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Bairds 46th Annual Industrial Conference – SM Energy Company

SM Energy Company · Nov 8, 2016 · 42 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. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 1
    Bairds 46th Annual Industrial Conference November 7-8, 2016 NYSE: SM sm-energy.com
  2. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 2
    SM Energy Mid-Cap Oil and Natural Gas E&P Company 6 billion enterprise value(1) Williston Basin - Bakken/Three Forks Production 153,900 Boe/d; 31% oil, 44% natural gas, 25% NGLs(2) Midland Basin - Wolfcamp/Spraberry…
  3. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 3
    Vision Premier Operator of Top Tier Assets Differential Shareholder Returns High Margin Growth Improved Capital Efficiency Portfolio Changes (RockStar, Asset Sales) 4
  4. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 4
    Top Tier Performance 3rd Quarter Highlights Operational execution setting foundation for the future Exceeded production guidance range; lowered operating cost guidance Production Transformational acquisitions of Tier 1 assets in…
  5. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 5
    Premier Operator Midland Basin Sweetie Peck Success Best in class Midland Basin well performance Track record of delivering better wells and lower costs at operated Sweetie Peck Net Production (BOEPD) Sweetie Peck asset 8,000 5%…
  6. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 6
    Premier Operator Midland Basin 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…
  7. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 7
    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…
  8. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 8
    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…
  9. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 9
    Midland Basin Acquisitions Outstanding Performance Rock Oil actual well results exceeding expectations 140,000 120,000 Cumulative Oil Barrels 100,000 80,000 60,000 40,000 20,000 0 0 50 100 150 200 250 300 350…
  10. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 10
    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…
  11. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 11
    Driving Value Creation Per Section Longer lateral lengths, higher sand loading and tighter spacing add value Wolfcamp A 100 90 Drilling Unit NPV10 Strip Pricing(1) (MM) 80 70 60 50 40 30 20 10 0 8 wells 12…
  12. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 12
    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)…
  13. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 13
    Midland Basin Acquisitions Impact of Transactions(1) 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…
  14. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 14
    Eagle Ford Top Tier Gas and NGL Asset SM is a premier Eagle Ford operator Lower Eagle Ford East IRR Sensitivity(1) 45% 40% 35% 30% 25% IRR 20% 15% 3Q16 Average 10% Mt. Belvieu /Gal 5% 0% 0.35 0.45 0.55 Mt. Belvieu…
  15. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 15
    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…
  16. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 16
    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…
  17. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 17
    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…
  18. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 18
    Vision Premier Operator of Top Tier Assets Differential Shareholder Returns High Margin Growth Improved Capital Efficiency Portfolio Changes (RockStar, Asset Sales) 19
  19. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 19
    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%…
  20. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 20
    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…
  21. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 21
    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…
  22. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 22
    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…
  23. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 23
    Sweetie Peck 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 40% 30% 20%…
  24. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 24
    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:…
  25. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 25
    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…
  26. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 26
    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…
  27. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 27
    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…
  28. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 28
    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)…
  29. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 29
    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…
  30. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 30
    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…
  31. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 31
    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…
  32. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 32
    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…
  33. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 33
    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…
  34. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 34
    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…
  35. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 35
    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…
  36. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 36
    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…
  37. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 37
    Permian Area Operators Howard County Rock Oil Element Callon (Big Star) Encana Surge Diamondback Qstar Oxy Energen Breitburn Other in area without shapefiles: Crownquest 39
  38. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 38
    Permian Area Operators Sweetie Peck 40
  39. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 39
    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…
  40. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 40
    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 42
  41. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 41
    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…
  42. Bairds 46th Annual Industrial Conference – SM Energy Company – slide 42
    Contact Information Jennifer Martin Samuels Senior Director, Investor Relations 303-864-2507 jsamuelssm-energy.com 44

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