SM Energy Company (SM) Q2 2024 Prepared Remarks earnings summary

Executive summary

• Q2 2024 net production reached 158.5 MBoe/d, exceeding guidance by 2,500 Boe/d, with 46% oil content, driven by strong Midland and South Texas well performance.

• Net income for Q2 2024 was $210.3 million ($1.82 per diluted share), up 40% year-over-year, supported by higher production and realized prices.

• Announced Uinta Basin acquisitions totaling $2.1–$2.55 billion, adding 63,300 net acres and 465 net drilling locations, expected to close October 1, 2024.

• Returned $72 million to shareholders in Q2 via dividends and share repurchases; board approved an 11% dividend increase to $0.20/share and reloaded $500 million buyback program through 2027.

• Exercised option for Altamont acquisition, expanding Uinta Basin footprint by 26,100 net acres for $70 million.

Financial highlights

• Q2 2024 adjusted EBITDAX was $485.9 million; adjusted free cash flow was $98.4 million; operating revenues were $634.6 million.

• Net cash from operating activities was $476.4 million; capital expenditures were $322.7–$327.8 million.

• GAAP EPS was $1.82; adjusted EPS was $1.85; net income margin was 33%.

• Cash balance at quarter end was $488 million, with zero drawn on the revolver.

• Lease operating expense per BOE decreased 13% year-over-year to $4.82.

Outlook and guidance

• Full-year 2024 production guidance maintained at 57–60 MMBoe (156–164 MBoe/d), oil mix raised to 45%.

• Q3 2024 production guidance set at 15.0–15.4 MMBoe (163–167 MBoe/d), oil at 45–46%.

• Uinta Basin assets expected to add 44 MBoe/d at 87% oil in Q4 2024, with $100–$120 million in additional capex.

• Full-year 2024 capital expenditures guidance unchanged at $1.14–$1.18 billion, excluding acquisitions.

• Projecting around 45% oil production growth in 2025 due to acquisitions and strong asset performance.