SM Energy Co Q1 FY2025 earnings call

• Pleased with the integration across the company and the quality of Uinta Basin assets.
• 2025 plan: 30% increase in oil production, 20% increase in total production.
• Focus on allocating free cash flow to reduce leverage to 1 times.
• Uinta Basin: 90% of program focused on lower cube, primarily Uteland Butte, Wasatch, etc.; innovation in drilling, completion, and operations driving capital efficiency.
• LOE impacts: Fuel gas usage, workover activity, and water production changes included in adjusted full year guidance, with some costs having revenue offsetting.

SM Energy has top tier assets, with a focus on the Uinta Basin. While specific absolute revenue breakdowns by product segment aren't detailed, the company is pleased with the integration of Uinta Basin assets. The 2025 plan includes a 30% increase in oil production and 20% increase in total production, with the Uinta Basin being a key area of focus.

• 2025 production guidance: 30% oil increase, 20% total production increase; oil mix guidance remains within range.
• Rig count: Planning to drop to 6 rigs when it makes sense based on the program, sticking to TIL plan.
• Comfortable with program above $55 oil; at $55, generates significant free cash flow to pay off maturities and reduce leverage.
• Hedging: Focus on $55 floors on costless collars to protect positive cash flow levels.

• Commodity price fluctuations: Could impact capital allocation and production plans, especially below $50 oil.
• Cost variability: Uncertainty in LOE components like fuel gas usage, workover activity, and water production.
• Timing issues: Well completions affecting production timing and oil mix variability quarter-to-quarter.

Q: Understanding the shape and oil skew of 2025 production.

A: Beth explained third quarter sees major production increase, oil mix driven by Uinta wells coming online, staying within guidance range.

Q: Cash returns and leverage with oil below $60.

A: Prioritizing debt reduction using free cash flow, comfortable with current prices, open to occasional stock support.

Q: Uinta development and LOE.

A: 90% focus on lower cube, LOE impacts from fuel gas, workover, water production included in adjusted guidance.

Q: Rig count timeline.

A: No specific timeline for dropping additional rigs, sticking to TIL plan.

Q: Capital allocation between regions with price change.

A: Difficult to change program quickly, comfortable above $55, monitoring below $50.

Q: Uinta oil sales to refineries.

A: 15-20% sold to Salt Lake City refineries based on capacity.

Q: Operational plans and 2026.

A: No specific 2026 plan, multiple scenarios, comfortable with program above $55.

Q: Trajectory of second half and revenue recognition.

A: Third quarter sequential growth, slight lags in revenue recognition due to timing of transportation and sales cutoff dates.