DENVER, Nov. 2, 2017 /PRNewswire/ --
- Permian production up 31% sequentially, and up 118% since
4Q16
- Total production mix 32% oil; absolute oil production exceeded
expectations
- RockStar favorable new well results: three pads (eight wells)
average peak 30-day IP rates of 1,191 Boe/d, 1,453 Boe/d and 1,333
Boe/d per well on each pad
- Initiated Eagle Ford North JV to accelerate use of new
technology and build value
- Portfolio transition drives margin expansion, raising average
realized price to $27.59 (pre-hedge),
the highest level since 4Q14 despite sub-$50 oil
- Liquidity remains strong at $1.4
billion
SM Energy Company ("SM Energy" or the "Company") (NYSE: SM)
announced today financial results and operations highlights from
the third quarter of 2017. This earnings release is accompanied by
an investor presentation and pre-recorded call with transcript all
posted to the Company's website. Please visit the Company's website
at sm-energy.com to access this additional third quarter detail.
The Company will host a webcast and conference call at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) tomorrow, November 3, 2017, to answer questions. Further
information on the earnings webcast and conference call can be
found below.
MANAGEMENT COMMENTARY
President and Chief Executive Officer Jay Ottoson comments: "The third quarter of 2017
marked a significant turning point in our transformation with a
large increase in Permian production. In particular, our Howard
County area wells in the Midland Basin, with high oil percentages
and associated high margins, are generating outstanding returns,
and continued delineation of our acreage in that area is yielding
encouraging results.
"Overall, we are executing with excellence, resulting in a high
level of capital efficiency as indicated by our higher than
expected production and cash flows so far in 2017 (adjusted for
divested/retained assets), despite lower commodity prices than
anticipated, without change in our guided capital
spending. Our operational performance keeps us on track
to drive significant growth in cash flow, and we have substantial
liquidity to fund our projected two-year cash flow outspend.
"We are also announcing today the signing of a joint venture
agreement in a portion of our Eagle Ford North area that will
result in a further increase in our capital efficiency.
This partnership, which is similar to our existing Powder River
Basin joint venture, will allow us to test new technologies and
completion designs at varied well spacing on a portion of our
acreage that does not currently generate substantial cash flow,
potentially enhancing the asset value while reducing our required
capital outlay for acreage holding."
THIRD QUARTER 2017 RESULTS
PRODUCTION
|
Oil
|
|
Natural
Gas
|
|
NGLs
|
|
Total
|
|
MMBbls
|
|
Bcf
|
|
MMBbls
|
|
MMBoe
|
Permian
|
|
2.3
|
|
|
3.9
|
|
|
—
|
|
|
3.0
|
Eagle
Ford
|
|
0.4
|
|
|
24.2
|
|
|
2.4
|
|
|
6.7
|
Rockies
|
|
0.7
|
|
|
1.0
|
|
|
—
|
|
|
1.0
|
Total
|
|
3.4
|
|
|
29.1
|
|
|
2.4
|
|
|
10.7
|
Third quarter production totaled 10.7 MMBoe, comprised of 32%
oil, 45% natural gas and 23% NGLs. Oil production of 3.4 MMBbls
exceeded the Company's guidance, driven by a 31% sequential
increase in Permian Basin production. As previously reported,
natural gas and NGL production was affected early in September by
Hurricane Harvey, which resulted in the curtailment of 0.2 MMBoe
due to downstream, third party facilities that were impacted by the
storm. Natural gas and NGL production was within the updated
guidance despite further production curtailments late in the
quarter that were predominantly due to severe rain storms in
South Texas. During the last week
of September, more than 18 inches of rain fell in portions of the
Company's Eagle Ford producing areas forcing the shut-in of a
number of wells because certain roads were closed or impassable.
Natural gas and NGL production was also affected by reduced working
interests in certain wells due to the Eagle Ford North JV
(discussed below). On a retained asset basis, third quarter
production was up 7% compared with the third quarter of 2016. On a
retained asset basis, for the first nine months of 2017, production
was up 11% compared with the first nine months of 2016.
REALIZED PRICING
|
|
|
Oil
|
|
Natural
Gas
|
|
|
NGLs
|
|
Average
|
|
|
|
$/Bbl
|
|
$/Mcf
|
|
|
$/Bbl
|
|
$/Boe
|
Permian
|
|
|
46.26
|
|
4.13
|
|
|
23.36
|
|
41.53
|
Eagle
Ford
|
|
|
38.90
|
|
2.86
|
|
|
22.42
|
|
20.14
|
Rockies
|
|
|
44.87
|
|
1.09
|
|
|
20.71
|
|
36.87
|
Average
Pre-Hedge
|
|
|
45.20
|
|
2.96
|
|
|
22.40
|
|
27.59
|
Average
Post-Hedge
|
|
|
44.47
|
|
3.79
|
|
|
18.86
|
|
28.82
|
Benchmark pricing for the third quarter of 2017 was: WTI at
$48.20 per barrel; NYMEX natural gas
at $3.00 per MMBtu; and Hart
Composite NGLs at $27.55 per
barrel.
In the third quarter of 2017, the average realized price per Boe
before the effects of commodity hedges was $27.59 per Boe, which is at its highest level
since the fourth quarter of 2014 and demonstrates the margin
expansion that results from the Company's portfolio transition.
Cash production costs totaled $11.49
per Boe, which included LOE of $4.81
per Boe (before ad valorem tax of $0.29 per Boe). Eagle Ford LOE per Boe came in
above expectations largely due to non-recurring costs and lower
overall volumes, while Permian LOE per Boe was down sequentially by
approximately $1 as the Company gains
efficiencies of scale with new wells coming on production.
Transportation costs continued to decline, averaging $5.24 per Boe for the third quarter, as Permian
production, which has low transportation costs, becomes an
increasing portion of the production mix. Cash production costs are
up 6.6% compared with the third quarter of 2016 and up 6.1% for the
first nine months of 2017 compared with the first nine months of
2016.
Net loss for the third quarter of 2017 was $89.1 million, or $0.80 per diluted common share, compared with a
net loss of $40.9 million or
$0.52 per diluted common share in the
third quarter of 2016. Net loss in the third quarter of 2017
reflects a 25% decrease in production as a result of asset sales
and a $44.4 million decrease in
realized hedge gains, partially offset by a higher third quarter
2017 pre-hedge operating margin and lower depletion, depreciation
and amortization expenses. The 2017 period also includes a loss on
divestiture activity versus a gain in the prior year period.
Net cash provided by operating activities was $128.5 million in the third quarter of 2017 and
$370.6 million for the first nine
months of 2017.
As discussed below, adjusted
EBITDAX, adjusted net income (loss) and adjusted net income (loss)
per diluted common share are non-GAAP measures. Please reference
the reconciliations to the most directly comparable GAAP financial
measures at the end of this release.
Adjusted EBITDAX for the third quarter of 2017 was $164.5 million, which is up 7% sequentially
predominantly due to the higher operating margin partially offset
by lower production and lower realized derivative gains. Adjusted
EBITDAX was down 20% from the prior year period. The prior year
period benefited from higher production (prior to non-core asset
sales) and significantly higher realized derivative gains.
For the first nine months of 2017, adjusted EBITDAX was
$490.7 million.
Adjusted net loss for the third quarter was $27.5 million, or $0.25 per diluted common share, compared with an
adjusted net loss of $29.0 million,
or $0.37 per diluted common share, in
the third quarter of 2016. For the first nine months of 2017,
adjusted net loss was $82.7 million,
or $0.74 per diluted common share.
The calculation of adjusted net loss excludes non-recurring items
and items difficult to estimate in order to present results that
can be more consistently compared with prior periods and peer
results.
FINANCIAL POSITION AND LIQUIDITY
At September 30, 2017, the
outstanding principal balance on the Company's long-term debt
included $2.8 billion in senior notes
plus $172.5 million in senior
convertible notes, with zero drawn on the Company's senior secured
credit facility. At quarter-end, the Company had a cash balance of
$441.4 million, providing for net
debt of $2.5 billion. The Company's
undrawn credit facility plus cash on hand provided $1.4 billion in liquidity.
CAPITAL ACTIVITY AND OPERATIONS
Please refer to the Total
Capital Spend Reconciliation at the end of this release for a
reconciliation to Costs Incurred in oil and gas activities
(GAAP).
Costs incurred for the third quarter of 2017 were $226.6 million. Third quarter total capital spend
was $226.8 million. During the
quarter, the Company drilled or participated in 31 net wells and
completed or participated in 28 net wells. For the first nine
months of 2017, costs incurred were $741.6
million and total capital spend was $657.0 million. Year-to-date, the Company has
drilled or participated in 88 net wells and completed or
participated in 87 net wells.
PERMIAN - MIDLAND BASIN
In the third quarter of 2017, production from the Company's
Midland Basin assets was 3.0 MMBoe and was 78% oil. Midland Basin
production is up 31% sequentially as the Company had 23 (operated)
flowing completions in the quarter. The Company is currently
running seven horizontal rigs in the basin, with one in the Sweetie
Peck area and six in the RockStar area, and plans to add an eighth
rig to the area by year-end. The Company recently added a fourth
completions crew to the area. The third quarter production margin
for the Midland Basin assets was $30.62 per Boe.
The Company's Midland Basin operations continue to be
characterized by high capital efficiency and strong well
performance. New well results include the Iceman and Griswold pads,
each drilled at 420 foot well spacing. At the Iceman pad, three
Wolfcamp A wells averaged a peak 30-day rate of 1,453 Boe/d per
well (Lower Spraberry wells also producing on the Iceman pad have
not yet reached a peak rate), and at the three-well Griswold pad,
located on the south-east flank of the Company's RockStar acreage,
the Wolfcamp A wells averaged a peak 30-day rate of 1,191 Boe/d per
well. At the Jester pad, one Wolfcamp A and one Wolfcamp B well
averaged a peak 30-day rate of 1,333 Boe/d per well. (Please refer
to the 3Q17 Earnings Presentation for further detail on new well
results). Capital efficiency is evidenced by several drilling and
completion metrics. For example, the Company is currently drilling
at an average rate of 1,100 feet per day (based on spud to rig
release), which is up approximately 14% from the second quarter and
places the Company in the top quartile among Midland Basin
operators. Completions operations have achieved pumping
efficiencies of more than 80% as a result of excellent performance
from the Company's pumping service providers.
The Company currently has approximately 89,000 net acres in the
Midland Basin, which includes approximately 5,000 net acres
acquired year-to-date through acreage trades and other
transactions.
EAGLE FORD
In the third quarter of 2017, production from the Company's
Eagle Ford assets was 6.7 MMBoe and included 60% natural gas, 35%
NGLs, and 5% oil. Third quarter production was affected by
curtailments following Hurricane Harvey and a second storm late in
the quarter, as well as a reduction in the Company's working
interest in new wells as a result of the Eagle Ford North JV (see
below). The Company is currently running two horizontal rigs in the
area and no completions crews. The Company drilled six and
completed four net wells in the third quarter (all completions were
part of the Eagle Ford North JV) and drilled 17 and completed 35
net wells in the area in the first nine months of 2017.
The Company has approximately 165,000 net acres in its operated
Eagle Ford program.
EAGLE FORD NORTH JOINT VENTURE
In September 2017, the Company
entered into a joint venture (JV) agreement with a third party to
drill 16 wells and complete 23 wells in a focused portion of its
Eagle Ford North area. This partnership allows the Company to
use third party resources to test cutting edge technology,
accelerate the capture of technical data and hold acreage in this
area, potentially expanding economic drilling inventory and acreage
value. Moreover, the Company expects this partnership will result
in further optimizations outside of the JV area, enhancing the
overall value of its Eagle Ford asset. The objectives of this
agreement are similar to the Company's highly successful, ongoing
JV arrangement in the Powder River Basin. Per the terms of the
agreement, the Company's working interest was reduced in seven
wells completed during the quarter, which affected Eagle Ford
production by approximately (0.1) MMBoe for the quarter. The
partnership expects to drill six carried wells in the area in the
fourth quarter of 2017. The effect of the partnership on fourth
quarter production is estimated at up to (0.5) MMBoe, depending
upon actual well performance.
GUIDANCE
Full year 2017 guidance is revised as follows:
|
Full Year
2017
|
|
Implied 4Q17
at
Midpoint
|
Total Capital
Spend
|
~$875 MM
|
unchanged
|
~$218 MM
|
Total
Production
|
44.2-44.6
MMBoe
|
updated: to reflect
Eagle
Ford storm effects and JV;
4Q planned shut-ins
Rockies and Eagle Ford,
related to workovers and
offset operator activity
|
10.1-10.5
MMBoe
|
Percent Oil in
Mix
|
~30%
|
slightly
increased
|
~35%
|
LOE (including ad
valorem tax)
|
$4.60-4.80/Boe
|
additional storm
related
costs in 4Q; lower Eagle
Ford volumes
|
$5.20/Boe
|
Transportation
|
$5.40-5.60/Boe
|
narrowed
|
$5.00/Boe
|
Production
Taxes
|
4.0-4.5%
|
unchanged
|
|
G&A (includes
~$20MM non-cash,
stock-based comp expense)
|
$116-120
MM
|
reduced
|
$32.4 MM
|
Exploration/capitalized overhead
(wholly included in capital spend)
|
~$55-60 MM
|
reclassified
certain
amounts within total
capital spend
|
$18.2 MM
|
DD&A
|
$12-14/Boe
|
unchanged
|
$14.66/Boe
|
|
|
|
|
|
Total capital
spend (before acquisitions) is a non-GAAP measure. The Company is
unable to
present a quantitative reconciliation of this forward-looking
non-GAAP financial measure without
unreasonable effort because acquisition costs are inherently
unpredictable.
|
COMMODITY DERIVATIVES
As of November 1, 2017.
The Company remains well-hedged into the fourth quarter of 2017
with approximately 80% of production hedged (at the mid-point of
guidance). For 2018, hedged volumes are approximately 31 MMBoe, of
which 36% is oil, 39% is natural gas and 25% is NGLs.
|
OIL SWAPS
|
OIL
COLLARS
|
NATURAL GAS
SWAPS
|
NGL SWAPS
|
|
Volume/Average
Price
|
Volume/Avg.
Ceiling - Floor
|
Volume /Average
Price
|
Volume/Average
Price
|
Period
|
(MBbls/$Bbl)
|
(MBbls/$Bbl)
|
(BBtu/$MMBtu)
|
(MBbls/$Bbl)
|
|
|
|
|
|
4Q17
|
1,510/$47.11
|
1,086/$56.05 -
$47.51
|
22,001/$3.98
|
2,210/$22.05
|
|
|
|
|
|
1Q18
|
1,075/$50.16
|
1,026/$58.46 -
$50.00
|
20,788/$3.25
|
2,113/$31.07
|
|
|
|
|
|
2Q18
|
1,534/$49.57
|
1,004/$58.37 -
$50.00
|
15,712/$2.85
|
1,642/$28.08
|
|
|
|
|
|
3Q18
|
1,769/$49.77
|
1,393/$57.93 -
$50.00
|
17,147/$2.88
|
1,831/$28.14
|
|
|
|
|
|
4Q18
|
1,894/$49.87
|
1,607/$57.75 -
$50.00
|
18,646/$2.91
|
2,021/$28.13
|
|
Notes: The volumes
above represent fixed swap and collar contracts the Company has in
place through 4Q18. Volumes for 4Q17 include all commodity
contracts for settlement any time during the fourth quarter of
2017; prices are weighted averages; natural gas contracts reflect
regional contract positions and are no longer adjusted to a NYMEX
equivalent; NGL prices are at Mt. Belvieu and reflect specific NGL
components. 2017 and 2018 quarters include ethane, propane, butanes
and gasoline. In addition to the volumes above, the Company has oil
basis swaps in place. See 3Q17 Earnings Presentation for contract
details on the oil basis swaps.
|
UPCOMING EVENTS
EARNINGS WEBCAST AND CALL
As previously announced, SM Energy is posting a pre-recorded
discussion and presentation in conjunction with this earnings
release. Please look for the additional detail on our website at
www.sm-energy.com. Tomorrow morning, the Company will host a third
quarter financial and operating results Q&A session via webcast
and conference call. Please join management at 8:00 a.m. Mountain Time/10:00 a.m. Eastern Time November 3, 2017. Join us via webcast at
www.sm-energy.com or by telephone 877-870-4263 (toll free) or
412-317-0790 (international), and indicate SM Energy earnings call.
The webcast and call will also be available for replay. The dial-in
replay number is 877-344-7529 (toll free), and the replay access
code is 10112207.
UPCOMING CONFERENCE PARTICIPATION
- November 8, 2017 - Baird 47th Annual Industrial
Conference. Chief Financial Officer Wade
Pursell will present at 2:30 p.m.
Central time. This event will be webcast. An investor
presentation for this event will be posted to the Company's website
on November 7, 2017.
- November 14, 2017 - KLR E&P
Conference Denver. President and Chief Executive Officer
Jay Ottoson will present at
12:05 p.m. Mountain time. This event
will not be webcast.
- November 29, 2017 - BAML
Leveraged Finance Conference. Chief Financial Officer Wade Pursell will present at 10:50 a.m. Eastern time. This event will be
webcast. An investor presentation for this event will be posted to
the Company's website on November 28,
2017.
- December 6, 2017 - Capital One
Securities 12th Annual Energy Conference. President and
Chief Executive Officer Jay Ottoson
will present at 1:30 p.m. Central
time. This event will be webcast.
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of securities laws. The words "anticipate," "assume,"
"believe," "budget," "estimate," "expect," "forecast," "guidance,"
"intend," "plan," "project," "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, among other things, projected changes in
production volumes and cash flows and the expected benefits from
joint venture arrangements. General risk factors include the
availability of and access to capital markets; the availability,
proximity and capacity of gathering, processing and transportation
facilities; the volatility and level of oil, natural gas, and
natural gas liquids prices, including any impact on the Company's
asset carrying values or reserves arising from price declines;
uncertainties inherent in projecting future 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, including from pilot tests; the
uncertain nature of expected benefits from the actual or expected
acquisition, divestiture, joint venture, farm down or similar
efforts; 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 and quality of drilling, completion, and
operating equipment and services; the risks associated with the
Company's commodity price risk management strategy; uncertainty
regarding the ultimate impact of potentially dilutive securities;
and other such matters discussed in the "Risk Factors" section of
SM Energy's 2016 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 CONTACTS
INVESTORS: Jennifer Martin
Samuels, jsamuels@sm-energy.com, 303-864-2507
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS (UNAUDITED)
|
September 30,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended September 30,
|
|
For the Nine
Months Ended September 30,
|
Production
Data
|
2017
|
|
2016
|
|
Percent
Change
|
|
2017
|
|
2016
|
|
Percent
Change
|
Average realized
sales price, before
the effects of derivative settlements:
|
|
|
|
|
|
|
|
|
|
|
|
Oil (per
Bbl)
|
$
|
45.20
|
|
|
$
|
38.81
|
|
|
|
16%
|
|
$
|
45.77
|
|
|
$
|
34.69
|
|
|
|
32%
|
Gas (per
Mcf)
|
2.96
|
|
|
2.71
|
|
|
|
9%
|
|
2.98
|
|
|
2.12
|
|
|
|
41%
|
NGLs (per
Bbl)
|
22.40
|
|
|
16.58
|
|
|
|
35%
|
|
21.36
|
|
|
14.91
|
|
|
|
43%
|
Equivalent (per
BOE)
|
$
|
27.59
|
|
|
$
|
23.25
|
|
|
|
19%
|
|
$
|
26.76
|
|
|
$
|
19.87
|
|
|
|
35%
|
Average realized
sales price, including
the effects of derivative settlements:
|
|
|
|
|
|
|
|
|
|
|
|
Oil (per
Bbl)
|
$
|
44.47
|
|
|
$
|
50.15
|
|
|
|
(11)%
|
|
$
|
44.32
|
|
|
$
|
52.31
|
|
|
|
(15)%
|
Gas (per
Mcf)
|
3.79
|
|
|
2.98
|
|
|
|
27%
|
|
3.63
|
|
|
2.86
|
|
|
|
27%
|
NGLs (per
Bbl)
|
18.86
|
|
|
16.08
|
|
|
|
17%
|
|
18.93
|
|
|
15.12
|
|
|
|
25%
|
Equivalent (per
BOE)
|
$
|
28.82
|
|
|
$
|
27.31
|
|
|
|
6%
|
|
$
|
27.62
|
|
|
$
|
27.18
|
|
|
|
2%
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MMBbl)
|
3.4
|
|
|
4.3
|
|
|
|
(21)%
|
|
9.8
|
|
|
12.6
|
|
|
|
(22)%
|
Gas (Bcf)
|
29.1
|
|
|
37.1
|
|
|
|
(22)%
|
|
97.0
|
|
|
111.7
|
|
|
|
(13)%
|
NGLs
(MMBbl)
|
2.4
|
|
|
3.6
|
|
|
|
(34)%
|
|
8.1
|
|
|
10.7
|
|
|
|
(24)%
|
MMBOE
(6:1)
|
10.7
|
|
|
14.2
|
|
|
|
(25)%
|
|
34.1
|
|
|
41.9
|
|
|
|
(19)%
|
Average daily
production:
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MBbl/d)
|
37.1
|
|
|
47.2
|
|
|
|
(21)%
|
|
36.1
|
|
|
45.9
|
|
|
|
(21)%
|
Gas
(MMcf/d)
|
316.1
|
|
|
403.0
|
|
|
|
(22)%
|
|
355.4
|
|
|
407.8
|
|
|
|
(13)%
|
NGLs
(MBbl/d)
|
26.2
|
|
|
39.5
|
|
|
|
(34)%
|
|
29.6
|
|
|
39.0
|
|
|
|
(24)%
|
MBOE/d
(6:1)
|
116.0
|
|
|
153.9
|
|
|
|
(25)%
|
|
124.9
|
|
|
152.9
|
|
|
|
(18)%
|
Per BOE
data:
|
|
|
|
|
|
|
|
|
|
|
|
Realized price,
before the effects of derivative
settlements
|
$
|
27.59
|
|
|
$
|
23.25
|
|
|
|
19%
|
|
$
|
26.76
|
|
|
$
|
19.87
|
|
|
|
35%
|
Lease operating
expense
|
4.81
|
|
|
3.29
|
|
|
|
46%
|
|
4.22
|
|
|
3.46
|
|
|
|
22%
|
Transportation
costs
|
5.24
|
|
|
6.24
|
|
|
|
(16)%
|
|
5.62
|
|
|
6.08
|
|
|
|
(8)%
|
Production
taxes
|
1.15
|
|
|
1.04
|
|
|
|
11%
|
|
1.11
|
|
|
0.88
|
|
|
|
26%
|
Ad valorem tax
expense
|
0.29
|
|
|
0.21
|
|
|
|
38%
|
|
0.34
|
|
|
0.22
|
|
|
|
55%
|
General and
administrative (excluding stock-compensation)
|
2.16
|
|
|
1.96
|
|
|
|
10%
|
|
2.15
|
|
|
1.85
|
|
|
|
16%
|
Net, before the
effects of derivative settlements
|
$
|
13.94
|
|
|
$
|
10.51
|
|
|
|
33%
|
|
$
|
13.32
|
|
|
$
|
7.38
|
|
|
|
80%
|
Derivative settlement
gain
|
1.23
|
|
|
4.06
|
|
|
|
(70)%
|
|
0.86
|
|
|
7.31
|
|
|
|
(88)%
|
Margin, including the
effects of derivative settlements
|
$
|
15.17
|
|
|
$
|
14.57
|
|
|
|
4%
|
|
$
|
14.18
|
|
|
$
|
14.69
|
|
|
|
(3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Depletion,
depreciation, amortization,
and asset retirement obligation
liability accretion
|
$
|
12.61
|
|
|
$
|
13.70
|
|
|
|
(8)%
|
|
$
|
12.48
|
|
|
$
|
14.78
|
|
|
|
(16)%
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS (UNAUDITED)
|
September 30,
2017
|
Condensed
Consolidated Balance Sheets
|
|
|
|
(in thousands, except
share amounts)
|
September
30,
|
|
December
31,
|
ASSETS
|
2017
|
|
2016
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
441,415
|
|
|
$
|
9,372
|
|
Accounts
receivable
|
146,056
|
|
|
151,950
|
|
Derivative
asset
|
63,685
|
|
|
54,521
|
|
Prepaid expenses and
other
|
17,756
|
|
|
8,799
|
|
Total current
assets
|
668,912
|
|
|
224,642
|
|
|
|
|
|
Property and
equipment (successful efforts method):
|
|
|
|
Proved oil and gas
properties
|
5,938,351
|
|
|
5,700,418
|
|
Less - accumulated
depletion, depreciation, and amortization
|
(3,243,072)
|
|
|
(2,836,532)
|
|
Unproved oil and gas
properties
|
2,321,508
|
|
|
2,471,947
|
|
Wells in
progress
|
287,106
|
|
|
235,147
|
|
Oil and gas
properties held for sale, net
|
7,144
|
|
|
372,621
|
|
Other property and
equipment, net of accumulated depreciation of $50,468 and
$42,882, respectively
|
106,046
|
|
|
137,753
|
|
Total property
and equipment, net
|
5,417,083
|
|
|
6,081,354
|
|
|
|
|
|
Noncurrent
assets:
|
|
|
|
Derivative
asset
|
60,035
|
|
|
67,575
|
|
Other noncurrent
assets
|
32,896
|
|
|
19,940
|
|
Total other
noncurrent assets
|
92,931
|
|
|
87,515
|
|
Total
Assets
|
$
|
6,178,926
|
|
|
$
|
6,393,511
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
348,885
|
|
|
$
|
299,708
|
|
Derivative
liability
|
87,791
|
|
|
115,464
|
|
Total current
liabilities
|
436,676
|
|
|
415,172
|
|
|
|
|
|
Noncurrent
liabilities:
|
|
|
|
Revolving credit
facility
|
—
|
|
|
—
|
|
Senior Notes, net of
unamortized deferred financing costs
|
2,768,346
|
|
|
2,766,719
|
|
Senior Convertible
Notes, net of unamortized discount and deferred financing
costs
|
137,012
|
|
|
130,856
|
|
Asset retirement
obligation
|
100,958
|
|
|
96,134
|
|
Asset retirement
obligation associated with oil and gas properties held for
sale
|
—
|
|
|
26,241
|
|
Deferred income
taxes
|
208,720
|
|
|
315,672
|
|
Derivative
liability
|
67,676
|
|
|
98,340
|
|
Other noncurrent
liabilities
|
47,497
|
|
|
47,244
|
|
Total
noncurrent liabilities
|
3,330,209
|
|
|
3,481,206
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.01
par value - authorized: 200,000,000 shares; issued and
outstanding: 111,624,029 and 111,257,500 shares,
respectively
|
1,116
|
|
|
1,113
|
|
Additional paid-in
capital
|
1,734,217
|
|
|
1,716,556
|
|
Retained
earnings
|
691,915
|
|
|
794,020
|
|
Accumulated other
comprehensive loss
|
(15,207)
|
|
|
(14,556)
|
|
Total
stockholders' equity
|
2,412,041
|
|
|
2,497,133
|
|
Total Liabilities
and Stockholders' Equity
|
$
|
6,178,926
|
|
|
$
|
6,393,511
|
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS (UNAUDITED)
|
September 30,
2017
|
Condensed
Consolidated Statements of Operations
|
(in thousands, except
per share amounts)
|
For the Three
Months Ended
September 30,
|
|
For the Nine
Months Ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Operating revenues
and other income:
|
|
|
|
|
|
|
|
Oil, gas, and NGL
production revenue
|
$
|
294,459
|
|
|
$
|
329,165
|
|
|
$
|
912,596
|
|
|
$
|
832,130
|
|
Net gain (loss) on
divestiture activity
|
(1,895)
|
|
|
22,388
|
|
|
(131,565)
|
|
|
3,413
|
|
Other operating
revenues
|
2,815
|
|
|
1,107
|
|
|
7,807
|
|
|
2,007
|
|
Total
operating revenues and other income
|
295,379
|
|
|
352,660
|
|
|
788,838
|
|
|
837,550
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Oil, gas, and NGL
production expense
|
122,651
|
|
|
152,524
|
|
|
385,073
|
|
|
445,658
|
|
Depletion,
depreciation, amortization, and asset
retirement obligation liability accretion
|
134,599
|
|
|
193,966
|
|
|
425,643
|
|
|
619,193
|
|
Exploration
|
14,243
|
|
|
13,482
|
|
|
39,293
|
|
|
41,942
|
|
Impairment of proved
properties
|
—
|
|
|
8,049
|
|
|
3,806
|
|
|
277,834
|
|
Abandonment and
impairment of unproved properties
|
—
|
|
|
3,568
|
|
|
157
|
|
|
5,917
|
|
General and
administrative(1)
|
27,880
|
|
|
32,679
|
|
|
85,564
|
|
|
93,117
|
|
Net derivative (gain)
loss(2)
|
80,599
|
|
|
(28,037)
|
|
|
(89,364)
|
|
|
121,086
|
|
Other operating
expenses, net
|
999
|
|
|
(5,917)
|
|
|
6,303
|
|
|
7,731
|
|
Total
operating expenses
|
380,971
|
|
|
370,314
|
|
|
856,475
|
|
|
1,612,478
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
(85,592)
|
|
|
(17,654)
|
|
|
(67,637)
|
|
|
(774,928)
|
|
|
|
|
|
|
|
|
|
Non-operating income
(expense):
|
|
|
|
|
|
|
|
Interest
expense
|
(44,091)
|
|
|
(47,206)
|
|
|
(135,639)
|
|
|
(112,329)
|
|
Gain (loss) on
extinguishment of debt
|
—
|
|
|
—
|
|
|
(35)
|
|
|
15,722
|
|
Other, net
|
1,301
|
|
|
221
|
|
|
2,901
|
|
|
232
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(128,382)
|
|
|
(64,639)
|
|
|
(200,410)
|
|
|
(871,303)
|
|
Income tax
benefit
|
39,270
|
|
|
23,732
|
|
|
65,825
|
|
|
314,505
|
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(89,112)
|
|
|
$
|
(40,907)
|
|
|
$
|
(134,585)
|
|
|
$
|
(556,798)
|
|
|
|
|
|
|
|
|
|
Basic
weighted-average common shares outstanding
|
111,575
|
|
|
78,468
|
|
|
111,366
|
|
|
71,574
|
|
Diluted
weighted-average common shares outstanding
|
111,575
|
|
|
78,468
|
|
|
111,366
|
|
|
71,574
|
|
Basic net loss per
common share
|
$
|
(0.80)
|
|
|
$
|
(0.52)
|
|
|
$
|
(1.21)
|
|
|
$
|
(7.78)
|
|
Diluted net loss per
common share
|
$
|
(0.80)
|
|
|
$
|
(0.52)
|
|
|
$
|
(1.21)
|
|
|
$
|
(7.78)
|
|
|
|
|
|
|
|
|
|
(1)
Non-cash stock-based compensation component
included in:
|
|
|
|
|
|
|
|
Exploration
expense
|
$
|
1,495
|
|
|
$
|
1,590
|
|
|
$
|
3,898
|
|
|
$
|
5,037
|
|
G&A
expense
|
$
|
4,852
|
|
|
$
|
4,980
|
|
|
$
|
12,262
|
|
|
$
|
15,448
|
|
|
|
|
|
|
|
|
|
(2)
The net derivative (gain) loss line item consists of
the following:
|
|
|
|
|
|
|
|
Settlement
gain
|
$
|
(13,092)
|
|
|
$
|
(57,496)
|
|
|
$
|
(29,402)
|
|
|
$
|
(306,234)
|
|
(Gain) loss on fair
value changes
|
$
|
93,691
|
|
|
$
|
29,459
|
|
|
$
|
(59,962)
|
|
|
$
|
427,320
|
|
Total net
derivative (gain) loss
|
$
|
80,599
|
|
|
$
|
(28,037)
|
|
|
$
|
(89,364)
|
|
|
$
|
121,086
|
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS (UNAUDITED)
|
September 30,
2017
|
Condensed
Consolidated Statement of Stockholders' Equity
|
(in thousands, except
share amounts)
|
|
|
|
Additional
Paid-in
Capital
|
|
|
|
Accumulated
Other Comprehensive Loss
|
|
Total
Stockholders'
Equity
|
|
Common
Stock
|
|
|
Retained
Earnings
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balances, December
31, 2016
|
111,257,500
|
|
|
$
|
1,113
|
|
|
$
|
1,716,556
|
|
|
$
|
794,020
|
|
|
$
|
(14,556)
|
|
|
$
|
2,497,133
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(134,585)
|
|
|
—
|
|
|
(134,585)
|
|
Other comprehensive
loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(651)
|
|
|
(651)
|
|
Dividends, $0.10 per
share
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,144)
|
|
|
—
|
|
|
(11,144)
|
|
Issuance of common
stock under Employee Stock Purchase Plan
|
123,678
|
|
|
1
|
|
|
1,737
|
|
|
—
|
|
|
—
|
|
|
1,738
|
|
Issuance of common
stock upon vesting of restricted stock units, net of shares used
for tax withholdings
|
171,278
|
|
|
1
|
|
|
(1,241)
|
|
|
—
|
|
|
—
|
|
|
(1,240)
|
|
Stock-based
compensation expense
|
71,573
|
|
|
1
|
|
|
16,159
|
|
|
—
|
|
|
—
|
|
|
16,160
|
|
Cumulative effect of
accounting change
|
—
|
|
|
—
|
|
|
1,108
|
|
|
43,624
|
|
|
—
|
|
|
44,732
|
|
Other
|
—
|
|
|
—
|
|
|
(102)
|
|
|
—
|
|
|
—
|
|
|
(102)
|
|
Balances,
September 30, 2017
|
111,624,029
|
|
|
$
|
1,116
|
|
|
$
|
1,734,217
|
|
|
$
|
691,915
|
|
|
$
|
(15,207)
|
|
|
$
|
2,412,041
|
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS (UNAUDITED)
|
September 30,
2017
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
(in
thousands)
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net loss
|
$
|
(89,112)
|
|
|
$
|
(40,907)
|
|
|
$
|
(134,585)
|
|
|
$
|
(556,798)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Net (gain) loss on
divestiture activity
|
1,895
|
|
|
(22,388)
|
|
|
131,565
|
|
|
(3,413)
|
|
Depletion,
depreciation, amortization, and asset retirement
obligation liability accretion
|
134,599
|
|
|
193,966
|
|
|
425,643
|
|
|
619,193
|
|
Impairment of proved
properties
|
—
|
|
|
8,049
|
|
|
3,806
|
|
|
277,834
|
|
Abandonment and
impairment of unproved properties
|
—
|
|
|
3,568
|
|
|
157
|
|
|
5,917
|
|
Stock-based
compensation expense
|
6,347
|
|
|
6,570
|
|
|
16,160
|
|
|
20,485
|
|
Net derivative (gain)
loss
|
80,599
|
|
|
(28,037)
|
|
|
(89,364)
|
|
|
121,086
|
|
Derivative settlement
gain
|
13,092
|
|
|
57,496
|
|
|
29,402
|
|
|
306,234
|
|
Amortization of debt
discount and deferred financing costs
|
3,799
|
|
|
3,757
|
|
|
12,478
|
|
|
5,687
|
|
Non-cash (gain) loss
on extinguishment of debt, net
|
—
|
|
|
—
|
|
|
22
|
|
|
(15,722)
|
|
Deferred income
taxes
|
(36,668)
|
|
|
(23,756)
|
|
|
(67,458)
|
|
|
(314,770)
|
|
Plugging and
abandonment
|
(486)
|
|
|
(2,506)
|
|
|
(2,095)
|
|
|
(5,222)
|
|
Other, net
|
2,446
|
|
|
(11,374)
|
|
|
4,713
|
|
|
(8,857)
|
|
Changes in current
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
(25,491)
|
|
|
12,441
|
|
|
21,502
|
|
|
1,221
|
|
Prepaid expenses and
other
|
366
|
|
|
(835)
|
|
|
(8,955)
|
|
|
7,652
|
|
Accounts payable and
accrued expenses
|
30,533
|
|
|
(3,439)
|
|
|
21,560
|
|
|
(65,166)
|
|
Accrued derivative
settlements
|
6,563
|
|
|
5,534
|
|
|
6,046
|
|
|
19,651
|
|
Net cash provided
by operating activities
|
128,482
|
|
|
158,139
|
|
|
370,597
|
|
|
415,012
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Net proceeds from the
sale of oil and gas properties
|
12,118
|
|
|
188,862
|
|
|
778,365
|
|
|
201,829
|
|
Capital
expenditures
|
(258,226)
|
|
|
(147,224)
|
|
|
(624,969)
|
|
|
(492,794)
|
|
Acquisition of proved
and unproved oil and gas properties
|
751
|
|
|
(4,102)
|
|
|
(87,389)
|
|
|
(21,853)
|
|
Acquisition deposit
held in escrow
|
—
|
|
|
(49,000)
|
|
|
3,000
|
|
|
(49,000)
|
|
Other, net
|
—
|
|
|
900
|
|
|
—
|
|
|
—
|
|
Net cash provided
by (used in) investing activities
|
(245,357)
|
|
|
(10,564)
|
|
|
69,007
|
|
|
(361,818)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Proceeds from credit
facility
|
—
|
|
|
158,000
|
|
|
406,000
|
|
|
743,000
|
|
Repayment of credit
facility
|
—
|
|
|
(488,500)
|
|
|
(406,000)
|
|
|
(945,000)
|
|
Debt issuance costs
related to credit facility
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,132)
|
|
Net proceeds from
Senior Notes
|
—
|
|
|
492,397
|
|
|
—
|
|
|
492,397
|
|
Cash paid to
repurchase Senior Notes
|
—
|
|
|
—
|
|
|
(2,344)
|
|
|
(29,904)
|
|
Net proceeds from
Senior Convertible Notes
|
—
|
|
|
166,681
|
|
|
—
|
|
|
166,681
|
|
Cash paid for capped
call transactions
|
—
|
|
|
(24,109)
|
|
|
—
|
|
|
(24,109)
|
|
Net proceeds from
sale of common stock
|
—
|
|
|
530,912
|
|
|
1,738
|
|
|
533,266
|
|
Dividends
paid
|
—
|
|
|
—
|
|
|
(5,563)
|
|
|
(3,404)
|
|
Other, net
|
(1,231)
|
|
|
(2,308)
|
|
|
(1,392)
|
|
|
(2,341)
|
|
Net cash provided
by (used in) financing activities
|
(1,231)
|
|
|
833,073
|
|
|
(7,561)
|
|
|
927,454
|
|
|
|
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
(118,106)
|
|
|
980,648
|
|
|
432,043
|
|
|
980,648
|
|
Cash and cash
equivalents at beginning of period
|
559,521
|
|
|
18
|
|
|
9,372
|
|
|
18
|
|
Cash and cash
equivalents at end of period
|
$
|
441,415
|
|
|
$
|
980,666
|
|
|
$
|
441,415
|
|
|
$
|
980,666
|
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS (UNAUDITED)
|
September 30,
2017
|
Adjusted
EBITDAX(1)
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net
loss (GAAP) to adjusted EBITDAX (Non-GAAP) to
net cash provided by operating activities (GAAP)
|
For the Three
Months Ended
September 30,
|
|
For the Nine
Months Ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net loss
(GAAP)
|
$
|
(89,112)
|
|
|
$
|
(40,907)
|
|
|
$
|
(134,585)
|
|
|
$
|
(556,798)
|
|
Interest
expense
|
44,091
|
|
|
47,206
|
|
|
135,639
|
|
|
112,329
|
|
Other non-operating
income, net
|
(1,301)
|
|
|
(221)
|
|
|
(2,901)
|
|
|
(232)
|
|
Income tax
benefit
|
(39,270)
|
|
|
(23,732)
|
|
|
(65,825)
|
|
|
(314,505)
|
|
Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion
|
134,599
|
|
|
193,966
|
|
|
425,643
|
|
|
619,193
|
|
Exploration(2)
|
12,748
|
|
|
11,892
|
|
|
35,395
|
|
|
36,905
|
|
Impairment of proved
properties
|
—
|
|
|
8,049
|
|
|
3,806
|
|
|
277,834
|
|
Abandonment and
impairment of unproved properties
|
—
|
|
|
3,568
|
|
|
157
|
|
|
5,917
|
|
Stock-based
compensation expense
|
6,347
|
|
|
6,570
|
|
|
16,160
|
|
|
20,485
|
|
Net derivative (gain)
loss
|
80,599
|
|
|
(28,037)
|
|
|
(89,364)
|
|
|
121,086
|
|
Derivative settlement
gain
|
13,092
|
|
|
57,496
|
|
|
29,402
|
|
|
306,234
|
|
Net (gain) loss on
divestiture activity
|
1,895
|
|
|
(22,388)
|
|
|
131,565
|
|
|
(3,413)
|
|
(Gain) loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
35
|
|
|
(15,722)
|
|
Other
|
785
|
|
|
(8,314)
|
|
|
5,620
|
|
|
(4,757)
|
|
Adjusted EBITDAX
(Non-GAAP)
|
$
|
164,473
|
|
|
$
|
205,148
|
|
|
$
|
490,747
|
|
|
$
|
604,556
|
|
Interest
expense
|
(44,091)
|
|
|
(47,206)
|
|
|
(135,639)
|
|
|
(112,329)
|
|
Other non-operating
income, net
|
1,301
|
|
|
221
|
|
|
2,901
|
|
|
232
|
|
Income tax
benefit
|
39,270
|
|
|
23,732
|
|
|
65,825
|
|
|
314,505
|
|
Exploration(2)
|
(12,748)
|
|
|
(11,892)
|
|
|
(35,395)
|
|
|
(36,905)
|
|
Amortization of debt
discount and deferred financing costs
|
3,799
|
|
|
3,757
|
|
|
12,478
|
|
|
5,687
|
|
Deferred income
taxes
|
(36,668)
|
|
|
(23,756)
|
|
|
(67,458)
|
|
|
(314,770)
|
|
Plugging and
abandonment
|
(486)
|
|
|
(2,506)
|
|
|
(2,095)
|
|
|
(5,222)
|
|
Other, net
|
1,661
|
|
|
(3,060)
|
|
|
(920)
|
|
|
(4,100)
|
|
Changes in current
assets and liabilities
|
11,971
|
|
|
13,701
|
|
|
40,153
|
|
|
(36,642)
|
|
Net cash provided
by operating activities (GAAP)
|
$
|
128,482
|
|
|
$
|
158,139
|
|
|
$
|
370,597
|
|
|
$
|
415,012
|
|
|
|
|
|
|
|
|
|
(1)
Adjusted EBITDAX represents net loss before interest expense, other
non-operating income and expense, income taxes, depletion,
depreciation, amortization and asset retirement obligation
liability accretion expense, exploration expense, property
abandonment and impairment expense, non-cash stock-based
compensation expense, derivative gains and losses net of
settlements, gains and losses on divestitures, gains and losses on
extinguishment of debt, and certain other items. Adjusted
EBITDAX excludes certain items that we believe affect the
comparability of operating results and can exclude items that are
generally one-time in nature or whose timing and/or amount cannot
be reasonably estimated. Adjusted EBITDAX is a non-GAAP
measure that we present because we believe it provides useful
additional information to investors and analysts, as a performance
measure, for analysis of our ability to internally generate funds
for exploration, development, acquisitions, and to service
debt. We are also subject to financial covenants under our
Credit Agreement based on adjusted EBITDAX ratios. In
addition, adjusted EBITDAX 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, and many investors use the published research
of industry research analysts in making investment decisions.
Adjusted EBITDAX should not be considered in isolation or as a
substitute for net income (loss), income (loss) from operations,
net cash provided by operating activities, or other profitability
or liquidity measures prepared under GAAP. Because adjusted
EBITDAX excludes some, but not all items that affect net income
(loss) and may vary among companies, the adjusted EBITDAX amounts
presented may not be comparable to similar metrics of other
companies. Our credit facility provides a material source of
liquidity for us. Under the terms of our Credit Agreement, if
we failed to comply with the covenants that establish a maximum
permitted ratio of senior secured debt to adjusted EBITDAX and a
minimum permitted ratio of adjusted EBITDAX to interest, we would
be in default, an event that would prevent us from borrowing under
our credit facility and would therefore materially limit our
sources of liquidity. In addition, if we are in default under
our credit facility and are unable to obtain a waiver of that
default from our lenders, lenders under that facility and under the
indentures governing our outstanding Senior Notes and Senior
Convertible Notes would be entitled to exercise all of their
remedies for default.
|
(2)
Stock-based compensation expense is a component of exploration
expense and general and administrative expense on the accompanying
statements of operations. Therefore, the exploration line
items shown in the reconciliation above will vary from the amount
shown on the Company's condensed consolidated statements of
operations for the component of stock-based compensation expense
recorded to exploration expense.
|
SM ENERGY
COMPANY
|
FINANCIAL
HIGHLIGHTS (UNAUDITED)
|
September 30,
2017
|
Adjusted Net Loss
(Non-GAAP)
|
|
|
|
|
|
|
|
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
September 30,
|
|
For the Nine
Months Ended
September 30,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net loss
(GAAP)
|
$
|
(89,112)
|
|
|
$
|
(40,907)
|
|
|
$
|
(134,585)
|
|
|
$
|
(556,798)
|
|
Net derivative (gain)
loss
|
80,599
|
|
|
(28,037)
|
|
|
(89,364)
|
|
|
121,086
|
|
Derivative settlement
gain
|
13,092
|
|
|
57,496
|
|
|
29,402
|
|
|
306,234
|
|
Net (gain) loss on
divestiture activity
|
1,895
|
|
|
(22,388)
|
|
|
131,565
|
|
|
(3,413)
|
|
Impairment of proved
properties
|
—
|
|
|
8,049
|
|
|
3,806
|
|
|
277,834
|
|
Abandonment and
impairment of unproved properties
|
—
|
|
|
3,568
|
|
|
157
|
|
|
5,917
|
|
(Gain) loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
35
|
|
|
(15,722)
|
|
Termination fee on
temporary second lien facility
|
—
|
|
|
10,000
|
|
|
—
|
|
|
10,000
|
|
Other,
net(2)
|
785
|
|
|
(10,008)
|
|
|
5,620
|
|
|
(7,425)
|
|
Tax effect of
adjustments(1)
|
(34,790)
|
|
|
(6,818)
|
|
|
(29,321)
|
|
|
(253,497)
|
|
Adjusted net loss
(Non-GAAP)(3)
|
$
|
(27,531)
|
|
|
$
|
(29,045)
|
|
|
$
|
(82,685)
|
|
|
$
|
(115,784)
|
|
|
|
|
|
|
|
|
|
Diluted net loss
per common share (GAAP)
|
$
|
(0.80)
|
|
|
$
|
(0.52)
|
|
|
$
|
(1.21)
|
|
|
$
|
(7.78)
|
|
Net derivative (gain)
loss
|
0.72
|
|
|
(0.36)
|
|
|
(0.80)
|
|
|
1.69
|
|
Derivative settlement
gain
|
0.12
|
|
|
0.73
|
|
|
0.27
|
|
|
4.28
|
|
Net (gain) loss on
divestiture activity
|
0.02
|
|
|
(0.29)
|
|
|
1.18
|
|
|
(0.05)
|
|
Impairment of proved
properties
|
—
|
|
|
0.10
|
|
|
0.03
|
|
|
3.88
|
|
Abandonment and
impairment of unproved properties
|
—
|
|
|
0.05
|
|
|
—
|
|
|
0.08
|
|
(Gain) loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.22)
|
|
Termination fee on
temporary second lien facility
|
—
|
|
|
0.13
|
|
|
—
|
|
|
0.14
|
|
Other,
net(2)
|
—
|
|
|
(0.12)
|
|
|
0.05
|
|
|
(0.10)
|
|
Tax effect of
adjustments(1)
|
(0.31)
|
|
|
(0.09)
|
|
|
(0.26)
|
|
|
(3.54)
|
|
Adjusted net loss
per diluted common share (Non-GAAP)(4)
|
$
|
(0.25)
|
|
|
$
|
(0.37)
|
|
|
$
|
(0.74)
|
|
|
$
|
(1.62)
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average common shares
outstanding (GAAP)
|
111,575
|
|
|
78,468
|
|
|
111,366
|
|
|
71,574
|
|
|
|
|
|
|
|
|
|
(1) The
tax effect of adjustments is calculated using a tax rate of 36.1%
for the three-month and nine-month periods ended September 30,
2017, and a tax rate of 36.5% for the three-month and nine-month
periods ended September 30, 2016. These rates approximate the
Company's statutory tax rate for the respective periods, as
adjusted for ordinary permanent differences.
|
(2) For
the three-month and nine-month periods ended September 30, 2017,
the adjustment is related to impairment on materials inventory, the
change in Net Profits Plan liability, and bad debt expense.
For the three-month and nine-month periods ended September 30,
2016, the adjustment relates to the change in Net Profits Plan
liability, impairment of materials inventory, and an
adjustment relating to claims on royalties on certain Federal and
Indian leases. These items are included in other operating expenses
on the Company's condensed consolidated statements of
operations.
|
(3)
Adjusted net loss excludes certain items that the Company believes
affect the comparability of operating results. Items excluded
generally are non-recurring items or are items whose timing and/or
amount cannot be reasonably estimated. These items include non-cash
and other adjustments, such as derivative gains and losses net of
settlements, impairments, net (gain) loss on divestiture activity,
materials inventory loss, and gains or losses on extinguishment of
debt. The non-GAAP measure of adjusted net income (loss) is
presented because management believes it provides useful additional
information to investors for analysis of SM Energy's fundamental
business on a recurring basis. In addition, management believes
that adjusted net income (loss) 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, and many investors use the
published research of industry research analysts in making
investment decisions. Adjusted net income (loss) should not be
considered in isolation or as a substitute for net income (loss),
income (loss) from operations, cash provided by operating
activities, or other income, profitability, cash flow, or liquidity
measures prepared under GAAP. Since adjusted net income (loss)
excludes some, but not all, items that affect net income (loss) and
may vary among companies, the adjusted net income (loss) amounts
presented may not be comparable to similarly titled measures of
other companies.
|
(4) For
periods where the Company reports adjusted net loss, basic
weighted-average common shares outstanding are used in the
calculation of adjusted net loss per diluted common
share.
|
SM ENERGY
COMPANY
|
|
FINANCIAL
HIGHLIGHTS (UNAUDITED)
|
|
September 30,
2017
|
|
|
|
|
|
|
Total Capital
Spend Reconciliation
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
Reconciliation of
costs incurred in oil & gas activities
(GAAP) to total capital spend
(Non-GAAP)(1)(3)
|
For the Three
Months Ended
September 30,
|
|
For the Nine
Months Ended
September 30,
|
|
|
|
|
2017
|
|
2017
|
|
Costs incurred in
oil and gas activities (GAAP):
|
$
|
226.6
|
|
|
$
|
741.6
|
|
|
Asset retirement
obligation
|
0.4
|
|
|
(1.0)
|
|
|
Capitalized
interest
|
(3.5)
|
|
|
(8.6)
|
|
|
Proved property
acquisitions(2)
|
0.4
|
|
|
(1.0)
|
|
|
Unproved property
acquisitions
|
—
|
|
|
(75.6)
|
|
|
Other
|
2.9
|
|
|
1.6
|
|
|
Total capital
spend (Non-GAAP):
|
$
|
226.8
|
|
|
$
|
657.0
|
|
|
|
|
|
|
|
|
|
|
|
(1) The
non-GAAP measure of total capital spend is presented because
management believes it provides useful information to investors for
analysis of SM Energy's fundamental business on a recurring basis.
In addition, management believes that total capital spend 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, and many investors use
the published research of industry research analysts in making
investment decisions. Total capital spend should not be considered
in isolation or as a substitute for Costs Incurred or other capital
spending measures prepared under GAAP. The total capital spend
amounts presented may not be comparable to similarly titled
measures of other companies.
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(2)
Includes approximately $0 and $887,000 of ARO associated with
proved property acquisitions for the three and nine months ended
September 30, 2017, respectively.
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(3) The
Company completed several primarily non-monetary acreage trades in
the Midland Basin during the first nine months of 2017 totaling
$283.7 million of value attributed to the properties
surrendered. This non-monetary consideration is not reflected
in the costs incurred or capital spend amounts presented
above.
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SOURCE SM Energy Company