SM Energy (SM) 3 Aug 232023 Q2 Earnings call transcript

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the SM Energy's Second Quarter 2023 Financial and Operating Results Q&A. [Operator Instructions]. Jennifer Samuels, Vice President, Investor Relations and ESG Stewardship, you may begin your conference.

Rob. you, Thank everyone. Good morning,

I the do materials. inconvenience off, for apologize in posting for delay quarterly yesterday all First any of the

and Our have during overload this your technical Herb the third-party CFO, including joining the CEO, reference had us guess, and today, our call. web on call questions Wade Thank presentation reporting for transcript those issues. materials answer busiest Q&A and system. today, morning. the I can President To investor we We today's may Vogel, day Pursell. host you

I the Before recently we and forward-looking to to get I X our our Risk Factors that of X actual could Page section discussion non-GAAP accompanying filed of may associated with started, which and most direct describe statements need forward-looking the statements remind risks that to Slide deck, of results cause you the include you accompanying measures. today differ. release slide discussion XX-K, of earnings

also refer for definitions We measures. release see the measures forward-looking of non-GAAP discussion measures deck reconciliations most of earnings to to slide and Please may non-GAAP comparable and and GAAP appendix non-GAAP measures. directly the

morning. Also brief turn quarter look second filed with for XX-Q finally for I that, opening will it this Herb our to Herb? over And a commentary.

Good Jennifer. for joining us. thank you, morning, Thank you and

Before we get messages started, I just wanted key this to reiterate a quarter. few

or to been to yield the with very Including higher a Execution building and stockholders rig October slightly cap. market solid repurchase a X will increased we the September. CapEx geared guidance, quarter, that a September, in XX second reduced pleased XXXX. production first up has drive and received returned on dividend, of shares well program quarter. guidance program growth June based was since help solid million oil over add million very X.X quarter in the in have capital inception We're have in on sustainable X% to months million of the return of since Our our $XXX last X.X the

organically the XX% really acres to increase, People been which, that who've a interval of these followed We've net know Midland date wells us SM. year Midland producing differentiates with to build in in Basin, acres the and in Dean added has our today, excited inventory team Basin. XX,XXX our ability to latest potential, the very more some target is best XX,XXX this the

I've the to best true to to is say this way add value E&P an got company.

questions. XXXX an to of half first puts Rob With trajectory turn year. that, start The taking a Rob? excellent your I'll to on for it back SM

question [Operator JPMorgan. of from Instructions]. your line And first comes the Zach from Parham

I free guess, first over the amount your returned quarters. about return, In of the off, the How couple cash to significant declines. to half? is stock the maybe how cash and flow percent as stock? you're in plays buyback? expand how flow free half set cash like buyback should a the flow increases production last back year, of of have you the talk second your about through buybacks CapEx thinking buy of just cash price second XX-plus And we to continue Will free about utilize be into thinking you just

$XXX say question. now can go. that, guess We've This I to I million $XXX million million Wade. there is $XXX authorized. Yes. is all so used Great of

price current speculate say more than probably us. I -- did any think in remarks I looks to very I shouldn't attractive the So that the that.

of pro XXXX. I of would and you, if the remainder kind into the year rest think this rata model I were I just pretty

there? new to more And we acreage? plans Dean developing on When some a talked maybe start the some will expect there. operating on the you've talk position, new you know bit when development But wells about that results? to you just XX,XXX I the about X Can should just acres. your see initially little drill

Zach, this Herb. is

and as So another the fourth going to drilling Basin in soon a fourth June, we're but rig and to the we then picking be, up part in the [indiscernible] we on first, as late in quarter. conference into into should we'll And the Permian we're start over But I think we're moving RockStar, ready. acreage in then continue acreage on of year, XXXX. that going

the how pad that. doing we'll the execution much efficient We in be we haven't on budgeted terms and normal do when it. how there be quickly of put doing year frac We'll spread of we'll the

is been lining our we're out of that the a now. wells just So plans play the This Dean. have about in best sort it. excited really We're

what so And well lot We see horizontal offset and do of data, vertical confidence both up here. do can a given we're we really excited wells. to have

So that's plan, that. the no than really more

your of next question from And the Huang Company. Oliver TPH & comes line from

Congrats on the strong quarter.

the Martin, to key the acquisition I very about sand on wanted Just of up kind Spraberry asset, know Middle and the highlighted bit intervals are having Dawson follow Dean excited a you all as targets. little more.

any terms And the perspective? all any? within what's a opportunity if the color with commitments any thoughts respect you that of have to carry Just out, how Also planning asset to develop might set to initial from spacing you area? all the to in zones HBP are other

your our the as approach this that throughout conventional and at the your different plays. this spacing that, really the that lateral use normal with porosity quite much good with And stack what putting type so in look will for characteristic area, is wells Right same Permian assigned to return rock, last DSU. all, the now, is the Oliver, economics. sands economic -- In bit underpins more we where the usual from higher standpoint. the at a the mudrock a than optimize Yes. curve We prolific an targeting of really we're we'll It's first oil-saturated really of be a incremental well looking play. we're part optimizing length. not and

that be great wells. sure making basically will the we on economics that achieve So

bit some we'll first So that's the it'll just quite it, of there. in should drilling, wells probably offset be we getting southeast to been there, a get results from and But there's our up in results in well the year have be of next are some best that really the there. And Dean. we too. story half Basin ever well the of Permian the And already

all project just we Okay. to completed That's better. helpful trying color. can the most much now question, is great second little in there just Chalk should Or years? It investment the level And still the about couple way? And optimal we satisfy ops where see certainly pretty future for volumes see on point of from just sounds oil growth sort in at of there. of positive Texas, flowed the Or does some like over But might next Austin out South are at point. constraint? But how bit the any a of front? really that think to this be handling it's a understand the update this this we

to I'm year Yes, we Oliver, back a about to going ago. said what just refer

period expanding out where to developing. were were we So synced X-year the oil we pipeline progressively carry over with up the a

extension second that did and year, quarter, we So the part, third of year. year, we the that pipeline be second the a we in early and finished This next did there will part. first last

timely with that at it really other adjacent a so very that we wells oily efficiently, quite couple relieved The are mitigate we means doesn't constraints try things It we to each efficiently, long at we affect is and the time. that just what to of that But But and It we're wind flow only constraints stretches that's out and The on pads plateau bring want drives up schedule wells this [indiscernible] put and would longer. on how doing strongly. the that time it. that. all. can we

planning but line relieved. are to up things continue is, constraints tightly, we manage -- will but bottom So the manage if tightly. things constraints don't The to the pop yes, we're

comes line KeyBanc question Tim of Markets. the next your And Rezvan from from Capital

I I hit think on Oliver to plan ask. what

So your mystery you're cash sheet pivot this the wanted? context of think Is put I able Basin -- balance with of you on could X,XXX now, that acres. the How trying net to getting notes there redeem not that about kind acreage you more talked the to you're close about of decision may time wondering that think to right kind your sort par is asset, share in the of Do was I'm are set big information callable that right you to together at be if now. that and opportunity I some Midland marketplace? pursuing? you the to

That's only just Slide see showed think we've mentioned get we most that And at XX,XXX Tim, additional recent we that. around heads still up some give opportunity acquired I that this Conference XXXX newly you acreage. a XX, the that JPMorgan acreage Yes. to I'll acres. on the before

to are yet X,XXX like disclosed the where haven't expand. acres We we'd that

So color. really more we haven't given

will point. in things. And you won't go next we'll we're to based be about year We until be the sort planning some mid those at the there, wells we timing some of once sharing on results, have way seeing but

no-brainer. mature your one. the right add Those is don't the It's a coupon notes Tim. for good on just cash pretty -- that and I'll . 'XX to a Yes. to question, years, couple sheet balance of close a carrying now It's me is for

X% is cash close to Our pretty now. earning

liquidity opportunistic negative to to So and it's conservative a be cash thing. some able is big a and -- carry good always more not be have and

this how to And sense. sort more you went of one And kind formation to I pin guess, December, potential then your you on good of Dean you what there's detail spacing. I X-wells-per-unit the on on seem sort of and of add there's question, makes of Or and prolific think a Do you I the down is. type could of in sort is spoke back you the development? hoping kind kind was Dean marketplace, view Okay. the more in a on about debate prolific great to That believe see you more there inventory? you Herb, opportunity. circling into just context in firmly more that in we distinct like if traditionally trying give and area. little been highly view a little in -- Can and some this a because

Yes. people different about would it. views so -- work Tim, everywhere. understand I have why really it doesn't It's

would where geoscience they they allow productivity. that where to of and really are porosity nature have the for is the sands, the and are high and understand You strong oil saturated, the where

quite a So takes bit detailed mapping. of that

horizontals confirm wells You can have. the helps that really there's then process it you vertical thought the when with and start offset to

here the sands Dean, are the the thin, and really the okay, throughout the and here here the basin for there are Dean everyone would isn't what we've I where extremely that's And areas it And we've work everyone's well. it on. acreage, but homed So in and mapped say on Dean sands works, said, be certain will too wet, are thick. would here,

the call, So identify mapped will top-tier give, underpinned which is our existing our returns, RockStar which that performance. what we've what through in to I spots sweet Dean position, Northwest had that we've

Okay.

Okay. helpful. That's

as So we process to inventory guess of find should think about this sort to perspective an continue I for Dean... the more ongoing

we the whether say land to would inventory I and can we Yes. not. it's get then access is, know where or the

Okay.

Okay. question. if the sort X just could close Fair in the I And loop sneak X to handling of enough. on then last oil

could Texas final if constraints in once the for medium-term there be sort year? But next that South of there's would issues theory, build-out. in So year, is next with years handle that year next your done that many piece build some development

we'll But all happen, it, in southern we'll case, on. get Yes, unlikely is just before in does the pads bring sure that we're Tim. But we pads make most It's if would get And it it. we there line on the always It's early. that's last this issue. we it of of that extension ahead have an left. do that

Instructions]. [Operator

from Your next Scott question Capital comes RBC the Hanold from of line Markets.

forward? of some might of good what want side about that gave buybacks. Do comfortable with feel yield -- things. go where you think how context a the little where it you going is? you on all do color You think the you and Maybe Do dividend pretty about

Scott, We kind question. I last level, September, guess, that Wade. October. established it's of dividend Good

take We'll it in flow free leave tuned. we'll reassess said, predict year. soon doing this a coming of as decide I based whether or our on we anything on commodity assume generation stay market can certainly it can't and view up we wanted be not and And But is point. to you that increase coming we'd it -- years, the cash be or so the we'll occasionally. So and at where

a larger But mid-cap, on can of how with with think to give how you about S&P us like Any on you Do you it? Yes. of kind sizing this in sizing do about think you the if some some peers XXX, caps, percent with want that? be context flow? it competitive cash like view

No, to shareholders to can compare compare we at I a with we it in this want a is point. much it price answer Whether low I to, -- question. to too What we hard to that is count Yes. accomplish great that's dividend even very on environments. want really commodity who want sustainable think

think we I used before.

do the think fits what we analysis bill. and we'll determine So same again that

you some enough. few on a little context maybe about Fair going XXXX, mid-single-digit I more gets some gave the around growth. give you're thinking And thinking think Can a momentum Okay. how with -- year. -- you into breadcrumbs that, around Permian was there has that context next and

to tailwind cost how budget? think implications would of kind So allocation if some you savings you further any capital about the have discuss and of kind that can

then cash going I'll a we're free be is so Commodity Yes. of going as next the as number at capital I hopefully. price better. months can closely mean, here to about Herb level, Deflation costs next higher flow and watching a that what and to next or answer is it and that that, allocation, determining lower big say far kind appears a X really be year. year. will question, like stabilizing look word

allocation So coming going much coming but going in of determining think, a big free be first, how cash some for we're decisions thing flow there I be to to will us that, is have months. the out

mid-single-digit add. We growth. see just exactly right. you've do I'll heard a Scott, then, And Yes. Yes,

leaning in good bit little Permian would did allocate rig through We obviously, long the haven't more we we'll alone this running next quite that. to than more will up it's for environment year. into the it is identified commodity But We're picking the the that and and just just fourth Basin. Midland oily quarter, year fourth and And a be last be we year. how

So that's really what we're planning to do.

at I call some questions further for no this time. to Vogel, back are Mr. Herb you remarks. closing there And over turn the final

with we successes, deliver Rob, a Okay. to you your look our pleased first all and you, thank trajectory Well, and value build interest, this to very seeing upcoming continue of forward and number positioned events. returns. and for are we we're Thank you well at half to

you today's concludes your Thank call. This conference for participation.

You may now disconnect.