Q3 2016 Earnings Call November 2, 2016 NYSE: SM sm-energy.com
Vision Premier Operator of Top Tier Assets Differential Shareholder Returns High Margin Growth Improved Capital Efficiency Portfolio Changes (RockStar, Asset Sales) 3
3rd Quarter 2016 Highlights Operational execution setting foundation for the future Exceeded production guidance range; lowered operating cost guidance Production Transformational acquisitions of Tier 1 assets in the Midland…
SM Energy Coring Up in the Midland Basin Midland Basin Scale Parsley Energy RSP Permian Diamondback (2) SM + QStar PF (1) 90,000 Net Acres 53,000 Net Acres 86,000 Net Acres 83,750 Net 82,450 Net Acres Acres Source: Petrie…
SM Energy Rig Activity by Area Mid Continent 2014 2017e East Texas Eagle Ford Credit Facility Powder River Permian Eagle Ford (including non-op) Permian Bakken Driving improved capital efficiency and higher…
3rd Quarter 2016 Performance Production of 14.2 MMBoe exceeded guidance LOE below guidance; full year guidance reduced by 16% from original February budget Production 3Q16 Total Production (MMBOE) 14.2 Average Daily Production…
Financial Discipline Pro Forma Year-end 2016 Balance sheet strength and flexibility, with expected significant liquidity Pro-forma Balance Sheet(1) Liquidity 900 million No bond maturities until 2021; 2021 notes callable in November…
Funding Estimated Cash Flow(1) v. Capex(2) Accelerated program drives expected rapid growth in cash flow; projected outspend expected to be funded through further portfolio management, including sale of Eagle Ford non-op assets…
Great Assets Midland Basin Transformational acquisitions = Midland Basin Scale Pro Forma Net Acreage: 83,750 Sweetie Peck Net Production (BOEPD) 8,000 5% increase 12% increase 7,000 6,000 5,000 4,000 3,000 Sweetie Peck…
Top Tier Performance Sweetie Peck Success Ability to Leverage Sweetie Peck Experience and Expertise on RockStar Spud to total depth time reduced approximately 40% since 2015 Drilling and completion efficiency gains continuing 53%…
Midland Basin Value Creation Individual well performance increasing NPV per well longer laterals enhanced completions Building inventory increasing NPV per section down-spacing delineating additional intervals 13
Driving Value Creation Per Well Longer lateral lengths and higher sand loading improve returns 10 NPV10 Recent Strip Pricing(1) (MM) Wolfcamp A 8 Single Well Economics 6 4 2 0 1,370 lbs/ft 2,000 lbs/ft 1,370 lbs/ft…
Driving Value Creation Per Section Longer lateral lengths, higher sand loading and tighter spacing improve add value Wolfcamp A 100 90 Drilling Unit NPV10 Strip Pricing(1) (MM) 80 70 60 50 40 30 20 10 0 8 wells…
Midland Basin Acquisitions Creating Differential Value What we expect to achieve with QStar and Rock transactions: Midland Basin Scale 83,750 net acres in the Midland Basin(1) 4,500 4,000 Massive Permian inventory increase…
Production: Significant High-Margin Growth(1) Projected SM Midland Basin net production 45,000 40,000 35,000 Production Boe/d 30,000 25,000 20,000 15,000 10,000 5,000 - 2016 2017 2018 (1) Based on…
Vision Premier Operator of Top Tier Assets Differential Shareholder Returns High Margin Growth Improved Capital Efficiency Portfolio Changes (RockStar, Asset Sales) 18
Appendix 19
Financial Discipline Bringing Value Forward Midland Basin focus in Q4 - two rigs each in Sweetie Peck and Howard County 8 160 Drilled But Uncompleted Gross Operated Wells 7 140 6 120 5 100 Operated Rigs 4 80 3 60 2…
2016 Guidance(1) Capital spend adds RockStar(2) activity, LOE reduced again Capital Spend FY 2016 Total Capital Spend, before acquisitions (MM)(3) 700 Production FY 2016 Total Production (MMBOE) 55.3 - 56 Costs LOE, including Ad…
3Q16 Regional Realizations Pricing NYMEX WTI Oil (/Bbl) 44.94 NYMEX LLS Oil (/Bbl) 46.52 NYMEX Henry Hub Gas (/MMBTU) 2.81 Hart Composite NGL (/Bbl) 19.74 Production Volumes Eagle Ford Op Rocky Mountain Permian Eagle Ford Non-Op SM Total…
Leasehold Summary Pro-forma closing transactions Net Acres(1) Divested/ Pro-forma 6/30/16 Held for Sale Acquired Net Acres Midland Basin Sweetie Peck 16,440 - - 16,440 Halff East (Upton County) 5,535 - - 5,535 Permian Other 2,999(2)…
2016 Activity Wells Drilled, Flowing Completions & DUC Count Wells Drilled Flowing Completions DUC Count 3rd Quarter 2016 2016 YTD 3rd Quarter 2016 2016 YTD As of 9/30/16 Region Gross Net Gross Net Gross Net Gross Net Gross Net…
Financial Discipline Hedging Provides Cash Flow Stability 70% of expected 4Q 2016 production volumes hedged (at the midpoint of revised guidance) Approximately 70% of oil, 75% of natural gas and 55% of NGLs hedged in 4Q 2016…
Summary Derivative Positions By Quarter Through 2017 As of October 26, 2016(1) Fixed Swaps Oil Gas NGL(4) Volume Volume Volume (3) Period (MBbls) /Bbl(2) (BBTU) /MMBTU(2) (MBbls) /Bbl 4Q16 2,249 59.03 26,700 3.34 1,888 15.94 1Q17…
NGL Derivative Position Detail(1) NGL Swaps OPIS Eth Purity Mt Belv NGL Swaps OPIS Propane Mt Belv Non-TET NGL Swaps OPIS IsoButane Mt Belv Non TET Volume Volume Volume (2) (2) (2) Period (MBbls) /Bbl Period (MBbls) /Bbl Period…
Adjusted Net Loss Reconciliation Reconciliation of net loss (GAAP) to adjusted net loss Three Months Ended (Non-GAAP): (in thousands, except per share data) September 30, 2016 Net income (loss) (GAAP) (40,907) Change in Net Profits…
Adjusted EBITDAX(1) Reconciliation Reconciliation of net loss(GAAP) to Adjusted EBITDAX (non- GAAP) to net cash provided by operating activities (GAAP): Three Months Ended Nine Months Ended (in thousands) September 30, 2016 September…
Total Capital Spend Reconciliation Reconciliation of Costs Incurred in Oil and Gas Activities (GAAP) Three Months Nine Months to Total Capital Spend (Non-GAAP)(1) (in thousands) Ended Ended September 30, 2016 September 30, 2016 Costs…
Midland Basin Acquisitions Value Creation Midland Basin production growth outlook exceeds Permian pure play peers 180% Permian Production Growth Rate(1) 160% 140% 2016e EV/EBITDAX(2) 120% 100% 80% 60% 40% 20%…
Midland Basin Acquisitions Impact of Transactions(1) Projected rig count: accelerated program adds value 12 11 11 10 9 Operated Rig Count 8 7 6 6 5 4 4 3 2 1 0 4Q16 2017 2018 Sweetie Peck Rock QStar (1)…
Midland Basin Acquisitions Sizeable Inventory Upside Gross location summary Sweetie Peck Rock Oil QStar (16,440 net acres) (25,000 net acres) (36,000 net acres) Total Previously Disclosed / Risked Lower and Middle Spraberry 199 145…
SM Company-wide Rig Program Historical and Projected Plenty of organizational capacity to ramp up in the Midland Basin 18 17 16 15 15 14 14 12 11 Rig Count 10 8 7 6 4 4 2 0 2012 2013 2014 2015 2016E 2017E…
NGL Realizations 41% increase in realized price (before hedges) from 1Q16 to 3Q16 SM NGL price realizations are predominantly tied to Mont Belvieu, fee-based contracts Differential reflects NGL barrel product mix and transportation…
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