NYSE:SM SM Energy Q1 2025 Prepared Remarks Earnings Report $23.14 -0.04 (-0.16%) Closing price 05/23/2025 03:59 PM EasternExtended Trading$23.15 +0.01 (+0.03%) As of 05/23/2025 07:40 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast SM Energy EPS ResultsActual EPS$1.76Consensus EPS $1.60Beat/MissBeat by +$0.16One Year Ago EPS$1.13SM Energy Revenue ResultsActual Revenue$844.54 millionExpected Revenue$814.62 millionBeat/MissBeat by +$29.92 millionYoY Revenue Growth+50.80%SM Energy Announcement DetailsQuarterQ1 2025 Prepared RemarksDate5/1/2025TimeAfter Market ClosesConference Call DateThursday, May 1, 2025Conference Call Time4:15PM ETUpcoming EarningsSM Energy's Q2 2025 earnings is scheduled for Wednesday, August 6, 2025, with a conference call scheduled on Thursday, August 7, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)SEC FilingEarnings HistoryCompany ProfilePowered by SM Energy Q1 2025 Prepared Remarks Earnings Call TranscriptProvided by QuartrMay 1, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Patrick LytleSenior VP - Finance at SM Energy Company00:00:00Good afternoon. This is Pat Lytle, Senior Vice President of Finance. Welcome to SM Energy's First Quarter twenty twenty five Financial and Operating Results Webcast. Before we get started on our prepared remarks, I remind you that our discussion today will include forward looking statements. I direct you to Slide two of the accompanying slide deck, Page five of the accompanying earnings release and the Risk Factors section of our most recently filed 10 ks, which describe risks associated with forward looking statements that could cause actual results to differ. Patrick LytleSenior VP - Finance at SM Energy Company00:00:34We will also discuss non GAAP measures and metrics. Definitions and reconciliations of non GAAP measures and metrics to the most directly comparable GAAP measures and discussion of forward looking non GAAP measures can be found in both the earnings release and slide deck. Today's prepared remarks will be given by our President and Chief Executive Officer, Herb Vogel our Chief Operating Officer, Beth McDonald and our Chief Financial Officer, Wade Purcell. I will now turn Patrick LytleSenior VP - Finance at SM Energy Company00:01:04the call over to Herb. Herbert VogelPresident & CEO at SM Energy Company00:01:06Thank you, Pat, and good afternoon, everyone. While 2025 is off to an excellent start with our top tier assets generating excellent returns during the first quarter at oil prices averaging over $71 per barrel and gas prices over $3.65 per million BTU, we recognize that the industry is facing headwinds for likely the remainder of the year and into 2026. Fortunately, through the past several quarters, we maintained our consistent hedging program tied to our leverage and took action early to mitigate tariff related inflation risks this year. As we look forward to the remainder of the year with the prospect of oil prices averaging from $55 to $65 per barrel, we are taking action in specific areas to optimize our spend. Before we elaborate more on that, let me turn to Slide five and discuss progress toward our priorities in 2025. Herbert VogelPresident & CEO at SM Energy Company00:02:03The successful integration of our newly acquired Uinta Basin assets has strengthened SM as the Uinta assets drove first quarter performance with production, including oil production at the high end of our guidance range. We now have three top tier assets and a strong balance sheet, which positions us very well for a more uncertain near term future. Our three core objectives were established to support long term profitability and value creation. As you all know, our portfolio is made up of three core areas, each of which hold long duration drilling inventory of low breakeven assets that endure through commodity price cycles. Our strategy to focus on top tier assets supports our priorities of paying our fixed dividend, reducing leverage and returning cash to stockholders through our stock repurchase program once our leverage target of around one times is achieved. Herbert VogelPresident & CEO at SM Energy Company00:02:59During the first quarter, we successfully integrated our new Uinta Basin assets upon taking over operatorship on January 1, following expiration of a transition services agreement with the previous operator. We welcomed 83 new employees from XCL and Altamont to SM Energy in January with very positive and seamless onboarding. Our focus on successful integration of our Uinta assets resulted in excellent operational results for the quarter, once again demonstrating a production margin nearly equal to the production margin of our Midland Basin assets. Our team is now focused on evaluating opportunities to enhance the program and evaluate upside opportunities, which Beth will speak to shortly. Related to our second core objective, we generated free cash flow during the quarter, which we used to return capital to stockholders through our fixed quarterly dividend payment of $0.20 per share and to reduce debt. Herbert VogelPresident & CEO at SM Energy Company00:03:56Wade will speak more to that later on the call. Slide six summarizes why you should consider investing in SM Energy and what differentiates us from peers. We start with a long track record of innovation and improving capital efficiency. With our differential geoscience and technical focus, we continue to build on a long duration, high return and resilient inventory. Coupled with prudent financial management and a strong balance sheet, we are delivering a sustainable return of capital program composed of fixed dividends and opportunistic stock buybacks. Herbert VogelPresident & CEO at SM Energy Company00:04:30Finally, as a premier operator, we are a demonstrated leader in stewardship they can be proud of owning. Now back to the macro environment. As a 117 year old company, navigating through commodity price cycles is not new to us. And as in previous cycles, we are positioning the company to not only endure, but to take advantage of the opportunities that will undoubtedly arise in a below mid cycle pricing environment. As part of this, we have reviewed our 2025 operating plan and evaluated options that we can pursue under various price and cost outcomes. Herbert VogelPresident & CEO at SM Energy Company00:05:07Our 2025 plan was developed to optimize the allocation of capital across our three core assets with a plan already in place to slow the pace of development throughout 2025. As things turned out, this approach is now proving to be quite fortuitous. We began the year running nine drilling rigs, and we're down to seven drilling rigs at the end of the first quarter. As we evaluate different future macro environments, we are considering various commodity price levels, the duration of those prices resulting from potential geopolitical decisions, likely future oilfield service availability and costs and other factors. Wade will speak further to our thoughts in a bit, but even on a $55 oil price and $3.5 gas price scenario for the rest of 2025, we achieve our goal of near one times levered by the end of the year. Herbert VogelPresident & CEO at SM Energy Company00:06:00And if prices were to fall further, we have evaluated our options and have a plan. I'll sum up here by saying that we are well positioned to weather a lower oil price environment due to our increased scale, low breakeven program and excellent balance sheet with ample liquidity. As always, we remain committed to a multiyear plan to maximize free cash flow to support debt reduction to our target leverage level and deliver on our stockholder return commitments. We are very fortunate at times like these that for many years we invested in people and technologies to differentiate us. They have enabled us to identify top tier assets, grow inventory and strategically develop and produce our reserves to generate top tier returns. Herbert VogelPresident & CEO at SM Energy Company00:06:44I will now turn the call over to Beth for a deeper dive into our Uinta Basin integration efforts, as well as an update on all our operations, including some exciting milestones, technology evolution and results achieved in the first quarter. Beth? Beth McDonaldEVP & COO at SM Energy Company00:06:59Thank you, Herb. First quarter Uinta Basin results are a testament to the amazing integration efforts that continue here at SM Energy. As Herb previously mentioned, first quarter production margin for the Uinta Basin came in at $40.93 nearly equal to our Midland Basin production margin. This further demonstrates the quality of our top tier Uinta Basin assets and the efforts by our team to generate efficiencies and refine costs. Though we are already very pleased with these results, our teams continue to look at maximizing marketing optionality, working with all of our purchasers to optimize railcar routes, while continuing to move as much product as possible to Salt Lake City refineries. Beth McDonaldEVP & COO at SM Energy Company00:07:44Moving to Slide seven. We were excited to see the April 16 research report from Enveris, in which they announced they underwrote $152 sub-fifty dollars per barrel breakeven locations across the Uinta Basin Douglas Creek zone in the Upper cube. 38% or 57 of those locations are SM Energies. The industry recognition is a direct result of the excellent work that continues to be done by our geoscience and reservoir engineering teams to continue to gain confidence in our inventory in the 4,000 feet of stack pay in the Uinta Basin that we've been talking about. To quote Enveris, those recent buyers may be on to something. Beth McDonaldEVP & COO at SM Energy Company00:08:24We think it's safe to say that we are on to something and we'll continue to prove it in the months to come. On the right side of the slide, you'll see the familiar graph that we've shown before. This reiterates the upper cube wells more than compete with average Midland Basin and South Texas Gulf Coast wells based on cumulative oil production. Slide eight shows our most recent IP30 results in the Uinta Basin in South Texas Austin Chalk. As always, we release all well results that have reached IP30 rates. Beth McDonaldEVP & COO at SM Energy Company00:08:55While these particular Uinta Basin results appear slightly lower than our fourth quarter well results, it's important to remember that the lower cube consists of seven different benches and over 1,300 feet of vertical section, resulting in slight variations in productivity and oil mix across our acreage. Through our ongoing delineation of the field, we will continue to learn what is driving these changes and will incorporate our learnings into our optimization of the development plan and our future design. We are highly encouraged by these results and will continue to release new well results as they become available. While I mentioned some great results in our newly integrated Uinta Basin assets, it's important to remember that the first fully designed, permitted, drilled and completed SM Energy development will not be online until early twenty twenty six. We are excited to announce those results as they become available next year. Beth McDonaldEVP & COO at SM Energy Company00:09:48On the right side of the slide, we are showing some excellent Austin Chalk well results. These wells straddle our Northwestern oil area and the Southeastern liquids rich gas area. These wells reached an average IP30 rate of ten sixty one barrels of oil equivalent per day at 78% liquids and laterals averaging nearly 12,000 feet. The Austin Chalk continues to deliver great well productivity across our acreage. Slide nine depicts our continued stellar performance of our Texas assets. Beth McDonaldEVP & COO at SM Energy Company00:10:20The average cumulative oil production outperforms our peers in both Howard County and the Austin Chalk by 3242% respectively. These two core areas continue to deliver great returns and contribute to sustainable and repeatable free cash flow generation. As discussed in February, we will release updated results for both our Klondike and Woodford Barnett areas once new wells are online. Moving to Slide 10. Our teams continue to drive efficiencies across all three of our core basins looking for ways to innovate by redefining previous records in our operational execution. Beth McDonaldEVP & COO at SM Energy Company00:10:58Beginning with the Uinta Basin, we successfully drilled three mile lateral wells and will continue to test longer laterals to drive capital efficiency. Our completions team completed record footage in March and we had record oil takeaway in the first quarter. In the Permian Basin, our teams are focused on driving efficiencies through design enhancements. We are realizing savings in wellbore design changes that focus on less hydraulic horsepower requirements for the same pump rates. Additionally, we are working on completion fluids optimization to enhance productivity. Beth McDonaldEVP & COO at SM Energy Company00:11:31We are encouraged by what we are seeing today and plan to share results in our midyear update. As mentioned previously, SM has drilled an additional three, four mile laterals in the Midland Basin, driving incremental economics and strong well returns. In South Texas, our team realized cost efficiencies by utilizing our existing infrastructure to fuel our completion operations. We achieved these savings by tying into high pressure gas lift lines to provide natural gas as fuel to power our e fleet. Our completed cost per foot decreased over 30% since 2022, and our teams delivered records on drilling footage and drill out costs in the first quarter. Beth McDonaldEVP & COO at SM Energy Company00:12:12A top tier operator, generating capital efficiencies is always at the forefront of our minds. And our teams are empowered to challenge the status quo to achieve improvements in all aspects of our business. This point segues nicely to Slide 11. Artificial intelligence or AI is getting a lot of airtime these days. So we want to take the opportunity to reflect on SM Energy's technology evolution. Beth McDonaldEVP & COO at SM Energy Company00:12:36Technology is part of SM Energy's DNA. As far back as 2015, SM Energy invested in foundational systems that have led to incredible advancements and enabled differential outcomes. Over the last decade, we built a stellar advanced analytics and emerging technology team that tackles many strategically aligned projects, including, but not limited to implementing the following: machine learning algorithms, which help in quick evaluations for acquisitions and aids in completion design and well spacing. The use of this technology allows us to continue to pursue exploitation ideas at scale to advance our understanding and potential future growth place. The computer vision is used to identify geophysical attributes and formations to allow for faster and more in-depth interpretations. Beth McDonaldEVP & COO at SM Energy Company00:13:28Robotic processing automation reduces risk and increases efficiencies of our back office processes. And finally, we have enabled company wide generative AI with custom solutions in development. We believe that employee empowerment to learn and implement new technology leads to innovation, which drives differential performance. And with that, I will turn the call over to Wade to talk about the financial highlights of the first quarter. Wade? A. Wade PursellEVP & CFO at SM Energy Company00:13:56Thank you, Beth. Good afternoon, everyone. Huge shout out to the SM team for successfully integrating our unit to basin assets, driving strong financial results from oilier production than expected at the high end of our guidance range. I'll discuss our first quarter results and then speak to our very strong balance sheet and wrap up by reviewing guidance for the remainder of the year. First, 1Q results on Slide 12. A. Wade PursellEVP & CFO at SM Energy Company00:14:21As I noted, strong production from our Uinta Basin assets drove volumes to the top end of guidance, including oil production at 53% of total production. Production volumes combined with strong benchmark commodity prices supported adjusted EBITDAX and adjusted EPS that were notable beats to consensus. On the operating cost side, higher first quarter twenty twenty five lease operating expenses reflect acceleration of certain workover activity in the Uinta Basin and South Texas as well as the increased cost of fuel gas used in our Uinta Basin operations due to higher natural gas prices. The latter is offset in production revenue as the fuel gas was produced from our own wells. Transportation expense was nearly 8% below the midpoint of our guidance as our Uinta Basin transportation cost declined substantially from the fourth quarter of twenty twenty four. A. Wade PursellEVP & CFO at SM Energy Company00:15:18Transportation expense for our Uinta Basin assets will fluctuate based on how many barrels are trucked to Salt Lake refineries versus the number of barrels put on rail to downstream markets. Our oil and gas marketing team is quite focused on continuing to refine where we sell our production to drive an even higher operating margin. Stay tuned as we continue to optimize oil sales from our Uinta Basin assets. Bottom line, we realized a strong production margin in the first quarter and I'd to reiterate the comparability of the Uinta economics to our core Midland Basin. As you can reference on Slide 19 in the appendix, the Uinta production margin is right on top of the Permian production margin again in the first quarter. A. Wade PursellEVP & CFO at SM Energy Company00:16:04Turning to capital. First quarter CapEx came in approximately $10,000,000 high to the midpoint of guidance, but for good reason. During the quarter, we accelerated approximately $15,000,000 in CapEx for certain production equipment in Texas, which allows for certainty in timing of related turn in lines and is beneficial should steel prices increase as a result of tariffs. Additionally, we recorded $5,000,000 of CapEx related to highly economic non operated projects in the Midland Basin. In turn, solid adjusted free cash flow for the quarter funded our fixed quarterly dividend of $0.2 per share and annualized yield of 3.5% as well as the final cash settlement of our Uinta Basin acquisition and provided for the repayment of a portion of the outstanding balance under our credit facility, which is a great segue to my second topic, the balance sheet on Slide 13. A. Wade PursellEVP & CFO at SM Energy Company00:17:01This slide shows the strength of our balance sheet and our substantial available liquidity. We exited the quarter with a ratio of net debt to adjusted EBITDAX at 1.3 times and $2,000,000,000 of liquidity. This leverage ratio only includes Uinta EBITDAX since the October 1 close date. Pro form a, if we include an estimate of XCL EBITDAX in the trailing twelve month number for the full twelve months, the leverage ratio would be 1.1 times. Earlier this week, our lender group reiterated their confidence in our top tier assets by reaffirming our borrowing base at $3,000,000,000 and commitments at $2,000,000,000 As you probably know, we target leverage of one times net debt to adjusted EBITDAX at mid cycle commodity prices. A. Wade PursellEVP & CFO at SM Energy Company00:17:51During the first quarter, we reduced the balance on our revolver by $31,000,000 from $69,000,000 to $38,000,000 and it is our intention to generally prioritize debt reduction to target leverage levels before directing free cash flow towards additional share buybacks. We're very much on track to meet our leverage target in a short timeframe following our $2,000,000,000 Uinta Basin acquisition. Even at a price deck of $55 oil and $3.5 gas for the remainder of the year, we near our one times leverage target by the end of the year. Flipping to Slide 14, we layered on hedges during the quarter and subsequent to quarter end for a portion of our oil and gas production in 2025 and 2026 and a portion of gas production in 2027. We're now hedged at 34% of expected remaining 2025 oil production and 38% of expected remaining 2025 natural gas production. A. Wade PursellEVP & CFO at SM Energy Company00:18:51See the appendix for a full summary of our hedges. Thirdly and lastly, a few comments on guidance for the remainder of the year. I'm on Slide 15. Our 2025 plan, as described in February, results in 20% production growth and 30% oil production growth. With respect to full year 2025 guidance, we are maintaining our estimates as released in February with one exception, LOE guidance. A. Wade PursellEVP & CFO at SM Energy Company00:19:17The increase in our LOE guidance to $5.9 per BOE for the full year is being driven by an expected increase in workover activity, expected higher water disposal costs due to impacts from completion activities on offset wells and increased cost of fuel gas used in our Uinta Basin operations. As previously noted, the portion related to fuel gas is offset in production revenue. For those of you that model quarterly, we expect production to grow from Q1 to Q2 and again from Q2 to Q3 while flattening out for Q4. On the CapEx side, we reiterate our comments from February that capital will be front end loaded with first half twenty twenty five CapEx just over 60% of the total expected CapEx of A. Wade PursellEVP & CFO at SM Energy Company00:20:07full A. Wade PursellEVP & CFO at SM Energy Company00:20:07year. Summarizing second quarter guidance, production for the second quarter is expected to range from 197,000 to 203,000 BOE per day at approximately 54% to 55% oil. LOE, including workover expense, is expected to be approximately $6.1 per BOE. CapEx, excluding acquisitions, is expected to range from $375,000,000 to $385,000,000 and is expected to include approximately 25 net drills and approximately 50 net completions. This range includes approximately $10,000,000 of CapEx for highly economic non operated projects in the Midland Basin. A. Wade PursellEVP & CFO at SM Energy Company00:20:53I will note that we have a number of completions scheduled near the end of the quarter, which could impact the actual number of wells brought online in the second quarter. '1 final note on guidance and planned activity. We're often asked at what oil price would we respond with a reduction in activity levels. Our response to that begins with the reminder that we have been slowing activity already going from nine rigs at the beginning of the year to seven now with a trajectory towards six. Also, top tier assets generate solid returns at prices well below these current levels and we have a strong balance sheet. A. Wade PursellEVP & CFO at SM Energy Company00:21:29However, at some point, reducing activity would be warranted. We intentionally contract our services in a manner to retain flexibility should this circumstance arise. As an example, in 2020, when oil prices plummeted due to the global pandemic, we continued to drill wells under existing contracts that suspended completion activities, which is the majority of the well cost. The result was near term addition to free cash flow, a buildup in DUCs and then a resumption of completion activity later in a period of lower completion costs and improved oil prices. Moving now to Slide 16. A. Wade PursellEVP & CFO at SM Energy Company00:22:07We'd like to emphasize the importance of stewardship as a key component of being a premier operator. We are proud of our continued progress as a leader in stewardship as recognized by Rystad's recent ranking of SM Energy as a top three operator excelling in sustainability based on 2023 results. Among oil focused operators, we were ranked number one. Finishing with Slide seventeen. As Herb said, the successful integration of our newly acquired Uinta Basin assets has strengthened SM. A. Wade PursellEVP & CFO at SM Energy Company00:22:38These assets drove strong first quarter performance with production, including oil production at the high end of our guidance range. It is clear that we now have three top tier assets. These top tier low breakeven assets along with our strong balance sheet, our excellent team of professionals who regularly evaluate cost reduction and margin enhancement opportunities and our flexibility when it comes to contracting services, all position us very well for any macro environment, including a lower commodity price environment should it persist. Thank you for listening today, and we look forward to answering your questions on the live Q and A webcast and call tomorrow morning.Read moreParticipantsExecutivesPatrick LytleSenior VP - FinanceHerbert VogelPresident & CEOBeth McDonaldEVP & COOA. Wade PursellEVP & CFOPowered by Key Takeaways Integrated its Uinta Basin assets seamlessly, driving Q1 production at the high end of guidance and achieving a Uinta production margin of $40.93/BOE, nearly matching its Midland Basin economics. Generated substantial free cash flow in Q1, beating consensus on adjusted EBITDAX and EPS, and used proceeds to pay a $0.20/share dividend, reduce debt (net debt/EBITDAX ~1.3×), and maintain $2 billion of liquidity. SM Energy has hedged ~34% of its remaining 2025 oil production and ~38% of gas volumes, and proactively reduced its rig count from nine to seven to manage spending amid a lower-price outlook. Capital allocation remains focused on a fixed dividend, deleveraging to ~1× net debt/EBITDAX before opportunistic share buybacks, under a conservative plan assuming $55/BBL oil and $3.50/MMBTU gas for 2025. Employing advanced technology and operational efficiencies—such as longer laterals, AI-driven analytics, and completion fluid optimization—SM is lowering costs and enhancing well performance across its core basins. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallSM Energy Q1 2025 Prepared Remarks00:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsPress Release(8-K) SM Energy Earnings HeadlinesGroove Botanicals (OTCMKTS:GRVE) & SM Energy (NYSE:SM) Head-To-Head ReviewMay 23 at 2:31 AM | americanbankingnews.comSM ENERGY ANNOUNCES PARTICIPATION IN UPCOMING INVESTOR CONFERENCESMay 21, 2025 | prnewswire.comHow Trade Wars Are Creating Fresh Opportunities for InvestorsTariffs and trade tensions are back in the headlines, and while many are focused on the risks, smart investors know there’s also opportunity. New supply chain shifts, pricing power adjustments, and sector revaluations are already underway—creating openings for those who act early. That’s why we’ve just released our latest research: 📈 “From Tariffs to Returns: How to Capitalize on Trade Disputes in Your Portfolio”May 25, 2025 | Darwin (Ad)Is SM Energy (SM) The Most Undervalued Stock With Smart Money Ratings?May 15, 2025 | msn.comIs SM Energy (SM) The Most Undervalued Stock With Smart Money Ratings?May 15, 2025 | msn.comExpert Outlook: SM Energy Through The Eyes Of 7 AnalystsMay 13, 2025 | benzinga.comSee More SM Energy Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like SM Energy? Sign up for Earnings360's daily newsletter to receive timely earnings updates on SM Energy and other key companies, straight to your email. Email Address About SM EnergySM Energy (NYSE:SM) Company, an independent energy company, engages in the acquisition, exploration, development, and production of oil, gas, and natural gas liquids in the state of Texas. It has working interests in oil and gas producing wells in the Midland Basin and South Texas. The company was formerly known as St. Mary Land & Exploration Company and changed its name to SM Energy Company in May 2010. SM Energy Company was founded in 1908 and is headquartered in Denver, Colorado.View SM Energy ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Booz Allen Hamilton Earnings: 3 Bullish Signals for BAH StockAdvance Auto Parts Jumps on Surprise Earnings BeatAlibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, UpgradesSymbotic Gets Big Earnings Lift: Is the Stock Investable Again?D-Wave Pushes Back on Short Seller Case With Strong EarningsAppLovin Surges on Earnings: What's Next for This Tech Standout? Upcoming Earnings PDD (5/27/2025)AutoZone (5/27/2025)Bank of Nova Scotia (5/27/2025)NVIDIA (5/28/2025)Synopsys (5/28/2025)Bank of Montreal (5/28/2025)Salesforce (5/28/2025)Haleon (5/28/2025)Costco Wholesale (5/29/2025)Marvell Technology (5/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
PresentationSkip to Participants Patrick LytleSenior VP - Finance at SM Energy Company00:00:00Good afternoon. This is Pat Lytle, Senior Vice President of Finance. Welcome to SM Energy's First Quarter twenty twenty five Financial and Operating Results Webcast. Before we get started on our prepared remarks, I remind you that our discussion today will include forward looking statements. I direct you to Slide two of the accompanying slide deck, Page five of the accompanying earnings release and the Risk Factors section of our most recently filed 10 ks, which describe risks associated with forward looking statements that could cause actual results to differ. Patrick LytleSenior VP - Finance at SM Energy Company00:00:34We will also discuss non GAAP measures and metrics. Definitions and reconciliations of non GAAP measures and metrics to the most directly comparable GAAP measures and discussion of forward looking non GAAP measures can be found in both the earnings release and slide deck. Today's prepared remarks will be given by our President and Chief Executive Officer, Herb Vogel our Chief Operating Officer, Beth McDonald and our Chief Financial Officer, Wade Purcell. I will now turn Patrick LytleSenior VP - Finance at SM Energy Company00:01:04the call over to Herb. Herbert VogelPresident & CEO at SM Energy Company00:01:06Thank you, Pat, and good afternoon, everyone. While 2025 is off to an excellent start with our top tier assets generating excellent returns during the first quarter at oil prices averaging over $71 per barrel and gas prices over $3.65 per million BTU, we recognize that the industry is facing headwinds for likely the remainder of the year and into 2026. Fortunately, through the past several quarters, we maintained our consistent hedging program tied to our leverage and took action early to mitigate tariff related inflation risks this year. As we look forward to the remainder of the year with the prospect of oil prices averaging from $55 to $65 per barrel, we are taking action in specific areas to optimize our spend. Before we elaborate more on that, let me turn to Slide five and discuss progress toward our priorities in 2025. Herbert VogelPresident & CEO at SM Energy Company00:02:03The successful integration of our newly acquired Uinta Basin assets has strengthened SM as the Uinta assets drove first quarter performance with production, including oil production at the high end of our guidance range. We now have three top tier assets and a strong balance sheet, which positions us very well for a more uncertain near term future. Our three core objectives were established to support long term profitability and value creation. As you all know, our portfolio is made up of three core areas, each of which hold long duration drilling inventory of low breakeven assets that endure through commodity price cycles. Our strategy to focus on top tier assets supports our priorities of paying our fixed dividend, reducing leverage and returning cash to stockholders through our stock repurchase program once our leverage target of around one times is achieved. Herbert VogelPresident & CEO at SM Energy Company00:02:59During the first quarter, we successfully integrated our new Uinta Basin assets upon taking over operatorship on January 1, following expiration of a transition services agreement with the previous operator. We welcomed 83 new employees from XCL and Altamont to SM Energy in January with very positive and seamless onboarding. Our focus on successful integration of our Uinta assets resulted in excellent operational results for the quarter, once again demonstrating a production margin nearly equal to the production margin of our Midland Basin assets. Our team is now focused on evaluating opportunities to enhance the program and evaluate upside opportunities, which Beth will speak to shortly. Related to our second core objective, we generated free cash flow during the quarter, which we used to return capital to stockholders through our fixed quarterly dividend payment of $0.20 per share and to reduce debt. Herbert VogelPresident & CEO at SM Energy Company00:03:56Wade will speak more to that later on the call. Slide six summarizes why you should consider investing in SM Energy and what differentiates us from peers. We start with a long track record of innovation and improving capital efficiency. With our differential geoscience and technical focus, we continue to build on a long duration, high return and resilient inventory. Coupled with prudent financial management and a strong balance sheet, we are delivering a sustainable return of capital program composed of fixed dividends and opportunistic stock buybacks. Herbert VogelPresident & CEO at SM Energy Company00:04:30Finally, as a premier operator, we are a demonstrated leader in stewardship they can be proud of owning. Now back to the macro environment. As a 117 year old company, navigating through commodity price cycles is not new to us. And as in previous cycles, we are positioning the company to not only endure, but to take advantage of the opportunities that will undoubtedly arise in a below mid cycle pricing environment. As part of this, we have reviewed our 2025 operating plan and evaluated options that we can pursue under various price and cost outcomes. Herbert VogelPresident & CEO at SM Energy Company00:05:07Our 2025 plan was developed to optimize the allocation of capital across our three core assets with a plan already in place to slow the pace of development throughout 2025. As things turned out, this approach is now proving to be quite fortuitous. We began the year running nine drilling rigs, and we're down to seven drilling rigs at the end of the first quarter. As we evaluate different future macro environments, we are considering various commodity price levels, the duration of those prices resulting from potential geopolitical decisions, likely future oilfield service availability and costs and other factors. Wade will speak further to our thoughts in a bit, but even on a $55 oil price and $3.5 gas price scenario for the rest of 2025, we achieve our goal of near one times levered by the end of the year. Herbert VogelPresident & CEO at SM Energy Company00:06:00And if prices were to fall further, we have evaluated our options and have a plan. I'll sum up here by saying that we are well positioned to weather a lower oil price environment due to our increased scale, low breakeven program and excellent balance sheet with ample liquidity. As always, we remain committed to a multiyear plan to maximize free cash flow to support debt reduction to our target leverage level and deliver on our stockholder return commitments. We are very fortunate at times like these that for many years we invested in people and technologies to differentiate us. They have enabled us to identify top tier assets, grow inventory and strategically develop and produce our reserves to generate top tier returns. Herbert VogelPresident & CEO at SM Energy Company00:06:44I will now turn the call over to Beth for a deeper dive into our Uinta Basin integration efforts, as well as an update on all our operations, including some exciting milestones, technology evolution and results achieved in the first quarter. Beth? Beth McDonaldEVP & COO at SM Energy Company00:06:59Thank you, Herb. First quarter Uinta Basin results are a testament to the amazing integration efforts that continue here at SM Energy. As Herb previously mentioned, first quarter production margin for the Uinta Basin came in at $40.93 nearly equal to our Midland Basin production margin. This further demonstrates the quality of our top tier Uinta Basin assets and the efforts by our team to generate efficiencies and refine costs. Though we are already very pleased with these results, our teams continue to look at maximizing marketing optionality, working with all of our purchasers to optimize railcar routes, while continuing to move as much product as possible to Salt Lake City refineries. Beth McDonaldEVP & COO at SM Energy Company00:07:44Moving to Slide seven. We were excited to see the April 16 research report from Enveris, in which they announced they underwrote $152 sub-fifty dollars per barrel breakeven locations across the Uinta Basin Douglas Creek zone in the Upper cube. 38% or 57 of those locations are SM Energies. The industry recognition is a direct result of the excellent work that continues to be done by our geoscience and reservoir engineering teams to continue to gain confidence in our inventory in the 4,000 feet of stack pay in the Uinta Basin that we've been talking about. To quote Enveris, those recent buyers may be on to something. Beth McDonaldEVP & COO at SM Energy Company00:08:24We think it's safe to say that we are on to something and we'll continue to prove it in the months to come. On the right side of the slide, you'll see the familiar graph that we've shown before. This reiterates the upper cube wells more than compete with average Midland Basin and South Texas Gulf Coast wells based on cumulative oil production. Slide eight shows our most recent IP30 results in the Uinta Basin in South Texas Austin Chalk. As always, we release all well results that have reached IP30 rates. Beth McDonaldEVP & COO at SM Energy Company00:08:55While these particular Uinta Basin results appear slightly lower than our fourth quarter well results, it's important to remember that the lower cube consists of seven different benches and over 1,300 feet of vertical section, resulting in slight variations in productivity and oil mix across our acreage. Through our ongoing delineation of the field, we will continue to learn what is driving these changes and will incorporate our learnings into our optimization of the development plan and our future design. We are highly encouraged by these results and will continue to release new well results as they become available. While I mentioned some great results in our newly integrated Uinta Basin assets, it's important to remember that the first fully designed, permitted, drilled and completed SM Energy development will not be online until early twenty twenty six. We are excited to announce those results as they become available next year. Beth McDonaldEVP & COO at SM Energy Company00:09:48On the right side of the slide, we are showing some excellent Austin Chalk well results. These wells straddle our Northwestern oil area and the Southeastern liquids rich gas area. These wells reached an average IP30 rate of ten sixty one barrels of oil equivalent per day at 78% liquids and laterals averaging nearly 12,000 feet. The Austin Chalk continues to deliver great well productivity across our acreage. Slide nine depicts our continued stellar performance of our Texas assets. Beth McDonaldEVP & COO at SM Energy Company00:10:20The average cumulative oil production outperforms our peers in both Howard County and the Austin Chalk by 3242% respectively. These two core areas continue to deliver great returns and contribute to sustainable and repeatable free cash flow generation. As discussed in February, we will release updated results for both our Klondike and Woodford Barnett areas once new wells are online. Moving to Slide 10. Our teams continue to drive efficiencies across all three of our core basins looking for ways to innovate by redefining previous records in our operational execution. Beth McDonaldEVP & COO at SM Energy Company00:10:58Beginning with the Uinta Basin, we successfully drilled three mile lateral wells and will continue to test longer laterals to drive capital efficiency. Our completions team completed record footage in March and we had record oil takeaway in the first quarter. In the Permian Basin, our teams are focused on driving efficiencies through design enhancements. We are realizing savings in wellbore design changes that focus on less hydraulic horsepower requirements for the same pump rates. Additionally, we are working on completion fluids optimization to enhance productivity. Beth McDonaldEVP & COO at SM Energy Company00:11:31We are encouraged by what we are seeing today and plan to share results in our midyear update. As mentioned previously, SM has drilled an additional three, four mile laterals in the Midland Basin, driving incremental economics and strong well returns. In South Texas, our team realized cost efficiencies by utilizing our existing infrastructure to fuel our completion operations. We achieved these savings by tying into high pressure gas lift lines to provide natural gas as fuel to power our e fleet. Our completed cost per foot decreased over 30% since 2022, and our teams delivered records on drilling footage and drill out costs in the first quarter. Beth McDonaldEVP & COO at SM Energy Company00:12:12A top tier operator, generating capital efficiencies is always at the forefront of our minds. And our teams are empowered to challenge the status quo to achieve improvements in all aspects of our business. This point segues nicely to Slide 11. Artificial intelligence or AI is getting a lot of airtime these days. So we want to take the opportunity to reflect on SM Energy's technology evolution. Beth McDonaldEVP & COO at SM Energy Company00:12:36Technology is part of SM Energy's DNA. As far back as 2015, SM Energy invested in foundational systems that have led to incredible advancements and enabled differential outcomes. Over the last decade, we built a stellar advanced analytics and emerging technology team that tackles many strategically aligned projects, including, but not limited to implementing the following: machine learning algorithms, which help in quick evaluations for acquisitions and aids in completion design and well spacing. The use of this technology allows us to continue to pursue exploitation ideas at scale to advance our understanding and potential future growth place. The computer vision is used to identify geophysical attributes and formations to allow for faster and more in-depth interpretations. Beth McDonaldEVP & COO at SM Energy Company00:13:28Robotic processing automation reduces risk and increases efficiencies of our back office processes. And finally, we have enabled company wide generative AI with custom solutions in development. We believe that employee empowerment to learn and implement new technology leads to innovation, which drives differential performance. And with that, I will turn the call over to Wade to talk about the financial highlights of the first quarter. Wade? A. Wade PursellEVP & CFO at SM Energy Company00:13:56Thank you, Beth. Good afternoon, everyone. Huge shout out to the SM team for successfully integrating our unit to basin assets, driving strong financial results from oilier production than expected at the high end of our guidance range. I'll discuss our first quarter results and then speak to our very strong balance sheet and wrap up by reviewing guidance for the remainder of the year. First, 1Q results on Slide 12. A. Wade PursellEVP & CFO at SM Energy Company00:14:21As I noted, strong production from our Uinta Basin assets drove volumes to the top end of guidance, including oil production at 53% of total production. Production volumes combined with strong benchmark commodity prices supported adjusted EBITDAX and adjusted EPS that were notable beats to consensus. On the operating cost side, higher first quarter twenty twenty five lease operating expenses reflect acceleration of certain workover activity in the Uinta Basin and South Texas as well as the increased cost of fuel gas used in our Uinta Basin operations due to higher natural gas prices. The latter is offset in production revenue as the fuel gas was produced from our own wells. Transportation expense was nearly 8% below the midpoint of our guidance as our Uinta Basin transportation cost declined substantially from the fourth quarter of twenty twenty four. A. Wade PursellEVP & CFO at SM Energy Company00:15:18Transportation expense for our Uinta Basin assets will fluctuate based on how many barrels are trucked to Salt Lake refineries versus the number of barrels put on rail to downstream markets. Our oil and gas marketing team is quite focused on continuing to refine where we sell our production to drive an even higher operating margin. Stay tuned as we continue to optimize oil sales from our Uinta Basin assets. Bottom line, we realized a strong production margin in the first quarter and I'd to reiterate the comparability of the Uinta economics to our core Midland Basin. As you can reference on Slide 19 in the appendix, the Uinta production margin is right on top of the Permian production margin again in the first quarter. A. Wade PursellEVP & CFO at SM Energy Company00:16:04Turning to capital. First quarter CapEx came in approximately $10,000,000 high to the midpoint of guidance, but for good reason. During the quarter, we accelerated approximately $15,000,000 in CapEx for certain production equipment in Texas, which allows for certainty in timing of related turn in lines and is beneficial should steel prices increase as a result of tariffs. Additionally, we recorded $5,000,000 of CapEx related to highly economic non operated projects in the Midland Basin. In turn, solid adjusted free cash flow for the quarter funded our fixed quarterly dividend of $0.2 per share and annualized yield of 3.5% as well as the final cash settlement of our Uinta Basin acquisition and provided for the repayment of a portion of the outstanding balance under our credit facility, which is a great segue to my second topic, the balance sheet on Slide 13. A. Wade PursellEVP & CFO at SM Energy Company00:17:01This slide shows the strength of our balance sheet and our substantial available liquidity. We exited the quarter with a ratio of net debt to adjusted EBITDAX at 1.3 times and $2,000,000,000 of liquidity. This leverage ratio only includes Uinta EBITDAX since the October 1 close date. Pro form a, if we include an estimate of XCL EBITDAX in the trailing twelve month number for the full twelve months, the leverage ratio would be 1.1 times. Earlier this week, our lender group reiterated their confidence in our top tier assets by reaffirming our borrowing base at $3,000,000,000 and commitments at $2,000,000,000 As you probably know, we target leverage of one times net debt to adjusted EBITDAX at mid cycle commodity prices. A. Wade PursellEVP & CFO at SM Energy Company00:17:51During the first quarter, we reduced the balance on our revolver by $31,000,000 from $69,000,000 to $38,000,000 and it is our intention to generally prioritize debt reduction to target leverage levels before directing free cash flow towards additional share buybacks. We're very much on track to meet our leverage target in a short timeframe following our $2,000,000,000 Uinta Basin acquisition. Even at a price deck of $55 oil and $3.5 gas for the remainder of the year, we near our one times leverage target by the end of the year. Flipping to Slide 14, we layered on hedges during the quarter and subsequent to quarter end for a portion of our oil and gas production in 2025 and 2026 and a portion of gas production in 2027. We're now hedged at 34% of expected remaining 2025 oil production and 38% of expected remaining 2025 natural gas production. A. Wade PursellEVP & CFO at SM Energy Company00:18:51See the appendix for a full summary of our hedges. Thirdly and lastly, a few comments on guidance for the remainder of the year. I'm on Slide 15. Our 2025 plan, as described in February, results in 20% production growth and 30% oil production growth. With respect to full year 2025 guidance, we are maintaining our estimates as released in February with one exception, LOE guidance. A. Wade PursellEVP & CFO at SM Energy Company00:19:17The increase in our LOE guidance to $5.9 per BOE for the full year is being driven by an expected increase in workover activity, expected higher water disposal costs due to impacts from completion activities on offset wells and increased cost of fuel gas used in our Uinta Basin operations. As previously noted, the portion related to fuel gas is offset in production revenue. For those of you that model quarterly, we expect production to grow from Q1 to Q2 and again from Q2 to Q3 while flattening out for Q4. On the CapEx side, we reiterate our comments from February that capital will be front end loaded with first half twenty twenty five CapEx just over 60% of the total expected CapEx of A. Wade PursellEVP & CFO at SM Energy Company00:20:07full A. Wade PursellEVP & CFO at SM Energy Company00:20:07year. Summarizing second quarter guidance, production for the second quarter is expected to range from 197,000 to 203,000 BOE per day at approximately 54% to 55% oil. LOE, including workover expense, is expected to be approximately $6.1 per BOE. CapEx, excluding acquisitions, is expected to range from $375,000,000 to $385,000,000 and is expected to include approximately 25 net drills and approximately 50 net completions. This range includes approximately $10,000,000 of CapEx for highly economic non operated projects in the Midland Basin. A. Wade PursellEVP & CFO at SM Energy Company00:20:53I will note that we have a number of completions scheduled near the end of the quarter, which could impact the actual number of wells brought online in the second quarter. '1 final note on guidance and planned activity. We're often asked at what oil price would we respond with a reduction in activity levels. Our response to that begins with the reminder that we have been slowing activity already going from nine rigs at the beginning of the year to seven now with a trajectory towards six. Also, top tier assets generate solid returns at prices well below these current levels and we have a strong balance sheet. A. Wade PursellEVP & CFO at SM Energy Company00:21:29However, at some point, reducing activity would be warranted. We intentionally contract our services in a manner to retain flexibility should this circumstance arise. As an example, in 2020, when oil prices plummeted due to the global pandemic, we continued to drill wells under existing contracts that suspended completion activities, which is the majority of the well cost. The result was near term addition to free cash flow, a buildup in DUCs and then a resumption of completion activity later in a period of lower completion costs and improved oil prices. Moving now to Slide 16. A. Wade PursellEVP & CFO at SM Energy Company00:22:07We'd like to emphasize the importance of stewardship as a key component of being a premier operator. We are proud of our continued progress as a leader in stewardship as recognized by Rystad's recent ranking of SM Energy as a top three operator excelling in sustainability based on 2023 results. Among oil focused operators, we were ranked number one. Finishing with Slide seventeen. As Herb said, the successful integration of our newly acquired Uinta Basin assets has strengthened SM. A. Wade PursellEVP & CFO at SM Energy Company00:22:38These assets drove strong first quarter performance with production, including oil production at the high end of our guidance range. It is clear that we now have three top tier assets. These top tier low breakeven assets along with our strong balance sheet, our excellent team of professionals who regularly evaluate cost reduction and margin enhancement opportunities and our flexibility when it comes to contracting services, all position us very well for any macro environment, including a lower commodity price environment should it persist. Thank you for listening today, and we look forward to answering your questions on the live Q and A webcast and call tomorrow morning.Read moreParticipantsExecutivesPatrick LytleSenior VP - FinanceHerbert VogelPresident & CEOBeth McDonaldEVP & COOA. Wade PursellEVP & CFOPowered by