DENVER, July 18, 2019 /PRNewswire/ -- SM Energy
Company (the "Company") (NYSE: SM) today announced certain
operating and financial results for the second quarter of 2019,
including production, realized pricing and total capital spend. In
addition, for the full year, the Company is increasing its expected
mid-point production guidance and lowering expected mid-point total
capital spend (a non-GAAP measure defined and reconciled below).
Highlights include:
- Second quarter 2019 total production of 12.4 MMBoe (136.5
MBoe/d), up 16% sequentially, as performance from both the Permian
and South Texas exceeded
expectations. Commodity mix included 44% oil and 62% liquids.
- Second quarter 2019 costs incurred in oil and gas activities of
$269 million and total capital spend
of $261 million. Total capital spend
was below guidance, reflecting continued capital efficiencies.
- Full year 2019 total production guidance further increased at
the mid-point to 47.0 – 47.8 MMBoe, or 129 - 131 MBoe/d, while
total capital spend guidance is reduced at the mid-point to
$1,025 million, or approximately
$70-80 million per month for the
remainder of the year.
President and Chief Executive Officer Jay Ottoson comments: "Our performance in the
first half of 2019 continued to demonstrate the quality of our
assets and execution, with production higher than our recently
increased guidance and capital invested lower than guided. During
the quarter, we announced successful tests of several new intervals
on our existing acreage. We now forecast higher second half
production and lower full year total capital spend than we
originally planned. We are well hedged for the remainder of 2019
and expect that our improving capital efficiency will allow us to
achieve our second half objective of beginning to reduce debt while
maintaining a steady pace of activity and strong exit rate
production.
"During 2020, we expect to invest within our full-year
discretionary cash flow, delivering moderate growth in production,
higher margins, reduced debt and improved leverage metrics. At this
point, we expect that our 2020 capital program will be very similar
to our 2019 program and that spending will be evenly spread
throughout the year. We currently have more than 50% of our
expected oil production in 2020 hedged at prices over $55 per barrel.
"In summary, our results so far in 2019 and revised guidance
indicate that we are on track to deliver on our business plan
priorities: achieving growth within discretionary cash flow,
de-levering our balance sheet, and proving up additional drilling
inventory on our existing acreage."
UPDATED GUIDANCE
FULL YEAR 2019/GLIMPSE INTO 2020
- Expected production of 47.0 - 47.8 MMBoe with approximately 44%
oil in the commodity mix.
- Expected total capital spend $1,000-1,050 million with the assumption that the
capital program will be executed at a run rate of approximately
$70-80 million per month for the
remainder of 2019.
- In 2020, the Company expects total capital spend to be similar
to total capital spend in 2019, with a run rate of approximately
$80-90 million per month, and to
generate high-single digit corporate production growth and mid to
high-teen Permian Basin production growth. Capital allocation
between the Permian and South
Texas is expected to be similar to 2019.
THIRD QUARTER 2019
- Expected production of 12.0 -12.2 MMBoe with approximately 43%
oil in the commodity mix. Production guidance for the second half
of 2019 includes the effect of anticipated production shut-ins of
up to 1.5 MMBoe due to offset operator activity, simops and other
impacts. Production guidance also assumes ethane rejection
(compared with ethane processing in the first half of 2019), which
reduces overall barrel equivalent production volume. In
South Texas, the Company plans to
wrap-up 2019 planned net completions in the quarter, including two
new Austin Chalk wells that are
expected to start producing in the fourth quarter.
SECOND QUARTER OF 2019 PRODUCTION AND REALIZED PRICES
PRODUCTION:
|
|
|
Permian
|
South
Texas
|
Total
|
Oil - MBbl
|
5,137
|
290
|
5,427
|
Natural gas -
MMcf
|
8,469
|
19,822
|
28,291
|
NGLs -
MBbl
|
-
|
2,283
|
2,282
|
Total -
MBoe
|
6,548
|
5,877
|
12,425
|
Total -
MBoe/d
|
72.0
|
64.6
|
136.5
|
Note: Totals may not
sum due to rounding
|
- Permian volumes were up 37% year-over-year and up 15%
sequentially.
- Oil sales were 75% of production revenue.
- As projected, all 25 of the wells at the successful
Merlin Maximus development reached
their respective peak 30-day rates by the end of the quarter.
- Overall, better than expected production performance in the
Permian Basin is the result of strong early performance on a number
of new wells.
- In South Texas, production
outperformance stems from changes in the well design as well as
strong results from Austin Chalk
tests. These preliminary results support the Company's objectives
of increasing inventory and asset value in the region.
REALIZED
PRICES:
|
|
|
|
Permian
|
South
Texas
|
Totals
Pre/Post-Hedge
|
Oil/$Bbl
|
$56.15
|
$54.15
|
$56.04/$54.07
|
Natural
gas/$Mcf
|
1.94
|
2.46
|
2.31/2.51
|
NGLs/$Bbl
|
nm
|
16.44
|
16.42/20.42
|
Per Boe
|
$46.56
|
$17.36
|
$32.75/$33.07
|
- Benchmark pricing for the quarter included NYMEX WTI at
$59.81/Bbl, NYMEX Henry Hub natural
gas at $2.64/MMBtu and Hart Composite
NGLs at $22.23/Bbl.
- In the Permian Basin, the Midland-Cushing oil differential improved to
approximately ($2.14)/Bbl on average
for the three months while the WAHA-NYMEX natural gas differential
was approximately ($2.70)/MMBtu.
- The average realized price per Boe of $32.75 is before the effect of hedges. Including
the effect of realized hedges, the average price was $33.07, resulting in approximately $4.1 million of realized net hedge gains for the
quarter.
HEDGE POSITIONS
The Company's production revenue is primarily from oil sales.
For the remainder of 2019, approximately 80% of oil production is
hedged to Cushing WTI at weighted average floors between
$50 - $61/Bbl. The Company has added 2020 Cushing WTI
oil hedges and currently has more than 50% of expected 2020 oil
production hedged at weighted average floors between $55 – $60/Bbl.
FINANCIAL POSITION, LIQUIDITY AND TOTAL CAPITAL SPEND
On June 30, 2019, the outstanding
principal amount of the Company's long-term debt was $2.5 billion in senior notes plus $172.5 million in senior convertible notes, with
$118.0 million drawn on the Company's
senior secured credit facility.
Costs incurred in oil and gas activities for the second quarter
of 2019 were $269 million. Total
capital spend (a non-GAAP measure defined and reconciled below) for
the quarter was $261 million. During
the second quarter, the Company drilled 25 net wells and completed
32 net wells in the Permian, and drilled three net wells and
completed 11 net wells in South
Texas. Additionally, two net wells in the Permian and three
net wells in South Texas were
completed and were waiting on flowline connections at the end of
the second quarter.
TOTAL CAPITAL SPEND RECONCILIATION(1):
Reconciliation of
costs incurred in oil & gas activities (GAAP) to total capital
spend (non-GAAP)
|
For the Three
Months Ended
June 30,
|
|
For the Six Months
Ended
June 30,
|
($ in
millions)
|
2019
|
|
2019
|
Costs incurred in
oil and gas activities (GAAP):
|
$
|
268.5
|
|
$
|
590.5
|
Asset retirement
obligations
|
(0.3)
|
|
(0.8)
|
Capitalized
interest
|
(5.0)
|
|
(9.9)
|
Proved property
acquisitions
|
—
|
|
0.3
|
Other
|
(2.0)
|
|
(3.4)
|
Total capital
spend (non-GAAP):
|
$
|
261.3
|
|
$
|
576.8
|
Note: Totals may not
sum due to rounding
|
|
|
|
|
|
|
|
|
(1) Total
capital spend is calculated as costs incurred, less asset
retirement obligations ("ARO"), capitalized interest and
acquisitions. Total capital spend is presented because
management believes that it provides useful information to
investors in the analysis of SM Energy Company and is widely used
by professional research analysts and others in the valuation,
comparison and investment recommendations of companies in the oil
and gas exploration and production industry. The Company is unable
to present a quantitative reconciliation of this forward-looking,
non-GAAP financial measure without unreasonable effort because
acquisition costs are inherently unpredictable. Total capital spend
should not be used in isolation or as a substitute to costs
incurred or other capital spending measures under GAAP.
|
SCHEDULE FOR SECOND QUARTER REPORTING
August 1, 2019 – After market
close, the Company plans to issue its second quarter 2019 earnings
release, a pre-recorded webcast discussion of the second quarter
2019 financial and operating results, and an associated
presentation, all of which will be posted to the Company's website
at ir.sm-energy.com.
August 2, 2019 – Please join SM
Energy management at 8:00 a.m. Mountain
time/10:00 a.m. Eastern time
for the second quarter 2019 financial and operating results Q&A
session. This discussion will be accessible via webcast (available
live and for replay) on the Company's website at ir.sm-energy.com
or by telephone at:
- Live (conference ID 3293419) - Domestic toll
free/International: 844-343-4183/647-689-5129
- Replay (conference ID 3293419) - Domestic toll
free/International: 800-585-8367/416-621-4642
The call replay will be available approximately one hour after
the call and until August 9,
2019.
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of securities laws. The words "anticipate," "budget,"
"estimate," "expect," "forecast," "guidance," "plan," "project,"
"objectives," "target," "will" and similar expressions are intended
to identify forward-looking statements. These statements involve
known and unknown risks, which may cause SM Energy's actual results
to differ materially from results expressed or implied by the
forward-looking statements. Forward-looking statements in this
release include: projections for production and total capital
spend; the potential for future debt reduction and improved
margins; the expected effect of shut-in volumes; and the
expectation that the Company will spend within discretionary cash
flow in the second half of 2019 and beyond. General risk factors
include the availability, proximity and capacity of gathering,
processing and transportation facilities; the volatility and level
of oil, natural gas, and natural gas liquids prices and related
differentials, including any impact on the Company's asset carrying
values or reserves arising from price declines; uncertainties
inherent in projecting future timing and rates of production or
other results from drilling and completion activities; the
imprecise nature of estimating oil and natural gas reserves;
uncertainties inherent in projecting future drilling and completion
activities, costs or results; the availability of additional
economically attractive exploration, development, and acquisition
opportunities for future growth and any necessary financings;
unexpected drilling conditions and results; unsuccessful
exploration and development drilling results; the availability of
drilling, completion, and operating equipment and services; the
risks associated with the Company's commodity price risk management
strategy; and other such matters discussed in the Risk Factors
section of SM Energy's most recent Annual Report on Form 10-K, as
such risk factors may be updated from time to time in the Company's
other periodic reports filed with the Securities and Exchange
Commission. The forward-looking statements contained herein speak
as of the date of this announcement. Although SM Energy may from
time to time voluntarily update its prior forward-looking
statements, it disclaims any commitment to do so except as required
by securities laws.
ABOUT THE COMPANY
SM Energy Company is an independent energy company engaged in
the acquisition, exploration, development, and production of crude
oil, natural gas, and natural gas liquids in onshore North
America. SM Energy routinely posts important information
about the Company on its website. For more information about SM
Energy, please visit its website at www.sm-energy.com.
SM ENERGY INVESTOR CONTACT
Jennifer Martin Samuels,
jsamuels@sm-energy.com, 303-864-2507
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SOURCE SM Energy Company