460,169


      644,985

      Exploration (2)

      9,071


      13,203


      40,612


      41,152


      50,438

      Stock-based compensation expense

      6,038


      5,105


      14,519


      13,858


      19,433

      Net derivative (gain) loss

      75,355


      (137,577)


      12,352


      385,180


      1,184

      Derivative settlement gain (loss)

      (314)


      (186,299)


      20,398


      (595,080)


      (95,222)

      Loss on extinguishment of debt

      —


      —


      —


      67,605


      —

      Other, net

      698


      (2,040)


      1,625


      3,482


      1,642

      Adjusted EBITDAX (non-GAAP)

      $   475,565


      $   460,155


      $  1,267,179


      $  1,544,434


      $                     1,641,033

      Interest expense

      (23,106)


      (22,825)


      (67,713)


      (97,708)


      (90,351)

      Interest income

      4,106


      1,546


      13,802


      2,080


      17,496

      Income tax (expense) benefit

      45,979


      (119,379)


      (51,619)


      (218,951)


      (116,486)

      Exploration (2)(3)

      (8,912)


      (11,993)


      (31,566)


      (27,959)


      (40,417)

      Amortization of debt discount and deferred financing
      costs

      1,371


      1,303


      4,114


      8,910


      5,485

      Deferred income taxes

      (51,075)


      110,048


      43,171


      202,996


      109,232

      Other, net

      (8,041)


      (2,003)


      (22,160)


      (2,541)


      (23,576)

      Net change in working capital

      (52,893)


      96,518


      (57,329)


      (13,230)


      (116,162)

      Net cash provided by operating activities (GAAP)

      $   382,994


      $   513,370


      $  1,097,879


      $  1,398,031


      $                     1,386,254











      (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 three and nine months and the trailing twelve months ended September 30, 2023, amount excludes certain capital expenditures related to
           unsuccessful exploration activity for one well that experienced technical issues during the drilling phase. For the three and nine months ended
           September 30, 2022, and for the trailing twelve months ended September 30, 2023, amounts exclude certain capital expenditures related to
           unsuccessful exploration efforts outside of the Company's core areas of operation.

      SM ENERGY COMPANY

      FINANCIAL HIGHLIGHTS (UNAUDITED)

      September 30, 2023


      Adjusted Net Income Reconciliation (1)








      (in thousands, except per share data)
















      Reconciliation of net income (GAAP) to adjusted net income (non-
      GAAP):

      For the Three Months Ended

      September 30,


      For the Nine Months Ended

      September 30,


      2023


      2022


      2023


      2022

      Net income (GAAP)

      $        222,343


      $         481,240


      $        570,769


      $        853,489

      Net derivative (gain) loss

      75,355


      (137,577)


      12,352


      385,180

      Derivative settlement gain (loss)

      (314)


      (186,299)


      20,398


      (595,080)

      Loss on extinguishment of debt

      —


      —


      —


      67,605

      Other, net

      698


      (2,040)


      1,625


      3,482

      Tax effect of adjustments (2)

      (16,435)


      70,724


      (7,459)


      30,122

      Net R&D tax credit carryover (3)

      (76,686)


      —


      (76,686)


      —

      Adjusted net income (non-GAAP)

      $        204,961


      $         226,048


      $        520,999


      $        744,798









      Diluted net income per common share (GAAP)

      $               1.88


      $               3.87


      $               4.75


      $               6.87

      Net derivative (gain) loss

      0.64


      (1.11)


      0.10


      3.10

      Derivative settlement gain (loss)

      —


      (1.50)


      0.17


      (4.79)

      Loss on extinguishment of debt

      —


      —


      —


      0.54

      Other, net

      —


      (0.01)


      0.02


      0.04

      Tax effect of adjustments (2)

      (0.14)


      0.57


      (0.06)


      0.24

      Net R&D tax credit carryover (3)

      (0.65)


      —


      (0.64)


      —

      Adjusted net income per diluted common share (non-GAAP)

      $               1.73


      $               1.82


      $               4.34


      $               6.00









      Basic weighted-average common shares outstanding

      117,823


      123,195


      119,589


      122,318

      Diluted weighted-average common shares outstanding

      118,328


      124,279


      120,165


      124,233









      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, 2023, and 2022, 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.

      (3) Adjusted net income removes the benefit of the research and development tax credit carryover related to tax years prior to 2023.

      SM ENERGY COMPANY

      FINANCIAL HIGHLIGHTS (UNAUDITED)

      September 30, 2023


      Reconciliation of Total Principal Amount of Debt to Net Debt (1)


      (in thousands)



      As of September 30, 2023

      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

      401,980

      Net Debt (non-GAAP)

      $                               1,183,164



      (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, 2023.

      Adjusted Free Cash Flow (1)









      (in thousands)











      For the Three Months Ended

      September 30,


      For the Nine Months Ended

      September 30,



      2023


      2022


      2023


      2022

      Net cash provided by operating activities (GAAP)


      $        382,994


      $        513,370


      $     1,097,879


      $     1,398,031

      Net change in working capital


      52,893


      (96,518)


      57,329


      13,230

      Cash flow from operations before net change in working capital
      (non-GAAP)


      435,887


      416,852


      1,155,208


      1,411,261










      Capital expenditures (GAAP)


      216,710


      226,101


      766,756


      591,846

      Changes in capital expenditure accruals and other


      11,463


      12,810


      35,683


      50,590

      Capital expenditures before changes in accruals and other (non-
      GAAP)


      228,173


      238,911


      802,439


      642,436










      Adjusted free cash flow (non-GAAP)


      $        207,714


      $        177,941


      $        352,769


      $        768,825










      (1) See "Definitions of non-GAAP Measures and Metrics as Calculated by the Company" above.

      SOURCE SM Energy Company

      Modal title

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