- Record quarterly average daily
production of 147 MBOE per day, compared to guidance range of 136 -
143 MBOE per day; quarterly production mix of 53% liquids/47%
natural gas.
- Quarterly GAAP net income of $59.8
million, or $0.88 per diluted share; adjusted quarterly net income
of $106.5 million, or $1.56 per diluted share.
- Record quarterly adjusted EBITDAX of
$423.4 million; quarterly GAAP cash provided by operating
activities of $415.4 million.
- Announces agreement for acquisition
of approximately 61,000 net acres adjacent to Company's Gooseneck
prospect for $330 million.
- Tests of alternative completion
designs in operated Eagle Ford and Three Forks show significant
improvement to program economics.
SM Energy Company (NYSE: SM) announces its financial results for
the second quarter of 2014 and provides an operations update. In
addition, a new presentation concerning the Company's second
quarter earnings and operations update will be posted on the
Company's website at www.sm-energy.com. This presentation will be
referenced during the conference call scheduled for 8:00 a.m.
Mountain Time (10:00 a.m. Eastern Time) on July 30, 2014.
Information for the call can be found below.
SECOND QUARTER 2014 RESULTS
SM Energy reported net income for the second quarter of 2014 of
$59.8 million, or $0.88 per diluted share. This compares to
net income of $76.5 million, or $1.13 per diluted share, for the
same period of 2013.
Adjusted net income for the second quarter of 2014 was $106.5
million, or $1.56 per diluted share, compared to adjusted net
income of $51.8 million, or $0.76 per diluted share, for the same
period of 2013. Adjusted net income excludes certain items that the
Company believes affect the comparability of operating results and
are generally items whose timing and/or amount cannot be reasonably
estimated.
Earnings before interest, taxes, depreciation, depletion,
amortization, accretion, and exploration expense ("adjusted
EBITDAX") set a new quarterly record of $423.4 million in the
second quarter of 2014, an increase of 24% from $342.5 million for
the same period of 2013.
Adjusted net income and adjusted EBITDAX are non-GAAP financial
measures. Please refer to the respective reconciliations in the
Financial Highlights section at the end of this release for
additional information about these measures.
Total operating revenues for the second quarter of 2014 were
$675.0 million compared to $559.4 million for the same period of
2013, a 21% increase from period to period. The table below
provides the average realized prices received by product, as well
as the adjusted prices received after taking into account cash
settlements for derivative transactions:
Average Realized Commodity Prices for the Three Months
Ended June 30, 2014
Before the effect ofderivative
cashsettlements
After the effectof derivative
cashsettlements
Oil ($/Bbl) $ 91.78 $ 86.60 Gas ($/Mcf) $ 4.87
$ 4.51 Natural gas liquids ($/Bbl) $ 35.61 $ 35.59 Equivalent
($/BOE) $ 48.93 $ 46.41
The table below presents key performance measures and metrics,
as well as previously provided guidance for the second quarter of
2014:
Production
Reported 2Q14 Guidance
Average daily production (MBOE/d) 147.0 136 - 143 Total
production (MMBOE) 13.38 12.4 - 13.0
Costs LOE
($/BOE) $4.69 $4.80 - $5.05 Transportation ($/BOE) $6.20
$6.10 - $6.50
Production taxes (% of pre-derivative oil, gas, and NGL revenue)
4.9% 4.5% - 5.0% G&A - Cash ($/BOE) $2.24 $2.25 - $2.45
G&A - Cash NPP ($/BOE) $0.15 $0.25 - $0.40 G&A - Non-cash
($/BOE)
$0.46 $0.40 - $0.60 Total G&A
($/BOE) $2.85 $2.90 - $3.45 DD&A ($/BOE) $14.03 $14.00 -
$14.75
Reported average daily production increased by 6% from
production of 138.6 MBOE per day in the first quarter of 2014. In
the second quarter of 2014, SM Energy's reported production mix was
29% oil/condensate, 24% NGLs, and 47% natural gas.
In the second quarter, the Company reported per unit costs
in-line or slightly below its previously announced guidance
range.
OPERATIONS UPDATE
Eagle Ford Shale
The Company's operated net production in the Eagle Ford shale
averaged 83.2 MBOE per day in the second quarter of 2014, a 9%
sequential increase from the prior quarter and a 26% increase over
the second quarter of 2013. During the second quarter, SM Energy
made 23 flowing completions in its operated Eagle Ford Shale
program.
The Company has been shifting its Eagle Ford drilling and
completion program toward longer lateral wells and completions with
higher sand loading. Although the Company's longer lateral testing
is ongoing, sufficient data on the Company's increased sand loading
tests is now available from wells in Area 2 of its operated Eagle
Ford shale position to conclude that wells completed with higher
sand loadings are more productive, have improved initial condensate
yields, and have significantly improved economics. Additional
details regarding this testing program are included in the
Company's presentation and will be discussed on the Company’s
earnings call.
In the non-operated portion of the Company's Eagle Ford shale
program, net production for the second quarter of 2014 averaged
23.8 MBOE per day, a 2% sequential increase over the first quarter
of 2014 production of 23.4 MBOE per day and a 37% increase over the
second quarter of 2013. The operator made approximately 95 flowing
completions during the second quarter. Consistent with previous
expectations, the drilling and completion carry provided under the
Company's Acquisition and Development Agreement with Mitsui was
completed in the second quarter of 2014. With the completion of the
carry, the Company is now responsible for funding its proportionate
share of drilling and completion costs.
Bakken / Three Forks
In the second quarter of 2014, SM Energy's average daily
production for its Bakken/Three Forks program was 16.5 MBOE per
day. Average daily production for the quarter increased by 3% over
the prior quarter and increased 21% from the second quarter of
2013. During the second quarter, the Company made 12 gross flowing
completions in its operated Bakken/Three Forks program.
Earlier today, the Company entered into an agreement to acquire
approximately 61,000 net acres in Divide and Williams Counties,
North Dakota directly adjacent to its Gooseneck area for $330
million. Highlights of the transaction, which is expected to add
significant drilling inventory, include:
- Associated net production of
approximately 3,200 BOE/d (91% oil, 1,500 BTU rich gas)
- Properties are 90% operated and
approximately 70% held by production
- Interests in 126 drilling spacing
units, 81 of which will be operated by SM Energy
- Working interest for operated spacing
units is expected to range between 37.5% – 50.0%
The transaction has an effective date of July 1, 2014, is
expected to close by the end of the third quarter of 2014, and is
subject to customary closing conditions and adjustments. The
Company expects to fund the acquisition with cash on hand and
borrowings under its existing credit facility.
Directly adjacent to the acquisition area, SM Energy has seen
improvements in its Three Forks program recently due to faster
drilling times and improved completions, where results to date
indicate that recent wells have higher sustained production rates
than older wells. Additional details regarding Gooseneck Three
Forks well optimization are included in the Company's presentation
and will be discussed on the Company's earnings call.
Powder River Basin
SM Energy completed one well in its Powder River Basin acreage
in the second quarter of 2014. The Rush State 4277-36-1FH (SM 100%
WI) with a 3,788 foot effective lateral length had a peak 30-day
initial production rate of 737 BOE per day (2-stream, 85% oil).
During 2014, the Company has acquired or entered into transactions
to acquire approximately 33,000 net acres, resulting in a total of
approximately 166,000 net acres in the basin. SM Energy added a
third rig to its program during the second quarter and has
contracted a fourth rig for delivery in the third quarter of
2014.
Permian Basin
During the second quarter of 2014, the Company made 4 flowing
completions in its Sweetie Peck property. During the quarter, the
Company completed two of its most productive wells to date in this
program on a peak initial production per lateral foot basis. The
Dorcus 4236H (SM 100% WI) had a peak 30-day initial production rate
of 1,093 BOE per day on a two-stream basis and the Dorcus 3036H (SM
100% WI), the Company's first long lateral well in Sweetie Peck
with an approximately 7,650 foot effective lateral, had a peak
30-day initial production rate of 1,559 BOE per day on a two-stream
basis. In its Buffalo prospect in the northern Midland Basin, the
Company spud its first Wolfcamp D test at the end of the second
quarter.
FINANCIAL POSITION AND LIQUIDITY
As of the end of the second quarter, the Company had $163.8
million of cash on hand and outstanding borrowings of $1.6 billion,
which were comprised entirely of long term notes. As of the end of
the second quarter, SM Energy had an undrawn credit facility with
$1.3 billion in lender commitments. As of June 30, 2014, the
Company's debt to twelve month trailing adjusted EBITDAX remained
at 1.0 times and its debt-to-book capitalization ratio was 48%.
CAPITAL, PRODUCTION, AND PERFORMANCE GUIDANCE
SM Energy is reviewing its capital budget for 2014 in light of
its recent Bakken/Three Forks acquisition and expects to provide
updated capital, production, and performance guidance in mid-August
2014.
EARNINGS CALL INFORMATION
The Company has scheduled a teleconference to discuss these
results and other operational matters for July 30, 2014,
at 8:00 a.m. Mountain time (10:00 a.m. Eastern time). Conference
dial-in information is included below. A telephonic replay of the
call will be available approximately two hours after the call
through August 13, 2014.
Call Type Phone Number
Conference ID Domestic Participant
877-303-1292 72768736 Domestic
Replay 855-859-2056
72768736 International Participant
315-625-3086 72768736 International Replay
404-537-3406 72768736
This call is being webcast live and can be accessed at SM Energy
Company's website at www.sm-energy.com. An audio recording of the
conference call will be available at that site through August 13,
2014.
INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of securities laws, including forecasts and projections.
The words “anticipate,” “assume,” “believe,” “budget,” “estimate,”
“expect,” “forecast,” “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.
These risks include factors such as the availability, proximity and
capacity of gathering, processing and transportation facilities;
the uncertainty of negotiations to result in an agreement or a
completed transaction; the uncertain nature of announced
acquisition, divestiture, joint venture, farm down or similar
efforts and the ability to complete any such transactions; the
uncertain nature of expected benefits from the actual or expected
acquisition, divestiture, joint venture, farm down or similar
efforts; the volatility and level of oil, natural gas, and natural
gas liquids prices; uncertainties inherent in projecting future
rates of production from drilling activities and acquisitions; the
imprecise nature of estimating oil and gas reserves; 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; uncertainty regarding the ultimate
impact of potentially dilutive securities; and other such matters
discussed in the “Risk Factors” section of SM Energy's 2013 Annual
Report on Form 10-K. 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 COMPANY FINANCIAL HIGHLIGHTS (unaudited)
June 30, 2014
Production
Data
For the Three Months EndedJune
30,
For the Six Months EndedJune
30,
2014 2013
PercentChange
2014 2013
PercentChange
Average realized sales price, before the effects of
derivative cash settlements: Oil (per Bbl) $ 91.78 $ 90.00 2
% $ 90.41 $ 90.82 — % Gas (per Mcf) 4.87 4.28 14 % 5.04 3.96 27 %
NGL (per Bbl) 35.61 34.09 4 % 37.13 35.24
5 % Equivalent (per BOE) $ 48.93 $ 44.57 10 % $ 49.43 $
44.95 10 %
Average realized sales price, including the
effects of derivative cash settlements: Oil (per Bbl) $
86.60 $ 89.64 (3 )% $ 86.85 $ 90.45 (4 )% Gas (per Mcf) 4.51 4.23 7
% 4.67 4.08 14 % NGL (per Bbl) 35.59 36.00 (1 )%
35.67 36.81 (3 )% Equivalent (per BOE) $ 46.41 $
44.66 4 % $ 47.00 $ 45.52 3 %
Production: Oil
(MMBbls) 3.89 3.23 21 % 7.55 6.36 19 % Gas (Bcf) 37.96 39.15 (3 )%
73.50 71.39 3 % NGL (MMBbls) 3.16 2.24 41 % 6.05
4.08 48 % MMBOE 13.38 11.99 12 % 25.85 22.34 16 %
Average daily production: Oil (MBbls per day) 42.8
35.5 21 % 41.7 35.1 19 % Gas (MMcf per day) 417.2 430.2 (3 )% 406.1
394.4 3 % NGL (MBbls per day) 34.7 24.6 41 % 33.4
22.5 48 % MBOE 147.0 131.8 12 % 142.8 123.4 16 %
Per BOE Data: Realized price before the effects of
derivative cash settlements $ 48.93 $ 44.57 10 % $ 49.43 $ 44.95 10
% Lease operating expense 4.69 4.69 — % 4.64 4.96 (6 )%
Transportation costs 6.20 5.59 11 % 6.27 5.12 22 % Production taxes
2.38 2.21 8 % 2.29 2.24 2 % General and administrative 2.85
2.95 (3 )% 2.83 3.03 (7 )% Operating profit,
before the effects of derivative cash settlements $ 32.81 $ 29.13
13 % $ 33.40 $ 29.60 13 % Derivative cash settlements (2.52 ) 0.09
(2,900 )% (2.43 ) 0.57 (526 )% Operating profit,
including the effects of derivative cash settlements $ 30.29
$ 29.22 4 % $ 30.97 $ 30.17 3 % Depletion,
depreciation, amortization, and asset retirement obligation
liability accretion $ 14.03 $ 18.82 (25 )% $ 14.12 $ 19.00 (26 )%
SM ENERGY COMPANY FINANCIAL HIGHLIGHTS
(unaudited) June 30, 2014
Condensed
Consolidated Statements of Operations
(in thousands, except per share amounts)
For the Three MonthsEnded June
30,
For the Six MonthsEnded June
30,
2014 2013 2014 2013 Operating revenues:
Oil, gas, and NGL production revenue $ 654,661 $ 534,520 $
1,277,770 $ 1,004,095 Other operating revenues 20,319 24,840
29,930 39,445 Total operating revenues 674,980
559,360 1,307,700 1,043,540
Operating expenses: Oil, gas, and NGL production expense 177,598
149,737 341,307 275,370
Depletion, depreciation, amortization, and
asset retirementobligation liability accretion
187,781 225,731 364,996 424,440 Exploration 24,270 20,657 45,605
36,055 Impairment of proved properties — 34,552 — 55,771
Abandonment and impairment of unproved properties 164 4,339 2,965
4,641 General and administrative 38,115 35,374 73,166 67,654 Change
in Net Profits Plan liability (7,105 ) (5,438 ) (8,881 ) (7,363 )
Derivative loss (gain) 126,469 (85,190 ) 224,131 (54,618 ) Other
operating expenses 5,972 35,314 14,061 51,108
Total operating expenses 553,264 415,076
1,057,350 853,058 Income from operations
121,716 144,284 250,350 190,482 Non-operating income
(expense): Interest expense (24,040 ) (21,581 ) (48,230 ) (40,682 )
Other, net (1,847 ) 24 (1,821 ) 36 Income
before income taxes 95,829 122,727 200,299 149,836 Income tax
expense (36,049 ) (46,205 ) (74,912 ) (56,587 )
Net
income $ 59,780 $ 76,522
$ 125,387 $ 93,249
Basic weighted-average common shares outstanding 67,069
66,295 67,063 66,254 Diluted
weighted-average common shares outstanding 68,239 67,893
68,180 67,711
Basic net income per
common share $ 0.89 $ 1.15
$ 1.87 $ 1.41
Diluted net income per common share $
0.88 $ 1.13 $ 1.84
$ 1.38 SM ENERGY
COMPANY FINANCIAL HIGHLIGHTS (unaudited) June 30,
2014
Condensed
Consolidated Balance Sheets
(in thousands, except share amounts)
June 30, December
31, ASSETS 2014 2013 Current assets: Cash
and cash equivalents $ 163,794 $ 282,248 Accounts receivable
312,415 318,371 Derivative asset 3,613 21,559 Deferred income taxes
12,086 10,749 Prepaid expenses and other 15,007 14,574
Total current assets 506,915 647,501
Property and equipment (successful efforts method): Proved oil and
gas properties 6,151,765 5,637,462 Less - accumulated depletion,
depreciation, and amortization (2,883,506 ) (2,583,698 ) Unproved
oil and gas properties 388,336 271,100 Wells in progress 495,052
279,654
Oil and gas properties held for sale net
of accumulated depletion, depreciation and amortization of $23,697
and $7,390, respectively
23,935 19,072 Other property and equipment, net of accumulated
depreciation of $33,529 and $28,775, respectively 258,619
236,202 Total property and equipment, net 4,434,201
3,859,792 Noncurrent assets: Derivative asset 1,300
30,951 Restricted cash 5,499 96,713 Other noncurrent assets 56,120
70,208 Total other noncurrent assets 62,919
197,872
Total Assets $ 5,004,035
$ 4,705,165 LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and
accrued expenses $ 592,493 $ 606,751 Derivative liability 92,088
26,380 Other current liabilities — 6,000 Total
current liabilities 684,581 639,131 Noncurrent
liabilities: Revolving credit facility — — Senior Notes 1,600,000
1,600,000 Asset retirement obligation 117,916 115,659 Asset
retirement obligation associated with oil and gas properties held
for sale 2,760 3,033 Net Profits Plan liability 48,104 56,985
Deferred income taxes 725,408 650,125 Derivative liability 52,847
4,640 Other noncurrent liabilities 26,467 28,771
Total noncurrent liabilities 2,573,502 2,459,213
Stockholders’ equity:
Common stock, $0.01 par value -
authorized: 200,000,000 shares; issued: 67,116,732 and
67,078,853shares outstanding, respectively; net of treasury shares:
67,116,732 and 67,056,441, respectively
671 671 Additional paid-in capital 273,664 257,720 Treasury stock,
at cost: zero and 22,412 shares, respectively — (823 ) Retained
earnings 1,476,703 1,354,669 Accumulated other comprehensive loss
(5,086 ) (5,416 ) Total stockholders’ equity 1,745,952
1,606,821
Total Liabilities and Stockholders’ Equity
$ 5,004,035 $ 4,705,165
SM ENERGY COMPANY FINANCIAL HIGHLIGHTS
(unaudited) June 30, 2014
Condensed
Consolidated Statements of Cash Flows
(in thousands)
For the Three MonthsEnded June
30,
For the Six MonthsEnded June
30,
2014 2013 2014 2013 Cash flows from
operating activities: Net income $ 59,780 $ 76,522 $ 125,387 $
93,249 Adjustments to reconcile net income to net cash provided by
operating activities: Gain on divestiture activity (2,526 ) (6,280
) (5,484 ) (5,706 ) Depletion, depreciation, amortization, and
asset retirement obligation liability accretion 187,781 225,731
364,996 424,440 Exploratory dry hole expense 6,459 5,727 6,459
5,886 Impairment of proved properties — 34,552 — 55,771 Abandonment
and impairment of unproved properties 164 4,339 2,965 4,641
Stock-based compensation expense 7,997 9,955 14,341 18,068 Change
in Net Profits Plan liability (7,105 ) (5,438 ) (8,881 ) (7,363 )
Derivative loss (gain) 126,469 (85,190 ) 224,131 (54,618 )
Derivative cash settlement (loss) gain (33,680 ) 2,211 (62,620 )
14,003 Amortization of deferred financing costs 1,477 1,363 2,954
2,440 Deferred income taxes 35,537 45,959 73,911 56,239 Plugging
and abandonment (1,894 ) (2,368 ) (3,219 ) (3,746 ) Other, net
(1,724 ) 3,933 (4,827 ) 5,769 Changes in current assets and
liabilities: Accounts receivable (11,905 ) (37,120 ) (2,558 )
(59,284 ) Prepaid expenses and other 417 (637 ) 1,302 (32 )
Accounts payable and accrued expenses 48,178 40,804
(13,704 ) 46,598
Net cash provided by operating
activities 415,425 314,063
715,153 596,355 Cash flows from
investing activities: Net proceeds from sale of oil and gas
properties 44,842 16,036 46,821 20,343 Capital expenditures
(426,841 ) (352,852 ) (778,580 ) (733,992 ) Acquisition of proved
and unproved oil and gas properties (98,619 ) (59,156 ) (98,619 )
(59,201 ) Other, net (6,484 ) (2,915 ) (2,257 ) (4,940 )
Net
cash used in investing activities (487,102 )
(398,887 ) (832,635 ) (777,790
) Cash flows from financing activities: Proceeds from
credit facility — 293,000 — 516,500 Repayment of credit facility —
(695,000 ) — (828,500 ) Deferred financing costs related to credit
facility — (3,444 ) — (3,444 ) Net proceeds from 2024 Notes —
490,820 — 490,820 Proceeds from sale of common stock 2,490 2,880
2,490 3,652 Dividends paid (3,353 ) (3,314 ) (3,353 ) (3,314 )
Other, net (101 ) (29 ) (109 ) (29 )
Net cash provided by (used
in) financing activities (964 ) 84,913
(972 ) 175,685 Net change
in cash and cash equivalents (72,641 ) 89 (118,454 ) (5,750 ) Cash
and cash equivalents at beginning of period 236,435
87 282,248 5,926
Cash and cash equivalents
at end of period $ 163,794 $
176 $ 163,794 $
176 SM ENERGY COMPANY FINANCIAL
HIGHLIGHTS (unaudited) June 30, 2014
Adjusted Net
Income
(in thousands, except per share data)
Reconciliation of
net income (GAAP) to adjusted net income (Non-GAAP):
For the Three MonthsEnded June
30,
For the Six MonthsEnded June
30,
2014 2013 2014 2013 Reported net
income (GAAP) $ 59,780 $ 76,522 $ 125,387 $ 93,249
Adjustments net of tax: (1) Change in Net Profits Plan liability
(4,462 ) (3,393 ) (5,577 ) (4,580 ) Derivative loss (gain) 79,423
(53,159 ) 140,754 (33,973 ) Derivative cash settlement (loss) gain
(21,151 ) 1,380 (39,325 ) 8,710 Gain on divestiture activity (1,586
) (3,919 ) (3,444 ) (3,549 ) Impairment of proved properties —
21,561 — 34,690 Abandonment and impairment of unproved properties
103 2,708 1,862 2,887 Other (2) (5,558 ) 10,107 (5,558 ) 10,075
Adjusted
net income (Non-GAAP) (3) $ 106,549 $ 51,807
$ 214,099 $ 107,509 Diluted
weighted-average common shares outstanding: 68,239 67,893
68,180 67,711 Adjusted net income per
diluted common share: $ 1.56 $ 0.76 $ 3.14 $
1.59
(1) For the three and six-month period
ended June 30, 2014, adjustments are shown net of tax and are
calculated using a tax rate of 37.2%, which approximates the
Company's statutory tax rate for that period, as adjusted for
ordinary permanent differences. For the three and six-month period
ended June 30, 2013, adjustments are shown net of tax using the
Company's effective rate as calculated by dividing income tax
expense by income before income taxes on the condensed consolidated
statement of operations.
(2) For the three and six-month period
ended June 30, 2014, adjustments include items related to
settlements from the previously disclosed litigation against
Endeavour Operating Corporation. These items are included as a
portion of other operating revenues and non-operating expense,
other, net, on the Company's condensed consolidated statement of
operations. For the three and six-month period ended June 30, 2013,
adjustments include items related to an agreed clarification
concerning royalty payment provisions of various leases on certain
South Texas & Gulf Coast acreage. These items are included as a
portion of other operating expense on the Company's condensed
consolidated statement of operations.
(3) Adjusted net income excludes certain
items that the Company believes affect the comparability of
operating results and generally are items whose timing and/or
amount cannot be reasonably estimated. These items include non-cash
adjustments and impairments such as the change in the Net Profits
Plan liability, derivative loss, derivative cash settlement (loss)
gain, impairment of properties, and (gain) loss on divestiture
activity. The non-GAAP measure of adjusted net income 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 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 should not be considered in isolation or as a
substitute for net income, income from operations, cash provided by
operating activities or other income, profitability, cash flow, or
liquidity measures prepared under GAAP. Since adjusted net income
excludes some, but not all, items that affect net income and may
vary among companies, the adjusted net income amounts presented may
not be comparable to similarly titled measures of other
companies.
SM ENERGY COMPANY FINANCIAL HIGHLIGHTS
(unaudited) June 30, 2014 Adjusted EBITDAX
(3)
(in thousands)
Reconciliation of net income (GAAP) to
adjusted EBITDAX (Non-GAAP) to net cash provided by
operating activities (GAAP)
For the Three MonthsEnded June
30,
2014 2013 2014 2013
Net income (GAAP) $ 59,780 $ 76,522 $ 125,387 $ 93,249
Interest expense 24,040 21,581 48,230 40,682 Other non-operating
(income) expense, net 1,847 (24 ) 1,821 (36 ) Income tax expense
36,049 46,205 74,912 56,587
Depreciation, depletion, amortization, and
asset retirementobligation liability accretion
187,781 225,731 364,996 424,440 Exploration (1) 22,603 18,383
42,541 31,607 Impairment of proved properties — 34,552 — 55,771
Abandonment and impairment of unproved properties 164 4,339 2,965
4,641 Stock-based compensation expense 7,997 9,955 14,341 18,068
Derivative loss (gain) 126,469 (85,190 ) 224,131 (54,618 )
Derivative cash settlement gain (loss) (33,680 ) 2,211 (62,620 )
14,003 Change in Net Profits Plan liability (7,105 ) (5,438 )
(8,881 ) (7,363 ) Gain on divestiture activity (2) (2,526 ) (6,280
) (5,484 ) (5,706 )
Adjusted EBITDAX (Non-GAAP) 423,419
342,547 822,339 671,325 Interest
expense (24,040 ) (21,581 ) (48,230 ) (40,682 ) Other non-operating
income (expense), net (1,847 ) 24 (1,821 ) 36 Income tax expense
(36,049 ) (46,205 ) (74,912 ) (56,587 ) Exploration (1) (22,603 )
(18,383 ) (42,541 ) (31,607 ) Exploratory dry hole expense 6,459
5,727 6,459 5,886 Amortization of deferred financing costs 1,477
1,363 2,954 2,440 Deferred income taxes 35,537 45,959 73,911 56,239
Plugging and abandonment (1,894 ) (2,368 ) (3,219 ) (3,746 ) Other,
net (1,724 ) 3,933 (4,827 ) 5,769 Changes in current assets and
liabilities 36,690 3,047 (14,960 ) (12,718 )
Net
cash provided by operating activities (GAAP) $ 415,425 $
314,063 $ 715,153 $ 596,355
(1) Stock-based compensation expense is a
component of exploration expense and general and administrative
expense on the accompanying condensed consolidated statements of
operations. Therefore, the exploration line items shown in the
reconciliation above will vary from the amount shown on the
accompanying condensed consolidated statements of operations
because of the component of stock-based compensation expense
recorded to exploration.
(2) Gain on divestiture activity is
included within the other operating revenues line item of the
accompanying condensed consolidated statements of operations.
(3) Adjusted EBITDAX represents income
before interest expense, other non-operating (income) expense,
income taxes, depreciation, depletion, amortization, and accretion,
exploration expense, property impairments, non-cash stock
compensation expense, derivative gains and losses net of cash
settlements, change in the Net Profits Plan liability, and gains
and losses on divestitures. Adjusted EBITDAX excludes certain items
that the Company believes 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 is presented because
the Company believes that it provides useful additional information
to investors and analysts, as a performance measure, for analysis
of the Company's ability to internally generate funds for
exploration, development, acquisitions, and to service debt. The
Company is also subject to a financial covenant under its credit
facility based on its debt to adjusted EBITDAX ratio. 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, income from operations, net cash
provided by operating activities, or profitability or liquidity
measures prepared under GAAP. Because adjusted EBITDAX excludes
some, but not all items that affect net income and may vary among
companies, the adjusted EBITDAX amounts presented may not be
comparable to similar metrics of other companies.
SM Energy CompanyMEDIA:Patty Errico, 303-830-5052perrico@sm-energy.comorINVESTORS:James Edwards,
303-837-2444ir@sm-energy.comorBrent
Collins, 303-863-4326ir@sm-energy.com
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