SM Energy Company (SM) Stephens 26th Annual Investment Conference | NASH2024 summary

Strategic Positioning and Asset Overview

• Focus on sustainable, repeatable operations leveraging top-tier assets in Texas and a recent Uinta Basin acquisition, which added 63,000–63,300 net acres of highly oily, multi-interval potential and a sand mine for operational efficiency.

• Midland Basin and Austin Chalk assets deliver high-return, consistent well results, outperforming regional peers and acquisition models.

• Over 100 wells drilled in the Austin Chalk, with strong, consistent returns and ongoing inventory updates expected in early 2025.

• Integration of the Uinta asset is progressing well, with most key personnel retained and a significant increase in oil production scale.

• Portfolio includes ~111,000 net acres in Midland Basin, ~155,000 in South Texas, and ~63,300 in Uinta Basin, with up to 17 stacked pay targets in Uinta.

Financial Strategy and Capital Allocation

• Strengthened balance sheet with debt reduced below $1 billion before the Uinta acquisition; current leverage at 1.2x EBITDAX, targeting a return to 1x.

• 3Q24 adjusted EBITDAX reached $481.5 million, with adjusted free cash flow of $129.8 million.

• Cumulative capital returned to stockholders totaled $521.3 million, including $369.1 million in share repurchases and $152.2 million in dividends; fixed quarterly dividend increased to $0.20/share, with a $500 million buyback program through 2027.

• Maintained strong liquidity with $2.9–3.0 billion available and net debt of $1.0–1.8 billion post-acquisitions.

• Near-term free cash flow prioritizes debt reduction, with opportunistic share repurchases considered during market weakness.

Operational Highlights and Development Plans

• Midland Basin: New wells in Woodford Barnett and Dean zones show strong early results, with further drilling planned in 2025; Klondike and Sweetie Peck areas show significant inventory upside.

• Austin Chalk: Downspacing success increased location count by 53, with new wells paying out in ~6 months and ongoing evaluation of drilled-earn acreage.

• Uinta Basin: Early Upper Cube and Douglas Creek wells are highly oily and productive, with 94% oil content and strong initial rates; 2025 will focus on delineation and development.

• Well costs per lateral foot are similar across all three basins, trending down to the mid-$700s, with deflationary trends observed in 2023.

• 2024 plan includes processing ethane all year, supporting NGL realizations and high liquids content.