SM Energy presents at EnerCom’s The Oil & Gas Conference®

SM Energy (ticker: SM) focuses on onshore oil and natural gas plays in North America with economic drilling and completion opportunities. SM’s goal is to acquire tier one acreage through leasing and strategic acquisitions.

Q2 highlights

  • RockStar wells continue to produce best in class results. Spackler Wolfcamp A sets SM record as its top performing Midland Basin well to-date with a peak 30-day IP rate of 2,324 BOEPD. 24 new RockStar wells reached peak 30-day IP rates that averaged 1,330 BOEPD per well (87% oil) from three intervals
  • Production exceeded guidance range. 115 MBOEPD average production, 42% oil. Midland Basin production from retained assets was up 14% sequentially and 117% year-over-year. Full year production guidance raised ~3,700 BOEPD at the mid-point
  • Rapid margin expansion. $24.44 per BOE operating margin (pre-hedge) was the highest in 15 quarters, up 6% sequentially and up 110% year-over-year
  • Strong earnings. Net income was $17.2 million; EPS was $0.15 and adjusted EPS was $0.15, per diluted common share; net cash provided by operating activities (GAAP) was $171.4 million and adjusted EBITDAX was $225.0 million (adjusted EPS and adjusted EBITDAX are non-GAAP measures; see below for additional information)
  • Significant reduction in long-term debt. $345 million in 6.5% senior notes due 2021 redeemed subsequent to quarter-end, following the closing of two non-core divestitures for an aggregate sales price of $292 million

Breakout session at the EnerCom conference

During SM Energy’s breakout session at the 2018 EnerCom conference, management was asked the following questions:

  • Will you continue to partner with U.S. Silica?
  • Mont Belvieu’s fractionation capacity. Are you paying higher fractionation charges than in Eagle Ford? How do the volumes compare?
  • Lots of M&A in the Permian lately. Have you looked recently to acquire any more acreage? What’s your position?
    • Do you have the scale in Howard County to get good pricing on services?
  • Back to the spacing in Eagle Ford. Where do you think you are in Eagle Ford as far as testing? I mean with laterals, dimensions for wide-space wells, etc.
  • For the acreage in Middle Spraberry, is there a thermal maturity that you’re targeting? Are there any thermal maturity issues?
  • Can you talk a little bit about water?
    • How much are you expecting to get on a per barrel basis?
    • Water supply, the costs associated with that?
    • Are you investing in anything else, like recycling water?
  • Are the full cycle returns in Eagle Ford similar to the Permian right now?
    • Will there be more capital going into the region next year?
  • Where are you going to target in Wolfcamp D?
  • Have you considered putting capital in Eagle Ford instead of putting down debt?
  • A land related question. In the last 5 years, land owners have effectively been able to get a quarter share. Are we going to see them starting to get 30% out in the Midland Basin in the future?
  • You’ve been refinancing and then paying back. Could you give a little bit more detail behind that strategy, the debt adjusted per share capital?
  • What does a well cost in Howard County these days?
  • You have a lot of great IP30 rates. What does the decline curve look like on each of the wells?

You can listen to SM Energy’s presentation here.

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