SM Energy Co Q2 FY2024 earnings call

Management Statement and Operational Highlights: - Expanded high-quality portfolio by exercising the option to acquire 26,100 net acres adjacent to the XCL acquisition in Utah (Altamont acquisition) for around $70 million, adding 63,300 net acres in the Uinta Basin with ~44,000 Boe per day production and an initial estimate of 465 net locations. - Production performance exceeded the mid-point of guidance by ~2,500 Boe per day with higher oil content, and first Woodford-Barnett test wells in the Midland Basin showed favorable early results with potential for over 20,000 net acres in the formation. - Return of capital: Repurchased over 1 million shares in the second quarter and returned approximately $72 million to stockholders. The Board authorized an 11% increase in the quarterly dividend to $0.20 per share and reloaded the share repurchase authorization to $500 million through 2027. - Uinta Basin acquisitions met strategic objectives, extending high-quality inventory by over three years, increasing 2025 oil production by an estimated 45% vs. a standalone scenario, and being accretive to financial metrics. - In the Midland Basin, first Woodford-Barnett test wells had impressive results, with one lateral averaging 1,622 Boe per day and another 830 Boe per day, and the greater Sweetie Peck position is believed to have over 20,000 net acres prospective in the Woodford-Barnett formation. - In the Austin Chalk, new Briscoe C wells continue strong performance, with outperformance and positive spacing tests providing upside, and Enverus noting SM's Briscoe C spacing pilot could add over 60 locations to the inventory.

Segment Performance: In the second quarter, SM Energy achieved financial results where adjusted EBITDAX was $486 million and adjusted free cash flow was $98 million. Production exceeded the mid-point of guidance by approximately 2,500 Boe per day, with over 4,000 barrels per day more oil production than the mid-point. This was driven by strong performance in the Midland Basin and new South Texas wells with higher oil content. Capital expenditures were slightly above guidance due to a bulk pre-purchase of pipe. For full year 2024, oil production as a percentage of total production is increasing, and cash taxes are projected to be approximately $30 million net of refunds.

Guidance: - Full year 2024: Oil production as a percentage of total production is increased due to strong performance in Midland and South Texas. Cash taxes are adjusted to approximately $30 million net of refunds, with other guidance remaining unchanged. - Third quarter 2024: Production volumes expected to be 15.0 to 15.4 million Boe (163,000 to 167,000 Boe per day) at 45% to 46% oil. Capital expenditures expected to range between $300 million and $310 million. - Fourth quarter 2024: Uinta assets are expected to add approximately 44,000 Boe per day at 87% oil, with capital expenditures for Uinta adding $100 million to $120 million. - 2025: Expect to reduce the combined rig count from nine to six to seven while maintaining approximately three completion crews, aiming for ~45% oil production growth as the Uinta acquisitions are highly accretive.

Risks: Discussion includes forward-looking statements, and refers to risk factors in the most recently filed 10-K which could cause actual results to differ from forward-looking statements.