RockStar Results JANUARY 31, 2017 CREATING VALUE FROM THE START 1
Midland Basin Premier Operator of Top Tier Assets Midland Basin 87,600 net acres Well results clearly demonstrate successful operational execution RockStar and top tier returns Recent RockStar well results support acquisition…
Todays Discussion 1. Review outstanding results from first 8 RockStar wells 2. Dive into geologic understanding of Howard County 3. SM operational execution in the Permian Basin well performance and returns 4. Performance to…
Howard County Eight New Wells All Exceeding Expectations IP rates exceed Companys unrisked acquisition assumptions Successful tests of Wolfcamp A, Wolfcamp B, and Lower Spraberry Tackleberry WA IP-30 of 2,262 Boe/d among highest…
Howard County New Well Results Wells drilled across position and into three intervals Lateral IP Rate IP Well Name Interval Length (BOE/d) Days Tackleberry 43-42 A 1LS LS 7,873 1,286 30-day Tackleberry 43-42 A 1WA WCA 7,861 2,262…
Howard County Update on Blissard Well Longer laterals drive value creation Blissard 20-29 1H 3,000 1,775 Boe/d IP-30 (announced in December) 2,500 Showing prolonged high oil 2,000 BOEPD rate 1,500 Cumulative 158,000 Boe…
Fundamentals What is Important Drivers of top tier economic performance Hydrocarbons in place Type of rock porous with interconnected pore space Thermal maturity enabling mobile hydrocarbons Drilling cost depth and penetration…
Howard County Late Entrant to Midland Activity 2013 limited horizontal well data set potential not yet recognized Only 4 modern horizontal wells in 2013 9
Howard County SM on the Leading Edge of Geologic Analysis SMs vast and distinctive database supports geologic potential across Howard County SM Energy Database: 950 Well logs Detailed mapping of key parameters Enables sweet-spot top…
Howard County Back to the Fundamentals that Matter Understanding the good carbonates in Howard County Extensive log database enabled differentiation of a porous carbonate target Traditional target is mudrock, but Dean porous…
Howard County Wolfcamp A Evolution of SM Sweet Spot Mapping Database supports 100% of net acreage within sweet spot Industry horizontal drilling to date supports economics on 76% of net acreage November 2014 January 2017 Sweet Spot…
Howard County Wolfcamp B Evolution of SM Sweet Spot Mapping Database supports 95% of net acreage within sweet spot Industry horizontal drilling to date supports economics on 34% of net acreage November 2014 January 2017 Sweet Spot…
Howard County Lower Spraberry Evolution of SM Sweet Spot Mapping Database supports 83% of net acreage within sweet spot Industry horizontal drilling to date supports economics on 39% of net acreage January 2016 January 2017 Sweet Spot…
Howard County Confirming the Sweet Spot Full data set identifies the sweet spot for returns new horizontal wells confirm SM Energy Acreage % Confirmed % in Sweet Interval by HZ drilling Spot Wolfcamp A 76% 100% Wolfcamp B 34%…
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 USGS Wolfcamp A and Wolfcamp B boundaries According to the USGS…
Howard County Summary Growing in Stature Mapping sweet spots and confirming economic returns Long history of vertical drilling provided extensive data base New core enabled modern analysis of key rock characteristics Detailed…
Howard County Current Drilling Activity Industry confidence drives drilling activity across the county 18
Midland Basin Peer Type Curve and 20% IRR Threshold 350,000 300,000 Cumulative Production (BOE) 250,000 200,000 150,000 100,000 50,000 0 0 6 12 18 24 30 36 Months 1 MMBOE Peer Type Curve 20% IRR Type Curve…
Midland Basin SM Wells with 6,900 Laterals 20
Sweetie Peck Top Tier Well Performance SM Energy operated wells with greater than 6,900 lateral lengths 350,000 300,000 Cumulative Production (BOE) 250,000 200,000 150,000 100,000 50,000 0 0 6 12 18 24 30 36…
RockStar Top Tier Well Performance SM Energy operated wells with greater than 6,900 lateral lengths 200,000 180,000 Ogre 160,000 Cumulative Production (BOE) 140,000 Blissard (1) 120,000 Tackleberry WCA 100,000 (2)…
Howard County 2017 Drilling Plan Objectives Value creation through better wells, longer laterals, and increasing wells per section Retain leasehold Evaluate economics of drilling across position Lower Spraberry Wolfcamp A Wolfcamp…
Midland Basin Leading Edge Technology Optimizes Completions Using latest generation fiber optics to optimize completion designs Analyzed number of Fracture Initiation Points (FIP) with variable stage and cluster spacing in the…
Midland Basin Leading Edge Technology Optimizes Completions Using micro-seismic to evaluate alternative completion designs Use of micro-seismic to evaluate frac height growth and near wellbore fracture intensity and optimize…
Midland Basin What Next Operational execution + well performance to-date an excellent start to 2017-2019 program Six rigs in 2017: four currently active, two expected to arrive before 2Q All laterals 7,500 or longer, majority are…
Midland Basin Premier Operators of Top Tier Assets Well results underscore successful operational execution and top tier returns RockStar well results support geologic model; 2017-2018 program designed to evaluate full potential…
Appendix Significant activity and data collection over the past three years has redefined the geology of Howard County and provided new opportunity for early entrants 28
Howard County New Well Results Additional Details Clusters Lateral IP Rate IP per 24 Hour Proppant Oil Well Name Interval IP Days Stages per Length (BOE/d) 1,000 IP Rate (lbs./ft) % Stage Tackleberry 43-42 A 1LS LS 7,873 1,286…
Howard County Sweet Spot March 2016 Peer A June 2016 30
Howard County Sweet Spot March 2016 Peer B May 2016 31
Howard County Sweet Spot January 2014 Peer C October 2015 32
Howard County Operators SM Energy Callon Encana Surge/Yantai Xinchao Diamondback Oxy Energen BreitBurn Sabalo 33
Sweetie Peck Operators SM Energy Apache Chevron Concho Devon Diamondback Discovery Endeavor Exxon Legacy Oxy Pioneer Summit Miscellaneous 34
Contact Information Jennifer Martin Samuels Senior Director, Investor Relations 303-864-2507 jsamuelssm-energy.com 35
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