SM Energy (SM) Revises FY14 CapEx; Updates Outlook

SM Energy (NYSE: SM) announces that its board of directors approved a revised capital expenditure budget for 2014. The Company is also providing updated 2014 production and cost guidance, as well as production growth expectations for 2015 and 2016.

MANAGEMENT COMMENTARY

Tony Best, CEO, remarked, "I am pleased to share an improved production outlook that reflects the combination of our strong operational performance and our deep inventory of high return projects. Recent enhancements in our completion techniques are improving the value and quantity of drilling inventory across our portfolio, which has been further bolstered by our recent acquisition activity in oil-weighted areas of our Rocky Mountain region. It's an exciting time at SM Energy and one that I think will generate significant value for our stockholders."

REVISED CAPITAL PROGRAM

Capital Expenditures

SM Energy has updated its 2014 capital expenditure budget. The majority of the capital increase is attributable to approximately $430 million of un-budgeted acquisitions in the Powder River and Williston Basins and additional activity related to those acquisitions in the second half of 2014. Changes from the original 2014 budget are summarized in the table below:

The increase in Eagle Ford investment reflects higher levels of activity in the Company's non-operated Eagle Ford program than were assumed in its original budget. In the Bakken/Three Forks program, the increase in capital relates to drilling and completion activity in the fourth quarter associated with the Company's previously announced pending acquisition in its Gooseneck area in North Dakota, which is expected to close during the third quarter of 2014. In the Powder River Basin, the Company is increasing capital to reflect accelerated activity in the second half of 2014 due to strong results from its Frontier program. The increase in New Ventures and non-drilling is primarily due to construction of a gathering system in its East Texas program.

The Company will use cash on hand and its revolving credit facility to fund the increase in capital expenditure in 2014. Based on current commodity prices, the Company expects its year-end 2014 debt to trailing twelve month adjusted EBITDAX to be approximately 1.2 times.

REVISED PRODUCTION AND COST GUIDANCE

The Company is providing updated production and cost guidance for the third quarter and full year 2014 in the table below. Production guidance for 2014 has increased by approximately 3%, which is in line with the associated increase in drilling and completion capital outlined above.

The Company's production guidance for the remainder of 2014 incorporates downtime expected in its operated Eagle Ford asset in the 3rd quarter due to temporary well shut-ins during offset completion work.

The Company is increasing its expected annual 2015 production growth target to approximately 20%, up from its previously announced target of 15%. Additionally, SM Energy expects approximately 15% annual production growth for 2016. The aggregate annual capital investment program for each 2015 and 2016 is expected to be similar to the revised 2014 program, excluding the impact of 2014 acquisitions and non-operated Eagle Ford carried capital.

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