PR Newswire
DENVER, Feb. 21, 2024
DENVER, Feb. 21, 2024 /PRNewswire/ -- SM Energy Company (the "Company") (NYSE: SM) today announced certain fourth quarter and full year 2023 operating and financial results, year-end 2023 estimated net proved reserves and its 2024 operating plan. Highlights include:
Excellent financial results and operational performance:
Looking ahead to the 2024 strategy and plan, the Company targets value creation through:
Chief Executive Officer Herb Vogel comments: "In 2023, we delivered excellent financial and operating results, grew our Midland Basin footprint by 37%, increased net proved reserves to a record 605 MMBoe, reduced net debt(1) by 15%, announced an increase in our sustainable dividend and returned $300 million to stockholders. We achieved this with industry leading safety metrics, our top priority. We are exceptionally well positioned as we enter 2024, and we have set forth a plan that we expect will combine our low breakeven cost portfolio and differential technical capabilities to deliver optimized operational performance, inventory growth and an attractive return of capital to our stockholders. 2023 results exceeded expectations and the 2024 outlook supports another great year."
ESTIMATED NET PROVED RESERVES AT YEAR-END 2023
MMBoe | ||
Estimated net proved reserves year-end 2022 | 537 | |
Net infill/revisions (excluding 5 year rule and price) | 151 | |
Discovery/extensions | 31 | |
Net production | (55) | |
Revisions – 5 year rule | (31) | |
Revisions – price | (28) | |
Net acquisitions and divestitures | — | |
Estimated net proved reserves year-end 2023 | 605 |
Estimated net proved reserves at year-end 2023 were 605 MMBoe. Estimated net proved reserves were 56% in South Texas and 44% in the Midland Basin, and were comprised of 38% oil, 42% natural gas and 20% NGLs. Net proved reserves were 56% developed and 44% undeveloped.
STANDARDIZED MEASURE
The standardized measure of discounted future net cash flows from estimated net proved reserves was $6.28 billion at year-end 2023, down from $9.96 billion at year-end 2022. The 37% decline in the standardized measure compared with year-end 2022 is predominantly due to the significantly lower SEC pricing across commodities used in the calculation, partially offset by the increase in estimated net proved reserves. Pre-tax PV-10(1) was $7.38 billion.
FOURTH QUARTER AND FULL YEAR 2023 RESULTS
Details and discussions of fourth quarter and full year 2023 net production and commodity pricing were previously reported on February 1, 2024. Summary tables below:
NET PRODUCTION BY OPERATING AREA | |||
Fourth Quarter 2023 | |||
Midland Basin | South Texas | Total | |
Oil (MBbl / MBbl/d) | 4,553 / 49.5 | 1,523 / 16.5 | 6,075 / 66.0 |
Natural Gas (MMcf / MMcf/d) | 15,187 / 165.1 | 18,309 / 199.0 | 33,496 / 364.1 |
NGLs (MBbl / MBbl/d) | 5 / - | 2,455 / 26.7 | 2,460 / 26.7 |
Total (MBoe / MBoe/d) | 7,088 / 77.0 | 7,029 / 76.4 | 14,118 / 153.5 |
Note: Totals may not calculate due to rounding. | |||
Full Year 2023 | |||
Midland Basin | South Texas | Total | |
Oil (MBbl / MBbl/d) | 17,515 / 48.0 | 6,261 / 17.2 | 23,776 / 65.1 |
Natural Gas (MMcf / MMcf/d) | 59,814 / 163.9 | 72,555 / 198.8 | 132,369 / 362.7 |
NGLs (MBbl / MBbl/d) | 24 / - | 9,628 / 26.4 | 9,652 / 26.4 |
Total (MBoe / MBoe/d) | 27,508 / 75.4 | 27,982 / 76.7 | 55,490 / 152.0 |
Note: Totals may not calculate due to rounding. |
REALIZED PRICES BY OPERATING AREA | |||
Fourth Quarter 2023 | |||
Midland Basin | South Texas | Total (Pre/Post-hedge)(1) | |
Oil ($/Bbl) | $77.96 | $75.79 | $77.41 / $76.31 |
Natural Gas ($/Mcf) | $2.86 | $2.14 | $2.47 / $2.81 |
NGLs ($/Bbl) | nm | $21.91 | $21.92 / $22.57 |
Per Boe | $56.21 | $29.65 | $42.99 / $43.45 |
Note: Totals may not calculate due to rounding. | |||
Full Year 2023 | |||
Midland Basin | South Texas | Total (Pre/Post-hedge)(1) | |
Oil ($/Bbl) | $76.95 | $74.43 | $76.28 / $75.15 |
Natural Gas ($/Mcf) | $2.93 | $2.10 | $2.48 / $2.85 |
NGLs ($/Bbl) | nm | $23.01 | $23.02 / $23.51 |
Per Boe | $55.39 | $30.03 | $42.60 / $43.09 |
Note: Totals may not calculate due to rounding. |
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
Fourth quarter 2023 net income was $247.1 million, or $2.12 per diluted common share, compared with net income of $258.5 million, or $2.09 per diluted common share, for the same period in 2022. The current year period benefited on a per share basis from higher production volumes, lower per unit production costs, lower income tax expense and fewer shares outstanding, largely offset by higher exploration and per unit DD&A expense. For the full year 2023, net income was $817.9 million, or $6.86 per diluted common share, compared with net income of $1.11 billion, or $8.96 per diluted common share, for the full year 2022. Full year net income compared with the prior year reflects a 13% decrease in the realized price per Boe after the effect of net derivative settlements and higher per unit DD&A expense, partially offset by lower per unit production costs and lower interest expense.
Fourth quarter 2023 net cash provided by operating activities of $476.5 million before net change in working capital of $(52.8) million totaled $423.7 million,(1) which was up $76.5 million, or 22%, from $347.2 million(1) in the same period in 2022. The increase from the prior year period was due to higher production volumes, a higher realized price per Boe after the effect of net derivative settlements and lower per unit production costs. For the full year 2023, net cash provided by operating activities of $1.57 billion before net changes in working capital of $4.6 million totaled $1.58 billion,(1) which was down $179.5 million, or 10%, from $1.76 billion(1) in 2022. The decline in 2023 is predominantly due to a lower realized price per Boe after the effect of net derivative settlements, partially offset by higher production volumes and lower per unit costs.
ADJUSTED EBITDAX,(1) ADJUSTED NET INCOME(1) AND NET DEBT-TO-ADJUSTED EBITDAX(1)
Fourth quarter 2023 Adjusted EBITDAX(1) was $445.1 million, up $71.3 million, or 19%, from $373.9 million in the same period in 2022. For the full year 2023, Adjusted EBITDAX(1) was $1.71 billion, compared with $1.92 billion in 2022.
Fourth quarter 2023 adjusted net income(1) was $181.5 million, or $1.56 per diluted common share, which compares with adjusted net income(1) of $159.2 million, or $1.29 per diluted common share, for the same period in 2022. For the full year 2023, adjusted net income(1) was $702.5 million, or $5.89 per diluted common share, compared with adjusted net income(1) of $904.0 million, or $7.29 per diluted common share, in 2022.
At December 31, 2023, Net debt-to-Adjusted EBITDAX(1) was 0.57 times.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL EXPENDITURES
At year-end 2023, the outstanding principal amount of the Company's long-term debt was $1.59 billion with zero drawn on the Company's senior secured revolving credit facility. At year-end 2023, cash and cash equivalents were $616.2 million and net debt(1) was $969.0 million, down $171.2 million from year-end 2022. As of December 31, 2023, the Company's borrowing base and commitments under its senior secured revolving credit facility were $2.50 billion and $1.25 billion, respectively, and combined with the cash and cash equivalents balance, provided $1.86 billion in available liquidity.
In the fourth quarter 2023, capital expenditures of $222.7 million adjusted for increased capital accruals of $45.1 million totaled $267.8 million.(1) During the fourth quarter of 2023, the Company drilled 28 net wells and added 11 net flowing completions. For the full year 2023, capital expenditures of $989.4 million adjusted for increased capital accruals of $80.8 million totaled $1.07 billion(1) and the Company drilled 89 net wells and added 92 net flowing completions.
COMMODITY DERIVATIVES
As of February 8, 2024, commodity derivative positions for 2024 include:
SWAPS & COLLARS:
BASIS SWAPS:
A detailed schedule of these and other hedge positions are provided in the accompanying slide deck.
2024 OPERATING PLAN AND GUIDANCE
Discussion in this release of the Company's 2024 operating plan guidance includes the term "capital expenditures," which is defined to include adjustments for capital accruals, and is a non-GAAP measure. In reliance on the exception provided by Item 10l(1)(i)(B) of Regulation S-K, the Company is unable to provide a reconciliation of forward-looking non-GAAP capital expenditures because components of the calculations are inherently unpredictable, such as changes to, and the timing of, capital accruals, unknown future events, and estimating certain future GAAP measures. The inability to project certain components of the calculation could significantly affect the accuracy of a reconciliation.
KEY ASSUMPTIONS
GUIDANCE FULL YEAR 2024:
GUIDANCE FIRST QUARTER 2024:
UPCOMING EVENTS
EARNINGS Q&A WEBCAST AND CONFERENCE CALL
February 22, 2024 – Please join SM Energy management at 8:00 a.m. Mountain time/10:00 a.m. Eastern time for the 2023 financial and operating results/2024 operating plan Q&A session. This discussion will be accessible via:
CONFERENCE PARTICIPATION
DISCLOSURES
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the meaning of securities laws. The words "anticipate," "deliver," "demonstrate," "establish," "estimate," "expects," "goal," "generate," "maintain," "objectives," "optimize," "target," and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this release include, among other things, net proved reserves at year-end 2023 and the ratio of net proved reserves at year-end 2023 to 2023 net production, expected future commodity prices, projections for the first quarter and full year 2024 regarding guidance for production, capital expenditures, operating costs, general and administrative expenses, exploration expenses and DD&A, the number of net wells to be drilled and completed, the percentage of future production that is hedged, the allocation of activity between and within our operating areas, and the Company's 2024 strategic objectives, including plans to grow inventory, maintaining and expanding portfolio quality and depth, optimizing capital efficiency and well performance, delivering low breakeven and high-return wells, and returning capital to stockholders through share repurchases and dividends while reducing debt. These statements involve known and unknown risks, which may cause SM Energy's actual results to differ materially from results expressed or implied by the forward-looking statements. Future results may be impacted by the risks discussed in the Risk Factors section of SM Energy's most recent Annual Report on Form 10-K, as such risk factors may be updated from time to time in the Company's other periodic reports filed with the Securities and Exchange Commission, specifically the 2023 Form 10-K. The forward-looking statements contained herein speak as of the date of this release. Although SM Energy may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so, except as required by securities laws.
RESERVE DISCLOSURE
The SEC requires oil and natural gas companies, in their filings with the SEC, to disclose estimated net proved reserves, which are those quantities of oil, natural gas and NGLs, that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions (using the trailing 12-month average first-day-of-the-month prices), operating methods and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The SEC also permits the disclosure of separate estimates of probable or possible reserves that meet SEC definitions for such reserves; however, the Company currently does not disclose probable or possible reserves in its SEC filings.
Estimated net proved reserves attributable to the Company at December 31, 2023, are estimated utilizing SEC reserve recognition standards and pricing assumptions based on the trailing 12-month average first-day-of-the-month prices of $78.22 per Bbl of oil, $2.64 per MMBtu of natural gas, and $27.72 per Bbl of NGLs. At least 80% of the PV-10 of the Company's estimate of its total estimated net proved reserves as of December 31, 2023, was audited by Ryder Scott Company, L.P.
FOOTNOTE 1: Indicates a non-GAAP measure or metric. Please refer to the "Definitions of non-GAAP Measures and Metrics as Calculated by the Company" section in Financial 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, jsamuels@sm-energy.com, 303-864-2507
SM ENERGY COMPANY | |||
FINANCIAL HIGHLIGHTS | |||
December 31, 2023 | |||
Consolidated Balance Sheets | |||
(in thousands, except share data) | December 31, | ||
ASSETS | 2023 | 2022 | |
Current assets: | |||
Cash and cash equivalents | $ 616,164 | $ 444,998 | |
Accounts receivable | 231,165 | 233,297 | |
Derivative assets | 56,442 | 48,677 | |
Prepaid expenses and other | 12,668 | 10,231 | |
Total current assets | 916,439 | 737,203 | |
Property and equipment (successful efforts method): | |||
Proved oil and gas properties | 11,477,358 | 10,258,368 | |
Accumulated depletion, depreciation, and amortization | (6,830,253) | (6,188,147) | |
Unproved oil and gas properties, net of valuation allowance of $35,362 and $38,008, respectively | 335,620 | 487,192 | |
Wells in progress | 358,080 | 287,267 | |
Other property and equipment, net of accumulated depreciation of $59,669 and $56,512, respectively | 35,615 | 38,099 | |
Total property and equipment, net | 5,376,420 | 4,882,779 | |
Noncurrent assets: | |||
Derivative assets | 8,672 | 24,465 | |
Other noncurrent assets | 78,454 | 71,592 | |
Total noncurrent assets | 87,126 | 96,057 | |
Total assets | $ 6,379,985 | $ 5,716,039 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable and accrued expenses | $ 611,598 | $ 532,289 | |
Derivative liabilities | 6,789 | 56,181 | |
Other current liabilities | 15,425 | 10,114 | |
Total current liabilities | 633,812 | 598,584 | |
Noncurrent liabilities: | |||
Revolving credit facility | — | — | |
Senior Notes, net | 1,575,334 | 1,572,210 | |
Asset retirement obligations | 118,774 | 108,233 | |
Net deferred tax liabilities | 369,903 | 280,811 | |
Derivative liabilities | 1,273 | 1,142 | |
Other noncurrent liabilities | 65,039 | 69,601 | |
Total noncurrent liabilities | 2,130,323 | 2,031,997 | |
Stockholders' equity: | |||
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 115,745,393 and 121,931,676 shares, respectively | 1,157 | 1,219 | |
Additional paid-in capital | 1,565,021 | 1,779,703 | |
Retained earnings | 2,052,279 | 1,308,558 | |
Accumulated other comprehensive loss | (2,607) | (4,022) | |
Total stockholders' equity | 3,615,850 | 3,085,458 | |
Total liabilities and stockholders' equity | $ 6,379,985 | $ 5,716,039 |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 2023 | |||||||
Consolidated Statements of Operations | |||||||
(in thousands, except per share data) | For the Three Months Ended | For the Twelve Months Ended | |||||
2023 | 2022 | 2023 | 2022 | ||||
Operating revenues and other income: | |||||||
Oil, gas, and NGL production revenue | $ 606,857 | $ 669,250 | $ 2,363,889 | $ 3,345,906 | |||
Other operating income | 1,869 | 2,068 | 9,997 | 12,741 | |||
Total operating revenues and other income | 608,726 | 671,318 | 2,373,886 | 3,358,647 | |||
Operating expenses: | |||||||
Oil, gas, and NGL production expense | 137,343 | 150,667 | 563,543 | 620,912 | |||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 189,107 | 143,611 | 690,481 | 603,780 | |||
Exploration (1) | 15,847 | 10,826 | 59,480 | 54,943 | |||
Impairment | — | 1,002 | — | 7,468 | |||
General and administrative (1) | 36,639 | 32,843 | 121,063 | 114,558 | |||
Net derivative (gain) loss (2) | (80,506) | (11,168) | (68,154) | 374,012 | |||
Other operating expense, net | 385 | 879 | 20,567 | 3,493 | |||
Total operating expenses | 298,815 | 328,660 | 1,386,980 | 1,779,166 | |||
Income from operations | 309,911 | 342,658 | 986,906 | 1,579,481 | |||
Interest expense | (23,917) | (22,638) | (91,630) | (120,346) | |||
Interest income | 6,052 | 3,694 | 19,854 | 5,774 | |||
Loss on extinguishment of debt | — | — | — | (67,605) | |||
Other non-operating expense | (232) | (384) | (928) | (1,534) | |||
Income before income taxes | 291,814 | 323,330 | 914,202 | 1,395,770 | |||
Income tax expense | (44,703) | (64,867) | (96,322) | (283,818) | |||
Net income | $ 247,111 | $ 258,463 | $ 817,880 | $ 1,111,952 | |||
Basic weighted-average common shares outstanding | 115,971 | 122,485 | 118,678 | 122,351 | |||
Diluted weighted-average common shares outstanding | 116,587 | 123,399 | 119,240 | 124,084 | |||
Basic net income per common share | $ 2.13 | $ 2.11 | $ 6.89 | $ 9.09 | |||
Diluted net income per common share | $ 2.12 | $ 2.09 | $ 6.86 | $ 8.96 | |||
Net dividends declared per common share | $ 0.18 | $ 0.15 | $ 0.63 | $ 0.31 | |||
(1) Non-cash stock-based compensation included in: | |||||||
Exploration expense | $ 1,126 | $ 1,000 | $ 4,147 | $ 3,965 | |||
General and administrative expense | 4,605 | 3,914 | 16,103 | 14,807 | |||
Total non-cash stock-based compensation | $ 5,731 | $ 4,914 | $ 20,250 | $ 18,772 | |||
(2) The net derivative (gain) loss line item consists of the following: | |||||||
Net derivative settlement (gain) loss | $ (6,523) | $ 115,620 | $ (26,921) | $ 710,700 | |||
Net gain on fair value changes | (73,983) | (126,788) | (41,233) | (336,688) | |||
Total net derivative (gain) loss | $ (80,506) | $ (11,168) | $ (68,154) | $ 374,012 |
SM ENERGY COMPANY | |||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||
December 31, 2023 | |||||||||||
Consolidated Statements of Stockholders' Equity | |||||||||||
(in thousands, except share data and dividends per share) | |||||||||||
Additional | Retained | Accumulated | Total | ||||||||
Common Stock | |||||||||||
Shares | Amount | ||||||||||
Balances, December 31, 2021 | 121,862,248 | $ 1,219 | $ 1,840,228 | $ 234,533 | $ (12,849) | $ 2,063,131 | |||||
Net income | — | — | — | 1,111,952 | — | 1,111,952 | |||||
Other comprehensive income | — | — | — | — | 8,827 | 8,827 | |||||
Net cash dividends declared, $0.31 per share | — | — | — | (37,927) | — | (37,927) | |||||
Issuance of common stock under Employee Stock Purchase Plan | 113,785 | 1 | 3,038 | — | — | 3,039 | |||||
Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings | 1,291,427 | 13 | (25,142) | — | — | (25,129) | |||||
Stock-based compensation expense | 29,471 | — | 18,772 | — | — | 18,772 | |||||
Purchase of shares under Stock Repurchase Program | (1,365,255) | (14) | (57,193) | — | — | (57,207) | |||||
Balances, December 31, 2022 | 121,931,676 | $ 1,219 | $ 1,779,703 | $ 1,308,558 | $ (4,022) | $ 3,085,458 | |||||
Net income | — | — | — | 817,880 | — | 817,880 | |||||
Other comprehensive income | — | — | — | — | 1,415 | 1,415 | |||||
Net cash dividends declared, $0.63 per share | — | — | — | (74,159) | — | (74,159) | |||||
Issuance of common stock under Employee Stock Purchase Plan | 114,427 | 1 | 3,057 | — | — | 3,058 | |||||
Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings | 554,216 | 6 | (7,888) | — | — | (7,882) | |||||
Stock-based compensation expense | 56,872 | 1 | 20,249 | — | — | 20,250 | |||||
Issuance of common stock through cashless exercise of Warrants | 19,037 | — | — | — | — | — | |||||
Purchase of shares under Stock Repurchase Program | (6,930,835) | (70) | (230,100) | — | — | (230,170) | |||||
Balances, December 31, 2023 | 115,745,393 | $ 1,157 | $ 1,565,021 | $ 2,052,279 | $ (2,607) | $ 3,615,850 |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 2023 | |||||||
Consolidated Statements of Cash Flows | |||||||
(in thousands) | For the Three Months Ended | For the Twelve Months Ended | |||||
2023 | 2022 | 2023 | 2022 | ||||
Cash flows from operating activities: | |||||||
Net income | $ 247,111 | $ 258,463 | $ 817,880 | $ 1,111,952 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 189,107 | 143,611 | 690,481 | 603,780 | |||
Impairment | — | 1,002 | — | 7,468 | |||
Stock-based compensation expense | 5,731 | 4,914 | 20,250 | 18,772 | |||
Net derivative (gain) loss | (80,506) | (11,168) | (68,154) | 374,012 | |||
Net derivative settlement gain (loss) | 6,523 | (115,620) | 26,921 | (710,700) | |||
Amortization of debt discount and deferred financing costs | 1,372 | 1,371 | 5,486 | 10,281 | |||
Loss on extinguishment of debt | — | — | — | 67,605 | |||
Deferred income taxes | 45,085 | 66,061 | 88,256 | 269,057 | |||
Other, net | 9,314 | (1,426) | (2,175) | 6,242 | |||
Changes in working capital: | |||||||
Accounts receivable | 39,644 | 37,235 | (10,191) | 38,554 | |||
Prepaid expenses and other | (2,129) | 9,408 | (2,437) | (1,055) | |||
Accounts payable and accrued expenses | 15,263 | (105,476) | 8,077 | (109,562) | |||
Net cash provided by operating activities | 476,515 | 288,375 | 1,574,394 | 1,686,406 | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (222,655) | (288,088) | (989,411) | (879,934) | |||
Acquisition of proved and unproved oil and gas properties | (613) | — | (109,931) | (7) | |||
Other, net | — | 267 | 657 | (322) | |||
Net cash used in investing activities | (223,268) | (287,821) | (1,098,685) | (880,263) | |||
Cash flows from financing activities: | |||||||
Cash paid to repurchase Senior Notes | — | — | — | (584,946) | |||
Repurchase of common stock | (22,859) | (36,966) | (228,105) | (57,207) | |||
Net proceeds from sale of common stock | 1,243 | 1,394 | 3,058 | 3,039 | |||
Dividends paid | (17,447) | (18,419) | (71,614) | (19,637) | |||
Net share settlement from issuance of stock awards | — | — | (7,882) | (25,129) | |||
Other, net | — | — | — | (9,981) | |||
Net cash used in financing activities | (39,063) | (53,991) | (304,543) | (693,861) | |||
Net change in cash, cash equivalents, and restricted cash | 214,184 | (53,437) | 171,166 | 112,282 | |||
Cash, cash equivalents, and restricted cash at beginning of period | 401,980 | 498,435 | 444,998 | 332,716 | |||
Cash, cash equivalents, and restricted cash at end of period | $ 616,164 | $ 444,998 | $ 616,164 | $ 444,998 |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 2023 | |||||||
Consolidated Statements of Cash Flows (Continued) | |||||||
(in thousands) | For the Three Months Ended | For the Twelve Months Ended | |||||
2023 | 2022 | 2023 | 2022 | ||||
Supplemental schedule of additional cash flow information: | |||||||
Operating activities: | |||||||
Cash paid for interest, net of capitalized interest | $ (9,433) | $ (8,572) | $ (86,947) | $ (134,240) | |||
Net cash paid for incomes taxes | $ (2,799) | $ (70) | $ (8,975) | $ (10,576) | |||
Investing activities: | |||||||
Changes in capital expenditure accruals | $ 45,111 | $ (20,801) | $ 80,794 | $ 29,789 |
DEFINITIONS OF NON-GAAP MEASURES AND METRICS AS CALCULATED BY THE COMPANY
To supplement the presentation of its financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides certain non-GAAP measures and metrics, which are used by management and the investment community to assess the Company's financial condition, results of operations, and cash flows, as well as compare performance from period to period and across the Company's peer group. The Company believes these measures and metrics are widely used by the investment community, including investors, research analysts and others, to evaluate and compare recurring financial results among upstream oil and gas companies in making investment decisions or recommendations. These measures and metrics, as presented, may have differing calculations among companies and investment professionals and may not be directly comparable to the same measures and metrics provided by others. A non-GAAP measure should not be considered in isolation or as a substitute for the most directly comparable GAAP measure or any other measure of a company's financial or operating performance presented in accordance with GAAP. Reconciliations of each of the Company's non-GAAP measures to the most directly comparable GAAP measure are presented below. These measures may not be comparable to similarly titled measures of other companies.
Adjusted EBITDAX: Adjusted EBITDAX is calculated as net income before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items. Adjusted EBITDAX excludes certain items that the Company believes affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that the Company believes provides useful additional information to investors and analysts, as a performance measure, for analysis of the Company's ability to internally generate funds for exploration, development, acquisitions, and to service debt. The Company is also subject to financial covenants under the Company's Credit Agreement, a material source of liquidity for the Company, based on Adjusted EBITDAX ratios. Please reference the Company's 2023 Form 10-K for discussion of the Credit Agreement and its covenants.
Adjusted free cash flow: Adjusted free cash flow is calculated as net cash provided by operating activities before net change in working capital less capital expenditures before changes in accruals. The Company uses this measure as representative of the cash from operations, in excess of capital expenditures that provides liquidity to fund discretionary obligations such as debt reduction, returning cash to stockholders or expanding the business.
Adjusted net income and adjusted net income per diluted common share: Adjusted net income and adjusted net income per diluted common share excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. These items include non-cash and other adjustments, such as derivative gains and losses net of settlements, impairments, net (gain) loss on divestiture activity, gains and losses on extinguishment of debt, and accruals for non-recurring matters. The Company uses these measures to evaluate the comparability of the Company's ongoing operational results and trends and believes these measures provide useful information to investors for analysis of the Company's fundamental business on a recurring basis.
Net debt: Net debt is calculated as the total principal amount of outstanding senior notes plus amounts drawn on the revolving credit facility less cash and cash equivalents (also referred to as total funded debt). The Company uses net debt as a measure of financial position and believes this measure provides useful additional information to investors to evaluate the Company's capital structure and financial leverage.
Net debt-to-Adjusted EBITDAX: Net debt-to-Adjusted EBITDAX is calculated as Net Debt (defined above) divided by Adjusted EBITDAX (defined above) for the trailing twelve-month period (also referred to as leverage ratio). A variation of this calculation is a financial covenant under the Company's Credit Agreement. The Company and the investment community may use this metric in understanding the Company's ability to service its debt and identify trends in its leverage position. The Company reconciles the two non-GAAP measure components of this calculation.
Post-hedge: Post-hedge is calculated as the average realized price after the effects of commodity net derivative settlements. The Company believes this metric is useful to management and the investment community to understand the effects of commodity net derivative settlements on average realized price.
Pre-Tax PV-10: Pre-Tax PV-10 is the present value of estimated future revenue to be generated from the production of estimated net proved reserves, net of estimated production and future development costs, based on prices used in estimating the proved reserves and costs in effect as of the date indicated (unless such costs are subject to change pursuant to contractual provisions), without giving effect to non-property related expenses such as general and administrative expenses, debt service, future income tax expenses, or depreciation, depletion, and amortization, discounted using an annual discount rate of 10 percent. While this measure does not include the effect of income taxes as it would in the use of the standardized measure of discounted future net cash flows calculation, it does provide an indicative representation of the relative value of the Company on a comparative basis to other companies and from period to period. This measure is presented because management believes it provides useful information to investors for analysis of the Company's fundamental business on a recurring basis.
SM ENERGY COMPANY | |||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||
December 31, 2023 | |||||||||||
Production Data | |||||||||||
For the Three Months Ended | For the Twelve Months Ended | ||||||||||
2023 | 2022 | Percent | 2023 | 2022 | Percent | ||||||
Realized sales price (before the effect of net derivative settlements): | |||||||||||
Oil (per Bbl) | $ 77.41 | $ 82.35 | (6) % | $ 76.28 | $ 94.67 | (19) % | |||||
Gas (per Mcf) | $ 2.47 | $ 4.52 | (45) % | $ 2.48 | $ 6.28 | (61) % | |||||
NGLs (per Bbl) | $ 21.92 | $ 26.10 | (16) % | $ 23.02 | $ 35.66 | (35) % | |||||
Equivalent (per Boe) | $ 42.99 | $ 50.92 | (16) % | $ 42.60 | $ 63.18 | (33) % | |||||
Realized sales price (including the effect of net derivative settlements): | |||||||||||
Oil (per Bbl) | $ 76.31 | $ 67.30 | 13 % | $ 75.15 | $ 73.21 | 3 % | |||||
Gas (per Mcf) | $ 2.81 | $ 3.60 | (22) % | $ 2.85 | $ 4.92 | (42) % | |||||
NGLs (per Bbl) | $ 22.57 | $ 25.83 | (13) % | $ 23.51 | $ 32.60 | (28) % | |||||
Equivalent (per Boe) | $ 43.45 | $ 42.12 | 3 % | $ 43.09 | $ 49.76 | (13) % | |||||
Net production volumes: (1) | |||||||||||
Oil (MMBbl) | 6.1 | 5.7 | 6 % | 23.8 | 24.0 | (1) % | |||||
Gas (Bcf) | 33.5 | 32.1 | 4 % | 132.4 | 125.9 | 5 % | |||||
NGLs (MMBbl) | 2.5 | 2.1 | 18 % | 9.7 | 8.0 | 21 % | |||||
Equivalent (MMBoe) | 14.1 | 13.1 | 7 % | 55.5 | 53.0 | 5 % | |||||
Average net daily production: (1) | |||||||||||
Oil (MBbls per day) | 66.0 | 62.0 | 6 % | 65.1 | 65.7 | (1) % | |||||
Gas (MMcf per day) | 364.1 | 348.9 | 4 % | 362.7 | 345.0 | 5 % | |||||
NGLs (MBbls per day) | 26.7 | 22.7 | 18 % | 26.4 | 21.9 | 21 % | |||||
Equivalent (MBoe per day) | 153.5 | 142.9 | 7 % | 152.0 | 145.1 | 5 % | |||||
Per Boe data: (1) | |||||||||||
Lease operating expense | $ 5.31 | $ 5.20 | 2 % | $ 5.13 | $ 5.03 | 2 % | |||||
Transportation costs | $ 2.08 | $ 2.86 | (27) % | $ 2.46 | $ 2.83 | (13) % | |||||
Production taxes | $ 1.97 | $ 2.43 | (19) % | $ 1.89 | $ 3.07 | (38) % | |||||
Ad valorem tax expense | $ 0.37 | $ 0.97 | (62) % | $ 0.67 | $ 0.79 | (15) % | |||||
General and administrative (2) | $ 2.60 | $ 2.50 | 4 % | $ 2.18 | $ 2.16 | 1 % | |||||
Net derivative settlement gain (loss) | $ 0.46 | $ (8.80) | 105 % | $ 0.49 | $ (13.42) | 104 % | |||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | $ 13.39 | $ 10.93 | 23 % | $ 12.44 | $ 11.40 | 9 % | |||||
(1) Amounts and percentage changes may not calculate due to rounding. | |||||||||||
(2) Includes non-cash stock-based compensation expense per Boe of $0.33 and $0.30 for the three months ended December 31, 2023, and 2022, respectively, and $0.29 and $0.28 for the twelve months ended December 31, 2023, and 2022, respectively. |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 2023 | |||||||
Adjusted EBITDAX Reconciliation (1) | |||||||
(in thousands) | |||||||
Reconciliations of net income (GAAP) and net cash provided by operating activities (GAAP) to Adjusted EBITDAX (non-GAAP): | For the Three Months Ended | For the Twelve Months Ended | |||||
2023 | 2022 | 2023 | 2022 | ||||
Net income (GAAP) | $ 247,111 | $ 258,463 | $ 817,880 | $ 1,111,952 | |||
Interest expense | 23,917 | 22,638 | 91,630 | 120,346 | |||
Interest income | (6,052) | (3,694) | (19,854) | (5,774) | |||
Income tax expense | 44,703 | 64,867 | 96,322 | 283,818 | |||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 189,107 | 143,611 | 690,481 | 603,780 | |||
Exploration (2) | 14,721 | 9,826 | 55,333 | 50,978 | |||
Impairment | — | 1,002 | — | 7,468 | |||
Stock-based compensation expense | 5,731 | 4,914 | 20,250 | 18,772 | |||
Net derivative (gain) loss | (80,506) | (11,168) | (68,154) | 374,012 | |||
Net derivative settlement gain (loss) | 6,523 | (115,620) | 26,921 | (710,700) | |||
Loss on extinguishment of debt | — | — | — | 67,605 | |||
Other, net | (128) | (985) | 1,497 | (3,969) | |||
Adjusted EBITDAX (non-GAAP) | $ 445,127 | $ 373,854 | $ 1,712,306 | $ 1,918,288 | |||
Interest expense | (23,917) | (22,638) | (91,630) | (120,346) | |||
Interest income | 6,052 | 3,694 | 19,854 | 5,774 | |||
Income tax expense | (44,703) | (64,867) | (96,322) | (283,818) | |||
Exploration (2)(3) | (14,901) | (8,851) | (46,467) | (36,810) | |||
Amortization of debt discount and deferred financing costs | 1,372 | 1,371 | 5,486 | 10,281 | |||
Deferred income taxes | 45,085 | 66,061 | 88,256 | 269,057 | |||
Other, net | 9,622 | (1,416) | (12,538) | (3,957) | |||
Net change in working capital | 52,778 | (58,833) | (4,551) | (72,063) | |||
Net cash provided by operating activities (GAAP) | $ 476,515 | $ 288,375 | $ 1,574,394 | $ 1,686,406 | |||
(1) See "Definitions of non-GAAP Measures and Metrics as Calculated by the Company" above. | |||||||
(2) Stock-based compensation expense is a component of the exploration expense and general and administrative expense line items on the accompanying consolidated statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the accompanying consolidated statements of operations for the component of stock-based compensation expense recorded to exploration expense. | |||||||
(3) For the three and twelve months ended December 31, 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 twelve months ended December 31, 2022, amount excludes certain capital expenditures related to unsuccessful exploration efforts outside of the Company's core areas of operation. |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 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 | For the Twelve Months | |||||
2023 | 2022 | 2023 | 2022 | ||||
Net income (GAAP) | $ 247,111 | $ 258,463 | $ 817,880 | $ 1,111,952 | |||
Net derivative (gain) loss | (80,506) | (11,168) | (68,154) | 374,012 | |||
Net derivative settlement gain (loss) | 6,523 | (115,620) | 26,921 | (710,700) | |||
Impairment | — | 1,002 | — | 7,468 | |||
Loss on extinguishment of debt | — | — | — | 67,605 | |||
Other, net | (128) | (985) | 1,497 | (3,969) | |||
Tax effect of adjustments (2) | 16,082 | 27,509 | 8,623 | 57,632 | |||
Net R&D tax credit carryover (3) | (7,591) | — | (84,277) | — | |||
Adjusted net income (non-GAAP) | $ 181,491 | $ 159,201 | $ 702,490 | $ 904,000 | |||
Diluted net income per common share (GAAP) | $ 2.12 | $ 2.09 | $ 6.86 | $ 8.96 | |||
Net derivative (gain) loss | (0.69) | (0.09) | (0.57) | 3.01 | |||
Net derivative settlement gain (loss) | 0.06 | (0.94) | 0.23 | (5.73) | |||
Impairment | — | 0.01 | — | 0.06 | |||
Loss on extinguishment of debt | — | — | — | 0.54 | |||
Other, net | — | (0.01) | 0.01 | (0.03) | |||
Tax effect of adjustments (2) | 0.14 | 0.22 | 0.07 | 0.46 | |||
Net R&D tax credit carryover (3) | (0.07) | — | (0.71) | — | |||
Adjusted net income per diluted common share (non-GAAP) | $ 1.56 | $ 1.29 | $ 5.89 | $ 7.29 | |||
Basic weighted-average common shares outstanding | 115,971 | 122,485 | 118,678 | 122,351 | |||
Diluted weighted-average common shares outstanding | 116,587 | 123,399 | 119,240 | 124,084 | |||
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 twelve months ended December 31, 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 | ||||||
December 31, 2023 | ||||||
Regional net proved oil and gas reserve quantities | ||||||
Midland Basin | South Texas | Total | ||||
Year-end 2023 estimated net proved reserves | ||||||
Oil (MMBbl) | 159.2 | 70.9 | 230.1 | |||
Gas (Bcf) | 654.8 | 877.2 | 1,532.0 | |||
NGL (MMBbl) | 0.2 | 119.3 | 119.5 | |||
MMBoe | 268.5 | 336.4 | 604.9 | |||
% Proved developed | 62 % | 52 % | 56 % | |||
Note: Amounts may not calculate due to rounding. |
Pre-tax PV-10 Reconciliation (1) | |||
(in millions) | |||
As of December 31, | |||
Reconciliation of standardized measure of discounted future net cash flows (GAAP) to Pre-tax PV-10 (non-GAAP): | 2023 | 2022 | |
Standardized measure of discounted future net cash flows (GAAP) | $ 6,280.1 | $ 9,962.1 | |
Add: 10 percent annual discount, net of income taxes | 5,294.5 | 7,551.5 | |
Add: future undiscounted income taxes | 2,000.0 | 3,888.3 | |
Pre-tax undiscounted future net cash flows | 13,574.6 | 21,401.9 | |
Less: 10 percent annual discount without tax effect | (6,198.1) | (9,247.4) | |
Pre-tax PV-10 (non-GAAP) | $ 7,376.5 | $ 12,154.5 | |
(1) See "Definitions of non-GAAP Measures and Metrics as Calculated by the Company" above. |
Reconciliation of Total Principal Amount of Debt to Net Debt (1) | |||
(in thousands) | |||
As of December 31, | |||
2023 | 2022 | ||
Principal amount of Senior Notes (2) | $ 1,585,144 | $ 1,585,144 | |
Revolving credit facility (2) | — | — | |
Total principal amount of debt (GAAP) | 1,585,144 | 1,585,144 | |
Less: Cash and cash equivalents | 616,164 | 444,998 | |
Net Debt (non-GAAP) | $ 968,980 | $ 1,140,146 | |
(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 II, Item 8 of the Company's 2023 Form 10-K. |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 2023 | |||||||
Adjusted Free Cash Flow (1) | |||||||
(in thousands) | |||||||
For the Three Months | For the Twelve Months | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net cash provided by operating activities (GAAP) | $ 476,515 | $ 288,375 | $ 1,574,394 | $ 1,686,406 | |||
Net change in working capital | (52,778) | 58,833 | 4,551 | 72,063 | |||
Cash flow from operations before net change in working capital (non-GAAP) | 423,737 | 347,208 | 1,578,945 | 1,758,469 | |||
Capital expenditures (GAAP) | 222,655 | 288,088 | 989,411 | 879,934 | |||
Changes in capital expenditure accruals | 45,111 | (20,801) | 80,794 | 29,789 | |||
Capital expenditures before changes in accruals (non-GAAP) | 267,766 | 267,287 | 1,070,205 | 909,723 | |||
Adjusted free cash flow (non-GAAP) | $ 155,971 | $ 79,921 | $ 508,740 | $ 848,746 | |||
(1) See "Definitions of non-GAAP Measures and Metrics as Calculated by the Company" above. |
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SOURCE SM Energy Company
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