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Capital One Securities 2016 Energy Conference – SM Energy Company

SM Energy Company · Dec 7, 2016 · 43 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. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 1
    Capital One Securities 2016 Energy Conference December 7, 2016 NYSE: SM sm-energy.com
  2. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 2
    Vision Premier Operator of Top Tier Assets Differential Shareholder Returns High Margin Growth Improved Capital Efficiency Portfolio Changes (RockStar, Divestitures) 3
  3. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 3
    Howard & Martin Counties Acquired Assets Combined(1) Acreage: added 65,875 net acres in Howard and Martin Counties, Texas(1) Production: 7,450 net Boe/d(2) Producing and prospective intervals: Lower Spraberry, Wolfcamp A…
  4. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 4
    SM Energy Competitive Scale Midland Basin Scale and contiguous positions Parsley Energy RSP Permian Diamondback (2) SM + QStar PF (1) 90,000 Net Acres 53,000 Net Acres 86,000 Net Acres 87,850 Net 82,450 Net Acres Acres…
  5. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 5
    Midland Basin Acquisitions Creating Differential Value What we expect to achieve with recent transactions: Midland Basin scale 87,850 net acres in the Midland Basin(1) 4,500 4,000 Significant Permian inventory increase 3,500…
  6. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 6
    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%…
  7. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 7
    Howard County Outstanding Permian Performance BMO: 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…
  8. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 8
    Midland Basin Acquisitions Outstanding Well Results New well results exceeding expectations Blissard 20-29 1H WA 30- day IP: 1,775 Boe/d (91% oil) Tackleberry 3-well pad(1) 12-day IP: 3,726 Boe/d with a peak rate of 4,860…
  9. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 9
    Midland Basin Acquisitions Outstanding Well Results RockStar well results exceeding expectations 140,000 120,000 Cumulative Oil Barrels (normalized to 7,500) 100,000 80,000 60,000 40,000 20,000 0 0 50 100 150…
  10. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 10
    Midland Basin Longer Laterals Drive Higher Returns Consolidation of drilling spacing units result in potential for longer laterals Sweetie Peck - Wolfcamp B Example YE15: 40% of laterals potentially greater than 5,000 YE16: 90% of…
  11. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 11
    Midland Basin Sweetie Peck IRR Sensitivity IRR at different lateral lengths Lower Spraberry 100% 90% 80% 70% 60% IRR 50% 40% 30% 20% 10% 0% 45 50 55 NYMEX WTI (/bbl) SP LSP 5,000'LL (660') SP LSP 7,600'LL (660') SP…
  12. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 12
    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…
  13. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 13
    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…
  14. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 14
    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…
  15. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 15
    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…
  16. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 16
    Midland Basin Acquisitions Impact of Transactions(1) Projected rig count: accelerated program expected to add value 12 11 11 10 9 Operated Rig Count 8 7 6 6 5 4 4 3 2 1 0 4Q16 2017E 2018E Sweetie Peck…
  17. Capital One Securities 2016 Energy 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 E 2018 E (1) Based on…
  18. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 18
    Driving Value Creation Midland Basin Top Tier Margins Higher margins drive future cash flow growth Cash Margins at 50 Oil(1) 45 Realized Price per Boe 40.61 40 35 30 Realized Price per Boe 25 23.00 34 per Boe 20 Cash Margin…
  19. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 19
    Vision Premier Operator of Top Tier Assets Differential Shareholder Returns High Margin Growth Improved Capital Efficiency Portfolio Changes (RockStar, Divestitures) 20
  20. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 20
    Appendix 21
  21. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 21
    Midland Basin Acquisitions Infrastructure Excellent proximity to gathering/processing and takeaway with ample capacity Numerous gas gathering and processing options with ample capacity Oil and gas gathering lines on or near our…
  22. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 22
    Top Tier Regional Well Performance: Howard County Silver City A 1HWA Eastland 15 2WH Callon Apache IP30: 2,123 BOED IP30*: 587 BOED *Short Lateral Adams 4231WA Oxy IP30: 1,636 BOED Wright 41-32 1SH Element Ponderosa L 1H IP30: 880…
  23. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 23
    Midland Basin Wolfcamp Potential is Massive USGS November 2016: Largest continuous oil discovery ever found in U.S. All of SMs Midland Basin acreage is within the Wolfcamp A, Wolfcamp B (upper), and Wolfcamp C boundaries A large…
  24. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 24
    Substantial Inventory Upside Potential Beyond Acquisition Assumptions ACQUISITION BASIS UPSIDE 25
  25. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 25
    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…
  26. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 26
    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%…
  27. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 27
    SM Company-wide Rig Program Historical and Projected Ample 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…
  28. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 28
    Financial Discipline Pro Forma Year-end 2016 Balance sheet strength and flexibility, with expected significant liquidity Pro-forma Balance Sheet(1) Liquidity 1.1+ billion No bond maturities until 2021; 2021 notes callable November…
  29. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 29
    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…
  30. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 30
    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…
  31. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 31
    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…
  32. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 32
    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…
  33. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 33
    Summary Derivative Positions By Quarter Through 2017 As of December 2, 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…
  34. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 34
    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…
  35. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 35
    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…
  36. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 36
    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…
  37. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 37
    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…
  38. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 38
    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:…
  39. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 39
    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…
  40. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 40
    Permian Area Operators Howard County SM Energy Callon Encana Surge/Yantai Xinchao Diamondback Oxy Energen BreitBurn 41
  41. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 41
    Permian Area Operators Sweetie Peck SM Energy Apache Chevron Concho Devon Diamondback Discovery Endeavor Exxon Legacy Oxy Pioneer Summit Miscellaneous
  42. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 42
    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 43
  43. Capital One Securities 2016 Energy Conference – SM Energy Company – slide 43
    Contact Information Jennifer Martin Samuels Senior Director, Investor Relations 303-864-2507 jsamuelssm-energy.com 44

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