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June 2016 Investor Presentation – SM Energy Company

SM Energy Company · Jun 27, 2016 · 53 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. June 2016 Investor Presentation – SM Energy Company – slide 1
    IR Presentation June 2016
  2. June 2016 Investor Presentation – SM Energy Company – slide 2
    SM Energy 4.7 billion enterprise value(1) Production 147,500 Boe/d, 31% oil/44% natural gas/25% NGLs(2) Prime U.S. basins: solid returns at strip Williston Basin - Bakken/Three Forks 430 gross operated locations(3) Midland…
  3. June 2016 Investor Presentation – SM Energy Company – slide 3
    SM Strategic Objective Grow DACF per Share Through Cycle How FINANCIAL DISCIPLINE GREAT ASSETS OPERATIONAL EXECUTION Result GROWTH IN SHAREHOLDER VALUE 4
  4. June 2016 Investor Presentation – SM Energy Company – slide 4
    Financial Discipline Reducing Rigs and Increasing Completions Driving capital efficiency in 2016 with more completions 8 160 7 140 Drilled but Uncompleted Gross Operated Wells 6 120 5 100 Operated Rigs 4 80 3 60…
  5. June 2016 Investor Presentation – SM Energy Company – slide 5
    Financial Discipline 2016 Capital Program Capex cut 46% from 2015; plan to spend less than projected EBITDAX 705 MM TOTAL CAPITAL BUDGET: 2016 PLAN: Financial strategy to preserve liquidity and manage debt metrics Permian 30%…
  6. June 2016 Investor Presentation – SM Energy Company – slide 6
    Financial Discipline Stability Balance sheet strength and flexibility, with expected ample liquidity Liquidity 1 billion No bond maturities until 2021 Coverage metrics(1) offer flexibility: Senior Secured Debt:TTM Adjusted EBITDAX…
  7. June 2016 Investor Presentation – SM Energy Company – slide 7
    Financial Discipline Hedging Provides Cash Flow Stability 65% of expected 2Q-4Q 2016 production volumes hedged (at the midpoint of guidance) Approximately 55% of oil, 70% of natural gas and 65% of NGLs 45% of 2017 production hedged…
  8. June 2016 Investor Presentation – SM Energy Company – slide 8
    Great Assets Permian Basin, Sweetie Peck MIDLAND UPTON * Net Acreage: 16,440 *2016 YTD through 1Q16; FY estimate is 2016 avg. Top tier acreage with top tier operational execution Growing acreage position with decades of…
  9. June 2016 Investor Presentation – SM Energy Company – slide 9
    Well Performance Wolfcamp B Slickwater frac performance exceeds hybrid design & peer results 250 2014 Slickwater Fracs (2 wells) 2013-2014 Hybrid Fracs (17 wells) 200 Operator A Cumulative MBOE Operator B 150 Operator C…
  10. June 2016 Investor Presentation – SM Energy Company – slide 10
    Better and better wells Wolfcamp B Initial Production Rates 60 day IP comparison new wells keep getting better 1800 1600 1400 1200 BOEPD 1000 800 600 400 200 0 0 5 10 15 20 25 30 35 40 45 50 55 60 Days on Production CVX…
  11. June 2016 Investor Presentation – SM Energy Company – slide 11
    Well Performance Lower Spraberry Early production data very positive 200 TXL-Jamie 3338H - Slickwater Frac 180 Holzgraf 3431H - Slickwater Frac 160 *2014 Jamie 4043H - Slickwater Frac Cumulative MBOE Operator A 140 120 100…
  12. June 2016 Investor Presentation – SM Energy Company – slide 12
    Lower Permian Costs Improved Drilling Execution Reduced costs with repeatable performance Feet Drilled per Day 7,600 Laterals Rig move costs reduced via pad drilling Landing zone optimization leads to faster drill times…
  13. June 2016 Investor Presentation – SM Energy Company – slide 13
    Lower Permian Costs Improved Completions Execution Improved frac and drill-out processes , Zipper fracs on 3-well pads maximizes number of frac stages pumped per day Optimization during pumping operations reduces chemical usage…
  14. June 2016 Investor Presentation – SM Energy Company – slide 14
    Lower Capital Costs Best in Class in Midland Basin 53% reduction in capital costs vs. 2014 Combination of efficiency gains and deflation in service costs 5.3MM for 7,600 lateral is among the best in the basin (drill, complete and…
  15. June 2016 Investor Presentation – SM Energy Company – slide 15
    Wolfcamp B and Lower Spraberry IRR Sensitivity 2016 Permian activity focused in Wolfcamp B and Lower Spraberry; upside potential in additional intervals Wolfcamp B and Lower Spraberry IRR Range(1) 80% 70% 60% 50% IRR…
  16. June 2016 Investor Presentation – SM Energy Company – slide 16
    Great Assets Bakken/Three Forks DIVIDE Substantial acreage position in Divide NORTH DAKOTA County contiguous acreage in geologic core supports competitive economics GOOSENECK 120,000 net acres RAVEN / BEAR DEN Bakken/Three…
  17. June 2016 Investor Presentation – SM Energy Company – slide 17
    Optimization Continued Success with Plug-and-Perf Completions Plug-and-perf completions have been employed by SM in both Divide County and Raven/Bear Den programs in the Williston Basin Divide TFS Results Raven/BD Bakken Results 16…
  18. June 2016 Investor Presentation – SM Energy Company – slide 18
    Divide County Driving Costs Down 25% Reduction in capital costs per lateral foot vs. early 2015; 40% of reduction due to efficiency gains Total Capital Cost per Lateral Foot(1) 1,000 900 800 700 600 500 400 300 200…
  19. June 2016 Investor Presentation – SM Energy Company – slide 19
    Bakken, Divide County IRR Sensitivity 2016 Activity focused in Divide County Bakken, Divide County IRR Sensitivity(1) 40% 35% 30% 25% IRR 20% 15% 10% 5% 0% 45 50 55 NYMEX WTI Well Cost: 4.1 MM Lateral Length:…
  20. June 2016 Investor Presentation – SM Energy Company – slide 20
    Great Assets Eagle Ford Large acreage position supports decades of economic inventory Focus on drilling and completion optimization continues to drive NORTH AREA efficiency gains and well performance EAST AREA Positive exposure…
  21. June 2016 Investor Presentation – SM Energy Company – slide 21
    Eagle Ford Driving Inventory Growth Thickness allows for joint development of Upper and Lower Eagle Ford 8 - 10 Wells / Section Pre 2015 Assumptions Austin Chalk Zone F7 Improved completion design Zone F6 allows for reduced LEF 500…
  22. June 2016 Investor Presentation – SM Energy Company – slide 22
    Operated Eagle Ford Driving Capital Costs Down 35% Reduction in capital costs per lateral foot vs. 2015; 25% of reduction due to efficiency gains Total Capital Cost per Lateral Foot 1,800 1,600 1,400 1,200 1,000 800 600 400…
  23. June 2016 Investor Presentation – SM Energy Company – slide 23
    Lower Eagle Ford East IRR Sensitivity 2016 activity is focused in Eagle Ford East including Lower and Upper Eagle Ford Lower Eagle Ford East IRR Sensitivity(1) 45% 40% 35% 30% 25% IRR 20% 15% 10% 5% 0% 0.35 0.45 0.55…
  24. June 2016 Investor Presentation – SM Energy Company – slide 24
    SM Strategic Objective Grow DACF per Share Through Cycle How FINANCIAL DISCIPLINE GREAT ASSETS OPERATIONAL EXECUTION Result GROWTH IN SHAREHOLDER VALUE 25
  25. June 2016 Investor Presentation – SM Energy Company – slide 25
    Appendix 26
  26. June 2016 Investor Presentation – SM Energy Company – slide 26
    Why Own SM Energy Stability and Upside Stability in current environment - Balance sheet strength and flexibility FINANCIAL DISCIPLINE - Driving production growth with capital and cash flow neutrality - Managing through cycle, no…
  27. June 2016 Investor Presentation – SM Energy Company – slide 27
    Why Own SM Energy Stability and Upside Significant valuation upside - 78% growth in 2015 at mid-cycle pricing INVENTORY GROWTH - Continued upside from additional intervals (Upper Eagle Ford, Bakken, several in Permian) - Down-spacing…
  28. June 2016 Investor Presentation – SM Energy Company – slide 28
    Lower Spraberry and Wolfcamp B Type Curves 2016 Activity focused in Lower Spraberry and Wolfcamp B; upside potential in additional intervals Lower Spraberry Cumulative Type Curve(1) Wolfcamp B Cumulative Type Curve(1) 250 300…
  29. June 2016 Investor Presentation – SM Energy Company – slide 29
    Bakken, Divide County Type Curve 2016 Activity focused in Divide County Bakken, Divide Cumulative Type Curve(1) 200 160 Cumulative Production 120 (MBOE) 80 40 0 0 12 24 Months on Production Lateral Length:…
  30. June 2016 Investor Presentation – SM Energy Company – slide 30
    Lower Eagle Ford East Type Curve 2016 activity is focused in Eagle Ford East, including Lower and Upper Eagle Ford Lower Eagle Ford East Cumulative Type Curve(1) 500 400 Cumulative Production 300 (MBOE) 200 100…
  31. June 2016 Investor Presentation – SM Energy Company – slide 31
    Proved Reserves History Production Replacement Ratio averages 347% Reserve CAGR 23% since 2010 Reserve History 600 548 500 471 400 429 (MMBOE) 300 293 200 210 164 100 0 2010 2011 2012 2013 2014 2015 Production…
  32. June 2016 Investor Presentation – SM Energy Company – slide 32
    Proved Reserves Better Wells, Lower Costs Successful 2015 testing and enhanced completions grow reserves +47 MMBOE Positive Performance Revision Largest in Company History Plug-N-Perf completions and lower operating costs in…
  33. June 2016 Investor Presentation – SM Energy Company – slide 33
    2015 Proved Reserves* 2015 Additions and Revisions +208 MMBOE reserve additions and performance revisions 52% Proved Developed 31% Oil, 45% Natural Gas, 24% NGLs 700 +47 600 -117 +161 500 -79 -63 MMBOE 400 300 522 471…
  34. June 2016 Investor Presentation – SM Energy Company – slide 34
    Proved Reserves By Region Year-end 2015 Proved Reserves South Texas & Rocky Permian Total Gulf Coast Mountain Oil (MMbl) 43.6 88.2 13.4 145.3 Gas (Bcf) 1,116.9 102.9 44.2 1,264.0 NGL (MMBbl) 112.6 2.8 - 115.4 Total (MMBOE) 342.4 108.1…
  35. June 2016 Investor Presentation – SM Energy Company – slide 35
    Drilling Inventory Substantial Growth in 2015 Continuing to drive value from current asset base More upside potential to realize 1,775 1,800 150 1,600 235 1,400 1,200 1,100 1,000 110 MMBOE 1,000 Permian 95 90…
  36. June 2016 Investor Presentation – SM Energy Company – slide 36
    1st Quarter 2016 Performance Production 1Q16 Total Production (MMBOE) 13.4 Average Daily Production (MBOE/d) 147.5 Pre-Hedge Realized Price (/BOE) 15.78 Post-Hedge Realized Price (/BOE) 26.74 Costs LOE (/BOE) 3.79 Ad Valorem…
  37. June 2016 Investor Presentation – SM Energy Company – slide 37
    1Q16 Regional Realizations Pricing NYMEX WTI Oil (/Bbl) 33.41 NYMEX LLS Oil (/Bbl) 35.31 NYMEX Henry Hub Gas (/MMBTU) 1.96 Hart Composite NGL (/Bbl) 15.99 Production Volumes Eagle Ford Rocky Mountain Permian SM Total Oil (MBbls)…
  38. June 2016 Investor Presentation – SM Energy Company – slide 38
    2016 Activity Wells Drilled, Flowing Completions and DUC Count Wells Drilled Flowing Completions Drilled and Uncompleted 1st Quarter 2016 1st Quarter 2016 As of March 31, 2016 Region Gross Net Gross Net Gross Net Eagle Ford…
  39. June 2016 Investor Presentation – SM Energy Company – slide 39
    Leasehold Summary(1) As of 12/31/15 Gross Acres Net Acres Eagle Ford Operated 166,951 161,474 Non-Operated 237,363 35,958 Rocky Mountain Divide 185,992 117,286 Raven/Bear Den 80,529 44,417 Powder River Basin 268,850 204,381…
  40. June 2016 Investor Presentation – SM Energy Company – slide 40
    Adjusted Net Income Reconciliation Reconciliation of net loss (GAAP) to adjusted net loss (Non-GAAP): Three Months Ended (in thousands, except per share data) March 31, 2016 Reported net loss (GAAP) (347,210) Adjustments to net…
  41. June 2016 Investor Presentation – SM Energy Company – slide 41
    Adjusted EBITDAX(1) Reconciliation Reconciliation of net income (GAAP) to Adjusted EBITDAX (non-GAAP) Three Months Ended to net cash provided by operating activities (GAAP): (in thousands) March 31, 2016 Net income (GAAP) (347,210)…
  42. June 2016 Investor Presentation – SM Energy Company – slide 42
    Total Capital Spend Reconciliation Reconciliation of Cost Incurred in Oil and gas Activities (GAAP) to Total Three Months Ended Capital Spend (Non-GAAP)(1) (in thousands) March 31, 2016 Development costs (2) 178,204 Exploration costs…
  43. June 2016 Investor Presentation – SM Energy Company – slide 43
    Summary Derivative Positions By Quarter Through 2017 As of May 25, 2016(1) Fixed Swaps Oil Gas NGL(4) Volume Volume Volume (3) Period (MBbls) /Bbl(2) (BBTU) /MMBTU(2) (MBbls) /Bbl 2Q16 1,752 86.73 20,780 3.40 2,236 16.45 3Q16 1,840…
  44. June 2016 Investor Presentation – SM Energy Company – slide 44
    NGL Derivative Position Detail(1) NGL Swaps OPIS Eth Purity Mt Belv NGL Swaps OPIS IsoButane Mt Belv Non TET (2) (2) Period Volume (MBbls) /Bbl Period Volume (MBbls) /Bbl 2Q16 828 8.28 2Q16 207 24.90 3Q16 751 8.70 3Q16 200 23.24 4Q16…
  45. June 2016 Investor Presentation – SM Energy Company – slide 45
    NGL Pricing Outlook Eagle Ford production has positive upside exposure to NGL pricing Operated Eagle Ford production is approximately 35% NGLs, with cost advantaged proximity to Mt. Belvieu Macro view projects increasing NGL prices…
  46. June 2016 Investor Presentation – SM Energy Company – slide 46
    NGL Realizations 1Q16 benefited 1.78/Bbl from propane, ethane, and butane hedges SM NGL price realizations are predominantly tied to Mont Belvieu, fee-based contracts Differential reflects NGL barrel product mix and transportation…
  47. June 2016 Investor Presentation – SM Energy Company – slide 47
    Managing to the Long-term Driving Shareholder Value 9 of 23 peers are expected to exceed 4 times debt:EBITDAX at year-end 2016(1) 20 of 23 peers have issued equity, diluting long-term shareholders(2) SM is the only company expected to…
  48. June 2016 Investor Presentation – SM Energy Company – slide 48
    Leader in Midland Basin Well Performance Top Midland Basin IP Performance Wolfcamp B Midland Basin 1,800 19 15 1 1,600 1 1,400 Normalized to 7,500 lateral length 24 Hr IP (BOEPD) 2 1,200 22 15 180 6 21 50 28…
  49. June 2016 Investor Presentation – SM Energy Company – slide 49
    Inventory Upside Eagle Ford Pilot Tests Extensive Eagle Ford tests drive significant growth in economic inventory Pilot Tests: 1) East Area Down-spacing 14-well 625 & 450 spacing 2) East Area Infill LEF W 2-well down-spaced infill…
  50. June 2016 Investor Presentation – SM Energy Company – slide 50
    Permian Area Operators 51
  51. June 2016 Investor Presentation – SM Energy Company – slide 51
    Eagle Ford Area Operators APC APC APC CHK APC SN Lewis SM EF North APC CHK NBL (ROSE) SM EF East SM EF South SFY Note: SM is a working interest partner in APC acreage with working interests that range from…
  52. June 2016 Investor Presentation – SM Energy Company – slide 52
    Divide Area Operators Canada AE CPEG BH HES CPEG SRC MV MV CLR MRX HNT NP Divide Williams CLR CLR CPEG HES Source: IHS Inc. November 2015 53
  53. June 2016 Investor Presentation – SM Energy Company – slide 53
    Raven/Bear Den Area Operators STO HES XTO EOG SLN Raven Bear Den HES CLR WLL OAS OAS Williams NFX COP STO McKenzie XTO WLL OAS EOG OAS CLR HES STO SLN XTO XTO OAS NFX CLR COP QEP WLL HES XTO…

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