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Deutsche Bank Leverage Finance Conference – SM Energy Company

SM Energy Company · Sep 28, 2016 · 49 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. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 1
    Deutsche Bank 24th Annual Leveraged Finance Conference September 27-28, 2016
  2. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 2
    SM Energy Creating Differential Value Vision Premier Operator, Top Tier Assets High quality acreage in Tier 1 areas Apply our demonstrated expertise Midland Basin scale to transform portfolio 3
  3. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 3
    Top Tier Performance Exceeding Expectations Across the Board Better wells, lower costs Across the board beat Production Outstanding execution and well performance Costs Capital spend guidance reduced; production guidance…
  4. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 4
    Top Tier Performance Premier Operator of Permian Assets Track record delivering better wells and lower costs at operated Sweetie Peck asset Best in class initial production rates in the Midland Basin Cost benchmarking indicates…
  5. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 5
    Top Tier Performance Proven Track Record Improving Performance J.P. Morgan 90-day oil cumulative production SM ranks 1 in Midland Basin SM wells outperformed the peer average by SM wells outperformed the peer average by 97% and…
  6. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 6
    Top Tier Performance Sweetie Peck Success Ability to Leverage Sweetie Peck Experience and Expertise in Howard County Spud to total depth time reduced 43% since 2015 Drilling and completion efficiency gains continuing 53% cost…
  7. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 7
    Permian Acquisition Why Howard County On a lateral adjusted basis, Howard County is the most productive(1) Howard County Ranks Best Based on Howard County Ranks Among Highest Cumulative Production per Well(2) Based on Oil Percentage…
  8. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 8
    Permian Acquisition Why Howard County Significant stacked pay area Excellent source rock Original-oil-in-place of up to 130 MMBbls per section 1,000 feet shallower targets than west side of the basin while maintaining thermal…
  9. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 9
    Permian Acquisition Summary Acreage: 24,783 net acres in Howard County, Texas(1) Production: 4,900 net Boe/d(2) plus two new wells August 2016; 140 wells producing Proved developed producing reserves: 6 MMBoe Producing and…
  10. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 10
    Permian Acquisition Substantial Multi-Bench Inventory Potential development model Up to 40 wells / section 24,783 net acres across 4 benches yields nearly 100,000 net equivalent acres Exploration potential in the Wolfcamp C and…
  11. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 11
    Permian Acquisition Strong Well Results Well Count Wells Type Curve Average 10,000 180 Oil Rate Normalized to 7,500' Equivalent Oil Rate (BOE/D) 1,000 120 Well Count 100 60 10 0 0 12 24 Months Seven operated…
  12. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 12
    Permian Acquisition Lower Spraberry and Wolfcamp A IRR Sensitivity Acquisition expected to deliver competitive Midland Basin Tier 1 economics Howard County, Texas Lower Spraberry and Wolfcamp A IRR Range(1) 80% 70% 60% 50%…
  13. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 13
    Permian Acquisition SM Expands to 46,750 net acres Following closing, Tier 1 Permian scale comparable to FANG and RSPP Permian Players Core Acreage(1) FANG: 54,100 net acres SM: 41,200 net acres(2) RSPP: 39,250 net acres (1)…
  14. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 14
    Eagle Ford Tier 1 Gas/NGL Asset, Top Tier Execution Better than expected performance New Galvan wells exceeding expectations Staggered UEF/LEF 625 within zone spacing / 312 spacing in plan view Choke managed to target rate…
  15. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 15
    Eagle Ford Tier 1 Gas/NGL Asset, Top Tier Execution Driving capital costs down (1) Total Capital Cost per Lateral Foot 1,400 1,200 1,000 800 600 400 200 - Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15…
  16. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 16
    Eagle Ford Tier 1 Gas/NGL Asset, Top Tier Execution 2016 activity is focused in Eagle Ford East including Lower and Upper Eagle Ford Lower Eagle Ford East IRR Sensitivity(1) 45% 40% 35% 2Q16 Average 30% Mt. Belvieu /Gal 25%…
  17. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 17
    Permian Acquisition Funding Largely funded through equity and convertible notes offerings plus announced divestitures 531 MM common shares offering(1) 166 MM convertible notes offering(1) 195 MM of announced, completed and pending…
  18. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 18
    (1) High Yield Notes No bond maturities until 2021; 2021 and 2023 Notes callable over 12 months Summary of High Yield Notes (in millions) 600 500 (2) 172.5 400 562 300 500 500 500 347 395 200 100 0 2017 2018 2019 2020 2021…
  19. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 19
    Liquidity Pro Forma for Announced Transactions (1) Significant liquidity post-Permian transaction Asset Sales 2,400 2026 Bond + 195MM 2,100 Equity & Convertible + - 490MM 980MM 1,800 Proceeds 1,500 + Credit 700MM 1,200 1.3B…
  20. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 20
    Financial Discipline 2016 Driving Capital Efficiency Permian focus through year end(1) 8 160 7 140 Drilled But Uncompleted Gross Operated Wells 6 120 5 100 Operated Rigs 4 80 3 60 2 40 1 20 0 0 Dec Jan Feb…
  21. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 21
    Permian Program Value Creation(1) Projected rig count increase over the next two years expected to drive high margin oil growth 8 7 6 5 Operated Rigs 4 3 2 1 0 4Q16 2017 2018 Sweetie Peck Howard County…
  22. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 22
    Permian Acquisition Value Creation High margin oil growth drives cash flow growth Permian Oil Growth 2Q'16 4Q'17 (1) 2Q16 actual production relates to Sweetie Peck; Estimated 4Q17 production relates to Sweetie Peck and Howard…
  23. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 23
    SM Energy Creating Differential Value Vision Premier Operator, Top Tier Assets High quality acreage in Tier 1 areas Apply our demonstrated expertise Midland Basin scale to transform portfolio 24
  24. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 24
    Appendix 25
  25. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 25
    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…
  26. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 26
    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:…
  27. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 27
    Cumulative Type Curves by Area Sweetie Peck Lower Spraberry(1) Bakken, Divide(3) 250 200 Cumulative Production Cumulative Production 200 160 (MBOE) 120 (MBOE) 150 100 80 50 40 0 0 0 12 24 0 12 24 Months on…
  28. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 28
    2Q16 Regional Realizations Pricing NYMEX WTI Oil (/Bbl) 45.59 NYMEX LLS Oil (/Bbl) 47.40 NYMEX Henry Hub Gas (/MMBTU) 1.95 Hart Composite NGL (/Bbl) 20.04 Production Volumes Eagle Ford Rocky Mountain Permian SM Total Oil (MBbls)…
  29. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 29
    2016 Activity Wells Drilled, Flowing Completions and DUC Count Wells Drilled Flowing Completions DUC Count 2nd Quarter 2016 2016 YTD 2nd Quarter 2016 2016 YTD As of June 30, 2016 Region Gross Net Gross Net Gross Net Gross Net Gross…
  30. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 30
    Leasehold Summary(1) As of 6/30/16 Gross Acres Net Acres Eagle Ford Operated 166,952 161,475 Non-Operated 237,362 35,957 Rocky Mountain Divide 186,201 126,603 Raven/Bear Den 84,009 43,954 Powder River Basin 262,994 171,378…
  31. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 31
    Financial Discipline Hedging Provides Cash Flow Stability 70% of expected 3Q and 4Q 2016 production volumes hedged (at the midpoint of revised guidance) Approximately 65% of oil, 75% of natural gas and 60% of NGLs 55% of 2017…
  32. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 32
    Summary Derivative Positions By Quarter Through 2017 As of September 23, 2016(1) Fixed Swaps Oil Gas NGL(4) Volume Volume Volume (3) Period (MBbls) /Bbl(2) (BBTU) /MMBTU(2) (MBbls) /Bbl 3Q16 2,172 67.66 25,724 3.13 2,062 16.14 4Q16…
  33. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 33
    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 3Q16 751 8.70 3Q16 200 23.24 4Q16 688 8.71 4Q16 182 23.25 2016…
  34. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 34
    Adjusted Net Loss Reconciliation Reconciliation of net loss (GAAP) to adjusted net loss (Non-GAAP): Three Months Ended (in thousands, except per share data) June 30, 2016 Reported net loss (GAAP) (168,681) Adjustments to net loss:…
  35. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 35
    Adjusted EBITDAX(1) Reconciliation Reconciliation of net loss(GAAP) to Adjusted EBITDAX (non- Three Months Ended Six Months Ended GAAP) to net cash provided by operating activities (GAAP): June 30, 2016 June 30, 2016 (in thousands)…
  36. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 36
    Total Capital Spend Reconciliation Reconciliation of Costs Incurred in Oil and Gas Activities Three Months Six Months (GAAP) to Total Capital Spend (Non-GAAP)(1) (in thousands) Ended Ended June 30, 2016 June 30, 2016 Costs incurred in…
  37. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 37
    Great Assets Eagle Ford 2Q16: Production of 10.9 MMBoe 9 gross/net wells completed NORTH AREA Top tier well performance with recent EAST AREA wells in gas/NGL areas Mexico MEXICO MEXICO SOUTH AREA TEXAS Operated…
  38. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 38
    Eagle Ford Tier 1 Gas/NGL Asset, Top Tier Execution Highest IP rates dont necessarily lead to best 2 year cumulative production Average 24 month Cumulative Production / Average Peak Month Production by Operator(1) 14 9,000 8,000…
  39. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 39
    NGL Uplift(1) by Region at 30 oil / 60 oil Eagle Ford top-tier geographic position to benefit from NGLs SM largest NGL producer in Eagle Ford Bakken -0.15/0.82 Niobrara Marcellus/ 0.03/0.46 Utica -0.01/0.42 Piceance…
  40. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 40
    NGL Realizations 37% increase in realized price (before hedges) from 1Q16 to 2Q16 SM NGL price realizations are predominantly tied to Mont Belvieu, fee-based contracts Differential reflects NGL barrel product mix and transportation…
  41. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 41
    Great Assets Bakken/Three Forks DIVIDE 2Q16: NORTH DAKOTA GOOSENECK Production of 2.6 MMBoe 120,000 net acres RAVEN / BEAR DEN 17 gross/14 net wells completed 44,000 net acres WILLIAMS Successfully employing diverter…
  42. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 42
    Permian Area Operators Howard County Rock Oil Element Callon (Big Star) Encana Surge Diamondback Qstar Oxy Energen Breitburn Other in area without shapefiles: Crownquest 44
  43. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 43
    Permian Area Operators Sweetie Peck 45
  44. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 44
    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…
  45. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 45
    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…
  46. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 46
    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 48
  47. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 47
    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…
  48. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 48
    Reserve and Resources Information about proved reserves This presentation contains references to certain items pertaining to the process used to estimate the Company's proved reserves and their PV-10, which is equal to the standardized…
  49. Deutsche Bank Leverage Finance Conference – SM Energy Company – slide 49
    Contact Information Jennifer Martin Samuels Senior Director, Investor Relations 303-864-2507 jsamuelssm-energy.com 51

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