SM Energy (SM) Misses Q4 EPS by 3c, Revenues Miss

SM Energy (NYSE: SM) reported Q4 EPS of $0.02, $0.03 worse than the analyst estimate of $0.05. Revenue for the quarter came in at $320.29 million versus the consensus estimate of $342.32 million.

President and Chief Executive Officer Herb Vogel comments: "The challenges brought forth in 2020 were met with exceptional resilience by the SM Energy team, generating approximately $240 million in free cash flow and reducing long-term debt by nearly $500 million, well exceeding pre-pandemic plan goals. At the same time, through delineation we have advanced the potential of high value inventory growth in the Austin Chalk in South Texas, improved upon our excellent safety record and significantly reduced GHG emissions. This was exceptional performance. Going forward, we believe our top tier asset base will support a long-term plan that delivers sustainable free cash flow and value creation to our stakeholders."

OUTLOOK

2021 GOALS

• Generate positive free cash flow and apply to debt reduction.
• Continue efforts to increase inventory and inventory value through testing new intervals and optimizing spacing, drilling and completion designs.
• Meet AXPC top quartile rank for safety, spills and GHG emissions.

KEY ASSUMPTIONS

• Price deck: $52.00 Bbl WTI; $2.80 MMBtu natural gas; $25.00 Bbl NGLs.
• Hedges currently in place.
• Capital program sized to optimize free cash flow and debt reduction over 5-year plan. Capital expenditures (as adjusted for capital accruals) of between $650-$675 million. Drilling and completion costs are expected to make-up approximately 90% of total capital, with approximately 70% allocated to Midland Basin operations and 30% to South Texas operations. Compared to preliminary 2021 capital plans, the number of wells expected to be drilled is increased to take advantage of drilling efficiencies, and certain wells partially completed in 2021 are pushed to flowing completions in 2022.
  • Midland Basin: Anticipate drilling approximately 55 net wells and completing approximately 72 net wells. Midland Basin activity will continue to co-develop zones and will include activity across the RockStar position as well as in Sweetie Peck.
  • South Texas: Anticipate drilling approximately 39 net wells and completing approximately 21 net wells. Activity will be concentrated on Austin Chalk development, where wells are expected to be economically competitive with the Midland Basin program.

GUIDANCE FULL YEAR 2021:

• Production: Approximately 47-50 MMBoe or 129-137 MBoe/d at 52-53% oil; assumes ethane rejection for the full year.
  • This projects approximately 5% production growth, including approximately 11% oil production growth.
  • This projects lower year-over-year production volumes from South Texas; however, higher oil volumes from South Texas, as activity will concentrate on the higher liquids content Austin Chalk formation.
  • The 2021 expected production growth rate over 2020 is lower compared with previous projections, largely due to higher-than-expected 2020 production, as a result of better well performance, and the timing of completions.
• Production costs: LOE $4.50-5.00/Boe, which reflects increased oil production and a range of potential economic workover activity; transportation $2.80-3.00/Boe reflecting lower total South Texas natural gas volumes and better contractual rates that become effective in July 2021.
• G&A: ~$100 million.
• Exploration/Capitalized overhead: ~$50 million.
• DD&A: $16-$18/Boe.
• Production and ad valorem taxes: ~$2.15/Boe.

GUIDANCE FIRST QUARTER 2021

• Capital expenditures: ~$180 million.
• As of this report date, the Company is assessing the effects to operations from the frigid cold and snow storms in Texas that caused widespread power outages, road closures and other impacts to oil and gas operations.

For earnings history and earnings-related data on SM Energy (SM) click here.

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