Attached files
| file | filename |
|---|---|
| 8-K - 8-K - SM Energy Co | form8-k022515.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
SM ENERGY PROVIDES 2015 GUIDANCE, OPERATIONAL UPDATE, AND REPORTS RESULTS FOR FOURTH QUARTER AND FULL-YEAR 2014
• | 2015 capital budget of $1.2 billion, a 43% reduction from 2014 CAPEX excluding acquisitions. |
• | Production guidance of 60.4 - 63.5 MMBOE, or 12% production growth year over year at the midpoint. |
• | Fourth quarter GAAP net income of $331.7 million or $4.91 per diluted share; adjusted net income of $70.9 million, or $1.05 per diluted share. |
• | Fourth quarter GAAP net cash provided by operating activities of $381.5 million; quarterly adjusted EBITDAX of $419.0 million. |
DENVER, CO February 24, 2015 - SM Energy Company (NYSE: SM) ("SM Energy" or the "Company") provides 2015 capital, production, and performance guidance, provides an update on the Company's operating activities, and reports financial results for the fourth quarter of 2014. In addition, a presentation regarding the aforementioned items has been 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 February 25, 2015. Information concerning access to the Company's earnings call can be found below.
MANAGEMENT COMMENTARY
Jay Ottoson, President and CEO, remarked, "SM Energy had a strong finish to 2014 as we continued to deliver on improvements in the productivity of our core development assets. We entered 2015 with a strong balance sheet and ample liquidity. Our entire focus now is to translate these competitive advantages into differential returns for our shareholders in what we believe will be a period of dramatic transition in our industry. We intend to accomplish this by rapidly reducing our activity level and positioning ourselves to generate strong, peer leading returns after costs adjust to the lower oil price environment."
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CAPITAL, PRODUCTION, AND PERFORMANCE GUIDANCE
In the table below, SM Energy provides 2015 capital expenditure guidance:
2015 Capital guidance | ||||||||||||
(in millions) | ||||||||||||
Program | Operated | Non-operated | Total | |||||||||
Eagle Ford | $ | 470 | $ | 135 | $ | 605 | ||||||
Bakken/Three Forks | 195 | 60 | 255 | |||||||||
Other | 170 | 15 | 185 | |||||||||
Drilling and Completion Subtotal | $ | 835 | $ | 210 | $ | 1,045 | ||||||
Non-drilling & New Ventures | 185 | |||||||||||
Total | $ | 1,230 | ||||||||||
In 2015, the Company plans to invest approximately $1.0 billion in drilling and completion ("D&C") capital, an approximately 44% reduction from $1.9 billion of D&C expenditures in 2014. SM Energy began 2015 with 17 operated rigs running and plans to reduce operated rig activity throughout the year, exiting 2015 with an expected 7 rigs. The capital allocation for the year focuses on minimizing outspend to protect the balance sheet and maintaining a level of activity that preserves the value of the Company's asset base. In its capital budget, the Company has assumed D&C cost reductions of 15% to 20% by year-end, depending on the basin. At recent strip pricing, the Company expects its 2015 capital expenditures to exceed 2015 adjusted EBITDAX by approximately $150 million and exit 2015 with a debt to trailing adjusted EBITDAX ratio of approximately 2.5 times without consideration for proceeds related to the previously announced Mid-Continent asset divestiture, which is expected to occur later this year.
Eagle Ford
The Company made 90 flowing completions in its operated Eagle Ford shale program in 2014, 23 of which were in the fourth quarter. At year-end 2014, SM Energy had 334 net wells producing. The Company's recent wells in this program, which have incorporated longer laterals and larger sand loadings, continue to meet or exceed Company expectations. In 2015, the Company plans to make approximately 75 flowing completions on its operated Eagle Ford shale acreage. Nearly all of the planned activity in 2015 will take advantage of enhanced well design, similar to wells drilled and completed in the second half of 2014.
In the Company's non-operated Eagle Ford program, the operator completed 86 gross wells in the fourth quarter of 2014. SM Energy has assumed a reduced level of activity in 2015.
Bakken/Three Forks
SM Energy made 46 gross flowing completions in its operated Bakken/Three Forks program in 2014, 13 of which were completed in the fourth quarter. At year-end 2014, SM Energy had 205
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net wells producing. The Company's recent Three Forks and Bakken wells in its Gooseneck asset continue to meet or exceed Company expectations. In 2015, the Company plans to make approximately 40 gross flowing completions on its operated Bakken/Three Forks acreage in the Williston Basin, with approximately 70% of the activity focused on its Gooseneck asset in Divide County, North Dakota.
Other
Of the remaining D&C capital for 2015, a majority will be allocated early in the year to the Company's operated PRB Frontier program. The capital allocated to this program will allow SM Energy to retain essentially all of its acreage.
Production
Based on the capital budget and program discussed above, SM Energy anticipates full-year 2015 production to range from 60.4 to 63.5 MMBOE (165 - 174 MBOE/d). The midpoint of the Company's provided guidance represents annual production growth of approximately 12% year over year. Production for the first quarter of 2015 is expected to be essentially flat to the fourth quarter of 2014, with production declining approximately 1% per quarter for the remainder of the year due to the reduction in rig activity and deferral of well completions throughout the year. The Company's production mix for 2015 is expected to be similar to that of 2014.
Production and cost guidance for full-year 2015 is provided in the table below:
FY 2015 | |
Production (MMBOE) | 60.4 – 63.5 |
Average daily production (MBOE/d) | 165 – 174 |
LOE ($/BOE) | $4.40 – $4.65 |
Ad Valorem ($/BOE) | $0.50 – $0.55 |
Transportation ($/BOE) | $6.25 – $6.55 |
Production Taxes (% of pre-derivative O&G revenue) | 4.5% – 5.0% |
G&A - cash ($/BOE) | $2.50 – $2.80 |
G&A - non-cash ($/BOE) | $0.30 – $0.40 |
G&A Total ($/BOE) | $2.80 – $3.20 |
DD&A ($/BOE) | $13.00 – $13.80 |
Effective income tax rate range | 36.3% - 37.5% |
% of income tax that is current | <3% |
General and administrative - cash for 2015 includes approximately $12.5 million, or $0.20/BOE, of non-recurring costs related to the expected mid-year closure of the Company's office in Tulsa, Oklahoma.
FOURTH QUARTER 2014 RESULTS
SM Energy posted GAAP net income for the fourth quarter of 2014 of $331.7 million, or $4.91 per diluted share, compared to net income of $7.0 million, or $0.10 per diluted share, for the
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same period of 2013. Adjusted net income for the fourth quarter was $70.9 million, or $1.05 per diluted share, compared to adjusted net income of $85.9 million, or $1.26 per adjusted diluted share, in the same period of 2013. Adjusted net income excludes certain items that the Company believes affect the comparability of operating results. Items excluded are generally one-time items or are items whose timing and/or amount cannot be reasonably estimated. Earnings before interest, taxes, depreciation, depletion, amortization, accretion, and exploration expense ("adjusted EBITDAX") were $419.0 million for the fourth quarter of 2014, an increase of 6% from $395.5 million for the same period in 2013.
Adjusted net income and adjusted EBITDAX are non-GAAP financial measures; please refer to the reconciliations in the accompanying Financial Highlights section at the end of this release for additional information about these measures.
SM Energy had average daily production of 176 MBOE/d for the fourth quarter of 2014. The production mix for the quarter was 32% oil/condensate, 45% gas, and 23% NGLs.
The table below presents actual production and per BOE cost metrics for the fourth quarter and full-year 2014, along with previously issued guidance for the fourth quarter and full-year 2014:
Guidance Comparison | For the Three Months | For the Twelve Months | |||||||||||||
Ended December 31, 2014 | Ended December 31, 2014 | ||||||||||||||
Actual | Guidance | Actual | Guidance | ||||||||||||
Production | |||||||||||||||
Average daily production (MBOE/d) | 175.8 | 152 | - | 159 | 151.1 | 145 | - | 147 | |||||||
Total production (MMBOE) | 16.17 | 13.9 | - | 14.7 | 55.14 | 52.9 | - | 53.6 | |||||||
Costs | |||||||||||||||
Lease operating expense ($/BOE) | $4.66 | $4.95 | - | $5.20 | $4.74 | $4.85 | - | $4.90 | |||||||
Transportation expense ($/BOE) | $5.77 | $6.05 | - | $6.35 | $6.11 | $6.20 | - | $6.30 | |||||||
Production taxes, as a percentage of pre-derivative oil, gas, and NGL revenue | 4.7 | % | 5.0 | % | - | 5.5% | 4.7 | % | 5.0 | % | - | 5.5% | |||
General and administrative - cash ($/BOE) | $2.80 | $2.25 | - | $2.45 | $2.43 | $2.26 | - | $2.31 | |||||||
General and administrative - cash related to Net Profits Plan ($/BOE) | $0.05 | $0.15 | - | $0.30 | $0.15 | $0.18 | - | $0.22 | |||||||
General and administrative - non-cash ($/BOE) | $0.38 | $0.35 | - | $0.55 | $0.45 | $0.44 | - | $0.50 | |||||||
General and administrative - Total ($/BOE) | $3.23 | $2.75 | - | $3.30 | $3.03 | $2.88 | - | $3.03 | |||||||
Depreciation, depletion, and amortization ($/BOE) | $13.56 | $14.00 | - | $14.75 | $13.92 | $14.05 | - | $14.25 | |||||||
Taxes | |||||||||||||||
Effective income tax rate | 37.4 | % | 37.0 | % | - | 37.5% | |||||||||
% of income tax that is current | 0.2 | % | <3% | ||||||||||||
In the fourth quarter of 2014, cash G&A expenses per unit were higher than guidance due to performance-based bonus compensation, which was better than projected for the year as a result of Company performance exceeding its 2014 targets.
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PROVED RESERVES AND COSTS INCURRED
SM Energy's estimate of proved reserves as of December 31, 2014, was 547.7 MMBOE, which is an increase of 28% from 428.7 MMBOE at the end of 2013. These reserves are comprised of 169.7 MMBbl of oil/condensate, 1,466.5 Bcf of natural gas, and 133.5 MMBbl of NGLs.
The standardized measure of discounted future net cash flows at December 31, 2014, was $5.7 billion. The PV-10 of the Company's estimated proved reserves at December 31, 2014, was $7.6 billion, which was 38% greater than the prior year PV-10 of $5.5 billion. More than 80% of SM Energy's estimated proved reserves by value were audited by an independent reserve engineering firm. The Company believes its use of an independent reserve auditor is a matter of interest to current and potential shareholders, as well as investment professionals who follow the Company. More information on these items are included in the Company's Form 10-K for the year ended December 31, 2014, which is to be filed with the Securities and Exchange Commission on or around February 25, 2015.
Total costs incurred for 2014 were $2.7 billion and were unchanged from the Company's previous release dated February 2, 2015. See the financial highlights section at the end of this release for details concerning costs incurred.
FINANCIAL POSITION AND LIQUIDITY
As of December 31, 2014, SM Energy had total long-term debt of $2.4 billion, which included $166.0 million of outstanding borrowings on its revolving credit facility. At year-end, SM Energy's debt to trailing twelve month adjusted EBITDAX was 1.4 times and debt-to-book capitalization ratio was 51%. As of the end of the fourth quarter, SM Energy was in compliance with all covenants associated with its long-term debt.
EARNINGS CALL INFORMATION
The Company has scheduled a teleconference to discuss these results and other operational matters on February 25, 2015 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 March 11, 2015.
Call Type | Phone Number | Conference ID | ||
Domestic Participant | 877-303-1292 | 70918598 | ||
Domestic Replay | 855-859-2056 | 70918598 | ||
International Participant | 315-625-3086 | 70918598 | ||
International Replay | 404-537-3406 | 70918598 | ||
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 March 11, 2015.
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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 and uncertainties related to the costs of such 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 2014 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.
INFORMATION ABOUT PROVED RESERVES
This press release contains references to certain items pertaining to the process used to estimate the Company's proved reserves and their PV-10, which is equal to the standardized measure of discounted future net cash flows from proved reserves on the applicable date, before deducting future income taxes, discounted at 10 percent. SM Energy believes that the presentation of pre-tax PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to the Company's proved reserves prior to taking into account future corporate income taxes and the Company's current tax structure. The Company further believes investors and creditors use pre-tax PV-10 as a basis for comparison of the relative size and value of the Company's proved reserves to other peer companies. SM Energy's pre-tax PV-10 for estimated proved reserves as of December 31, 2014, may be reconciled to its standardized measure of discounted future net cash flows as of December 31, 2014, by reducing the Company's pre-tax PV-10 by the discounted future income taxes associated with such reserves. A reconciliation of these adjustments is provided below.
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Reconciliation of standardized measure (GAAP) to PV-10 (Non-GAAP): | |||
As of December 31, | |||
2014 | |||
(in millions) | |||
Standardized measure of discounted future net cash flows (GAAP) | $ | 5,698.8 | |
Add: 10 percent annual discount, net of income taxes | 3,407.2 | ||
Add: future undiscounted income taxes | 3,511.4 | ||
Undiscounted future net cash flows | 12,617.4 | ||
Less: 10 percent annual discount without tax effect | (5,000.5 | ) | |
PV-10 (Non-GAAP) | $ | 7,616.9 | |
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:
MEDIA:
Patty Errico, perrico@sm-energy.com, 303-830-5052
INVESTORS:
Brent Collins, ir@sm-energy.com, 303-863-4326
James Edwards, ir@sm-energy.com, 303-837-2444
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SM ENERGY COMPANY | |||||||||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||||||||
December 31, 2014 | |||||||||||||||||||||
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | ||||||||||||||||||||
Production Data: | 2014 | 2013 | Percent Change | 2014 | 2013 | Percent Change | |||||||||||||||
Average realized sales price, before the effects | |||||||||||||||||||||
of derivative settlements: | |||||||||||||||||||||
Oil (per Bbl) | $ | 62.60 | $ | 86.48 | (28 | )% | $ | 80.97 | $ | 91.19 | (11 | )% | |||||||||
Gas (per Mcf) | 3.87 | 3.98 | (3 | )% | 4.58 | 3.93 | 17 | % | |||||||||||||
NGL (per Bbl) | 25.97 | 38.63 | (33 | )% | 33.34 | 35.95 | (7 | )% | |||||||||||||
Equivalent (per BOE) | $ | 36.27 | $ | 44.86 | (19 | )% | $ | 45.01 | $ | 45.50 | (1 | )% | |||||||||
Average realized sales price, including the | |||||||||||||||||||||
effects of derivative settlements: | |||||||||||||||||||||
Oil (per Bbl) | $ | 73.55 | $ | 86.12 | (15 | )% | $ | 82.68 | $ | 89.92 | (8 | )% | |||||||||
Gas (per Mcf) | 3.91 | 4.27 | (8 | )% | 4.40 | 4.14 | 6 | % | |||||||||||||
NGL (per Bbl) | 30.71 | 38.34 | (20 | )% | 34.18 | 36.66 | (7 | )% | |||||||||||||
Equivalent (BOE) | $ | 40.94 | $ | 45.57 | (10 | )% | $ | 45.23 | $ | 45.92 | (2 | )% | |||||||||
Production: | |||||||||||||||||||||
Oil (MMBbls) | 5.1 | 3.8 | 36 | % | 16.7 | 13.9 | 19 | % | |||||||||||||
Gas (Bcf) | 43.9 | 39.5 | 11 | % | 152.9 | 149.3 | 2 | % | |||||||||||||
NGL (MMBbls) | 3.8 | 2.9 | 30 | % | 13.0 | 9.5 | 37 | % | |||||||||||||
MMBOE (6:1) | 16.2 | 13.2 | 22 | % | 55.1 | 48.3 | 14 | % | |||||||||||||
Average daily production: | |||||||||||||||||||||
Oil (MBbls/d) | 55.4 | 40.8 | 36 | % | 45.6 | 38.2 | 19 | % | |||||||||||||
Gas (MMcf/d) | 476.9 | 429.3 | 11 | % | 419.0 | 409.2 | 2 | % | |||||||||||||
NGL (MBbls/d) | 40.9 | 31.5 | 30 | % | 35.6 | 26.0 | 37 | % | |||||||||||||
MBOE/d (6:1) | 175.8 | 143.8 | 22 | % | 151.1 | 132.4 | 14 | % | |||||||||||||
Per BOE Data: | |||||||||||||||||||||
Realized price before the effects of derivative settlements | $ | 36.27 | $ | 44.86 | (19 | )% | $ | 45.01 | $ | 45.50 | (1 | )% | |||||||||
Lease operating expense | 4.66 | 4.62 | 1 | % | 4.74 | 4.82 | (2 | )% | |||||||||||||
Transportation costs | 5.77 | 5.67 | 2 | % | 6.11 | 5.34 | 14 | % | |||||||||||||
Production taxes | 1.70 | 2.01 | (15 | )% | 2.13 | 2.19 | (3 | )% | |||||||||||||
General and administrative | 3.23 | 3.63 | (11 | )% | 3.03 | 3.09 | (2 | )% | |||||||||||||
Operating profit, before the effects of derivative settlements | $ | 20.91 | $ | 28.93 | (28 | )% | $ | 29.00 | $ | 30.06 | (4 | )% | |||||||||
Derivative settlement gain | 4.67 | 0.71 | 558 | % | 0.22 | 0.42 | (48 | )% | |||||||||||||
Operating profit, including the effects of derivative settlements | $ | 25.58 | $ | 29.64 | (14 | )% | $ | 29.22 | $ | 30.48 | (4 | )% | |||||||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | $ | 13.56 | $ | 15.31 | (11 | )% | $ | 13.92 | $ | 17.02 | (18 | )% | |||||||||
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SM ENERGY COMPANY | |||||||||||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||
December 31, 2014 | |||||||||||||||
Consolidated Statements of Operations | |||||||||||||||
(in thousands, except per share amounts) | For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Operating revenues and other income: | |||||||||||||||
Oil, gas, and NGL production revenue | $ | 586,567 | $ | 593,668 | $ | 2,481,544 | $ | 2,199,550 | |||||||
Gain on divestiture activity | 594 | 28,484 | 646 | 27,974 | |||||||||||
Marketed gas system revenue | 7,200 | 11,590 | 24,897 | 60,039 | |||||||||||
Other operating revenues | 1,460 | 2,985 | 15,220 | 5,811 | |||||||||||
Total operating revenues and other income | 595,821 | 636,727 | 2,522,307 | 2,293,374 | |||||||||||
Operating expenses: | |||||||||||||||
Oil, gas, and NGL production expense | 196,181 | 162,754 | 715,878 | 597,045 | |||||||||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 219,277 | 202,640 | 767,532 | 822,872 | |||||||||||
Exploration | 49,696 | 21,769 | 129,857 | 74,104 | |||||||||||
Impairment of proved properties | 84,480 | 110,935 | 84,480 | 172,641 | |||||||||||
Abandonment and impairment of unproved properties | 57,151 | 37,646 | 75,638 | 46,105 | |||||||||||
General and administrative | 52,241 | 47,977 | 167,103 | 149,551 | |||||||||||
Change in Net Profits Plan liability | (14,569 | ) | (15,419 | ) | (29,849 | ) | (21,842 | ) | |||||||
Derivative (gain) loss | (616,734 | ) | 11,605 | (583,264 | ) | (3,080 | ) | ||||||||
Marketed gas system expense | 6,759 | 11,642 | 24,460 | 57,647 | |||||||||||
Other operating expenses | 2,854 | 4,889 | 4,658 | 30,076 | |||||||||||
Total operating expenses | 37,336 | 596,438 | 1,356,493 | 1,925,119 | |||||||||||
Income from operations | 558,485 | 40,289 | 1,165,814 | 368,255 | |||||||||||
Non-operating income (expense): | |||||||||||||||
Other, net | (68 | ) | 3 | (2,561 | ) | 67 | |||||||||
Interest expense | (27,703 | ) | (24,541 | ) | (98,554 | ) | (89,711 | ) | |||||||
Income before income taxes | 530,714 | 15,751 | 1,064,699 | 278,611 | |||||||||||
Income tax expense | (198,988 | ) | (8,755 | ) | (398,648 | ) | (107,676 | ) | |||||||
Net income | $ | 331,726 | $ | 6,996 | $ | 666,051 | $ | 170,935 | |||||||
Basic weighted-average common shares outstanding | 67,410 | 66,999 | 67,230 | 66,615 | |||||||||||
Diluted weighted-average common shares outstanding | 67,535 | 68,354 | 68,044 | 67,998 | |||||||||||
Basic net income per common share | $ | 4.92 | $ | 0.10 | $ | 9.91 | $ | 2.57 | |||||||
Diluted net income per common share | $ | 4.91 | $ | 0.10 | $ | 9.79 | $ | 2.51 | |||||||
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SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||
December 31, 2014 | |||||||
Consolidated Balance Sheets | |||||||
(in thousands, except per share amounts) | December 31, | December 31, | |||||
ASSETS | 2014 | 2013 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 120 | $ | 282,248 | |||
Accounts receivable | 322,630 | 318,371 | |||||
Derivative asset | 402,668 | 21,559 | |||||
Deferred income taxes | — | 10,749 | |||||
Prepaid expenses and other | 19,625 | 14,574 | |||||
Total current assets | 745,043 | 647,501 | |||||
Property and equipment (successful efforts method): | |||||||
Proved oil and gas properties | 7,348,436 | 5,637,462 | |||||
Less - accumulated depletion, depreciation, and amortization | (3,233,012 | ) | (2,583,698 | ) | |||
Unproved oil and gas properties | 532,498 | 271,100 | |||||
Wells in progress | 503,734 | 279,654 | |||||
Oil and gas properties held for sale, net of accumulated depletion, depreciation and amortization of $22,482 and $7,390, respectively | 17,891 | 19,072 | |||||
Other property and equipment, net of accumulated depreciation of $37,079 and $28,775, respectively | 334,356 | 236,202 | |||||
Total property and equipment, net | 5,503,903 | 3,859,792 | |||||
Noncurrent assets: | |||||||
Derivative asset | 189,540 | 30,951 | |||||
Restricted cash | — | 96,713 | |||||
Other noncurrent assets | 78,214 | 70,208 | |||||
Total other noncurrent assets | 267,754 | 197,872 | |||||
Total Assets | $ | 6,516,700 | $ | 4,705,165 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 640,684 | $ | 606,751 | |||
Derivative liability | — | 26,380 | |||||
Deferred tax liability | 142,976 | — | |||||
Other current liabilities | 1,000 | 6,000 | |||||
Total current liabilities | 784,660 | 639,131 | |||||
Noncurrent liabilities: | |||||||
Revolving credit facility | 166,000 | — | |||||
Senior Notes | 2,200,000 | 1,600,000 | |||||
Asset retirement obligation | 120,867 | 118,692 | |||||
Net Profits Plan liability | 27,136 | 56,985 | |||||
Deferred income taxes | 891,681 | 650,125 | |||||
Derivative liability | 70 | 4,640 | |||||
Other noncurrent liabilities | 39,631 | 28,771 | |||||
Total noncurrent liabilities | 3,445,385 | 2,459,213 | |||||
Stockholders' equity: | |||||||
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued: 67,463,060 and 67,078,853 shares outstanding, respectively; net of treasury shares: 67,463,060 and 67,056,441, respectively | 675 | 671 | |||||
Additional paid-in capital | 283,295 | 257,720 | |||||
Treasury stock, at cost: zero and 22,412 shares, respectively | — | (823 | ) | ||||
Retained earnings | 2,013,997 | 1,354,669 | |||||
Accumulated other comprehensive loss | (11,312 | ) | (5,416 | ) | |||
Total stockholders' equity | 2,286,655 | 1,606,821 | |||||
Total Liabilities and Stockholders' Equity | $ | 6,516,700 | $ | 4,705,165 | |||
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SM ENERGY COMPANY | |||||||||||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||
December 31, 2014 | |||||||||||||||
Consolidated Statements of Cash Flows | |||||||||||||||
(in thousands) | For the Three Months | For the Twelve Months | |||||||||||||
Ended December 31, | Ended December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income | $ | 331,726 | $ | 6,996 | $ | 666,051 | $ | 170,935 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Gain on divestiture activity | (594 | ) | (28,484 | ) | (646 | ) | (27,974 | ) | |||||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 219,277 | 202,640 | 767,532 | 822,872 | |||||||||||
Exploratory dry hole expense | 21,583 | (32 | ) | 44,427 | 5,846 | ||||||||||
Impairment of proved properties | 84,480 | 110,935 | 84,480 | 172,641 | |||||||||||
Abandonment and impairment of unproved properties | 57,151 | 37,646 | 75,638 | 46,105 | |||||||||||
Stock-based compensation expense | 8,126 | 6,852 | 32,694 | 32,347 | |||||||||||
Change in Net Profits Plan liability | (14,569 | ) | (15,419 | ) | (29,849 | ) | (21,842 | ) | |||||||
Derivative (gain) loss | (616,734 | ) | 11,605 | (583,264 | ) | (3,080 | ) | ||||||||
Derivative cash settlements | 39,375 | 9,347 | (28,419 | ) | 22,062 | ||||||||||
Amortization of debt discount and deferred financing costs | 1,713 | 1,476 | 6,146 | 5,390 | |||||||||||
Deferred income taxes | 199,600 | 6,936 | 397,780 | 105,555 | |||||||||||
Plugging and abandonment | (2,603 | ) | (2,493 | ) | (8,796 | ) | (9,946 | ) | |||||||
Other, net | 4,003 | (154 | ) | 1,069 | 2,775 | ||||||||||
Changes in current assets and liabilities: | |||||||||||||||
Accounts receivable | 14,705 | (33,285 | ) | 24,088 | (78,494 | ) | |||||||||
Prepaid expenses and other | (2,056 | ) | 2,559 | (1,822 | ) | 98 | |||||||||
Accounts payable and accrued expenses | 36,270 | 20,520 | 9,466 | 93,224 | |||||||||||
Net cash provided by operating activities | 381,453 | 337,645 | 1,456,575 | 1,338,514 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Net proceeds from sale of oil and gas properties | 1,990 | 404,351 | 43,858 | 424,849 | |||||||||||
Capital expenditures | (656,936 | ) | (432,181 | ) | (1,974,798 | ) | (1,553,536 | ) | |||||||
Acquisition of proved and unproved oil and gas properties | (85,276 | ) | 404 | (544,553 | ) | (61,603 | ) | ||||||||
Other, net | (2,542 | ) | 896 | (3,256 | ) | (2,613 | ) | ||||||||
Net cash used in investing activities | (742,764 | ) | (26,530 | ) | (2,478,749 | ) | (1,192,903 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Proceeds from credit facility | 749,000 | 226,500 | 1,285,500 | 1,203,000 | |||||||||||
Repayment of credit facility | (973,000 | ) | (254,500 | ) | (1,119,500 | ) | (1,543,000 | ) | |||||||
Debt issuance costs related to credit facility | (3,388 | ) | — | (3,388 | ) | (3,444 | ) | ||||||||
Net proceeds from Senior Notes | 589,991 | (89 | ) | 589,991 | 490,185 | ||||||||||
Repayment of 3.50% Senior Convertible Notes | — | — | — | — | |||||||||||
Proceeds from sale of common stock | 1,979 | 2,408 | 4,877 | 6,858 | |||||||||||
Dividends paid | (3,370 | ) | (3,349 | ) | (6,723 | ) | (6,663 | ) | |||||||
Net share settlement from issuance of stock awards | (48 | ) | (17 | ) | (10,624 | ) | (16,220 | ) | |||||||
Other, net | (2 | ) | 4 | (87 | ) | (5 | ) | ||||||||
Net cash provided by (used in) financing activities | 361,162 | (29,043 | ) | 740,046 | 130,711 | ||||||||||
Net change in cash and cash equivalents | (149 | ) | 282,072 | (282,128 | ) | 276,322 | |||||||||
Cash and cash equivalents at beginning of period | 269 | 176 | 282,248 | 5,926 | |||||||||||
Cash and cash equivalents at end of period | $ | 120 | $ | 282,248 | $ | 120 | $ | 282,248 | |||||||
11
SM ENERGY COMPANY | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
December 31, 2014 | |||||||||||||||
Adjusted Net Income | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||
Reconciliation of net income (GAAP) | For the Three Months | For the Twelve Months | |||||||||||||
to adjusted net income (Non-GAAP): | Ended December 31, | Ended December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Actual net income (GAAP) | 331,726 | $ | 6,996 | $ | 666,051 | $ | 170,935 | ||||||||
Adjustments net of tax: (1) | |||||||||||||||
Change in Net Profits Plan liability | (9,164 | ) | (9,683 | ) | (18,775 | ) | (13,411 | ) | |||||||
Derivative (gain) loss | (387,926 | ) | 7,288 | (366,873 | ) | (1,891 | ) | ||||||||
Derivative settlement gain | 47,495 | 5,870 | 7,935 | 13,546 | |||||||||||
Gain on divestiture activity | (374 | ) | (17,888 | ) | (406 | ) | (17,176 | ) | |||||||
Impairment of proved properties | 53,138 | 69,667 | 53,138 | 106,002 | |||||||||||
Abandonment and impairment of unproved properties | 35,948 | 23,642 | 47,576 | 28,309 | |||||||||||
Other (3) | 68 | — | (5,032 | ) | — | ||||||||||
Adjusted net income (Non-GAAP) (2) | $ | 70,911 | $ | 85,892 | $ | 383,614 | $ | 286,314 | |||||||
Adjusted net income per diluted common share | $ | 1.05 | $ | 1.26 | $ | 5.64 | $ | 4.21 | |||||||
Diluted weighted-average shares outstanding | 67,535 | 68,354 | 68,044 | 67,998 | |||||||||||
(1) For the three and twelve-month periods ended December 31, 2014, adjustments are shown net of tax and are calculated using a tax rate of 37.1%, which approximates the Company's statutory tax rate adjusted for ordinary permanent differences. For the three-month period ended December 31, 2013, adjustments are shown net of tax and are calculated using a tax rate of 37.2%, which approximates the Company's statutory tax rate adjusted for ordinary permanent differences. For the twelve-month period ended December 31, 2013, adjustments are shown net of tax using the Company's effective rate of 38.6%, as calculated by dividing income tax expense by income before income taxes shown on the consolidated statement of operations. | |||||||||||||||
(2) Adjusted net income 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 the change in the Net Profits Plan liability, derivative (gain) loss, net of derivative settlement gains, impairment of proved properties, abandonment and impairment of unproved 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. | |||||||||||||||
(3) For the three and twelve-month periods ended December 31, 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 income (expense), other, net, on the Company's consolidated statement of operations. | |||||||||||||||
12
SM ENERGY COMPANY | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
December 31, 2014 | |||||||||||||||
Adjusted EBITDAX (4) | |||||||||||||||
(in thousands) | |||||||||||||||
Reconciliation of net income (GAAP) to adjusted EBITDAX (non-GAAP) to net cash provided by operating activities (GAAP): | For the Three Months | For the Twelve Months | |||||||||||||
Ended December 31, | Ended December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income (GAAP) | $ | 331,726 | $ | 6,996 | $ | 666,051 | $ | 170,935 | |||||||
Interest expense | 27,703 | 24,541 | 98,554 | 89,711 | |||||||||||
Other non-operating (income) expense, net | 68 | (3 | ) | 2,561 | (67 | ) | |||||||||
Income tax expense | 198,988 | 8,755 | 398,648 | 107,676 | |||||||||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 219,277 | 202,640 | 767,532 | 822,872 | |||||||||||
Exploration (5) | 47,881 | 20,105 | 122,577 | 65,888 | |||||||||||
Impairment of proved properties | 84,480 | 110,935 | 84,480 | 172,641 | |||||||||||
Abandonment and impairment of unproved properties | 57,151 | 37,646 | 75,638 | 46,105 | |||||||||||
Stock-based compensation expense | 8,126 | 6,852 | 32,694 | 32,347 | |||||||||||
Derivative (gain) loss | (616,734 | ) | 11,605 | (583,264 | ) | (3,080 | ) | ||||||||
Derivative settlement gain (6) | 75,509 | 9,347 | 12,615 | 22,062 | |||||||||||
Change in Net Profits Plan liability | (14,569 | ) | (15,419 | ) | (29,849 | ) | (21,842 | ) | |||||||
Gain on divestiture activity | (594 | ) | (28,484 | ) | (646 | ) | (27,974 | ) | |||||||
Adjusted EBITDAX (Non-GAAP) | $ | 419,012 | $ | 395,516 | $ | 1,647,591 | $ | 1,477,274 | |||||||
Interest expense | (27,703 | ) | (24,541 | ) | (98,554 | ) | (89,711 | ) | |||||||
Other non-operating income (expense), net | (68 | ) | 3 | (2,561 | ) | 67 | |||||||||
Income tax expense | (198,988 | ) | (8,755 | ) | (398,648 | ) | (107,676 | ) | |||||||
Exploration (5) | (47,881 | ) | (20,105 | ) | (122,577 | ) | (65,888 | ) | |||||||
Exploratory dry hole expense | 21,583 | (32 | ) | 44,427 | 5,846 | ||||||||||
Amortization of debt discount and deferred financing costs | 1,713 | 1,476 | 6,146 | 5,390 | |||||||||||
Deferred income taxes | 199,600 | 6,936 | 397,780 | 105,555 | |||||||||||
Plugging and abandonment | (2,603 | ) | (2,493 | ) | (8,796 | ) | (9,946 | ) | |||||||
Other, net | 4,003 | (154 | ) | 1,069 | 2,775 | ||||||||||
Changes in current assets and liabilities | 12,785 | (10,206 | ) | (9,302 | ) | 14,828 | |||||||||
Net cash provided by operating activities (GAAP) | $ | 381,453 | $ | 337,645 | $ | 1,456,575 | $ | 1,338,514 | |||||||
(4) Adjusted EBITDAX represents income (loss) before interest expense, interest income, income taxes, depreciation, depletion, amortization, and accretion, exploration expense, property impairments, non-cash stock compensation expense, derivative gains and losses net of settlements, change in the Net Profits Plan liability, and gains and losses on divestitures. 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 is presented because we believe that 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 a financial covenant under our credit facility based on our 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 (loss), income (loss) 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 (loss) and may vary among companies, the adjusted EBITDAX amounts presented may not be comparable to similar metrics of other companies. | |||||||||||||||
(5) 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 accompanying statements of operations for the component of stock-based compensation expense recorded to exploration. | |||||||||||||||
(6) Derivative settlement gain represents the portion of derivatives which were settled as of December 31, 2014. This amount is comprised of derivative cash settlements and a portion of changes in the accounts receivable and changes in accounts payable and accrued expenses line items on the accompanying statements of cash flows. The portion of changes in accounts receivable and changes in accounts payable and accrued expenses included in Derivative settlement gain was $36.1 million and $41.0 million for the three and twelve-month periods ended December 31, 2014, respectively. | |||||||||||||||
13
SM ENERGY COMPANY | ||||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||||
December 31, 2014 | ||||||||||||||||||||
Proved oil and gas reserve quantities: | ||||||||||||||||||||
For the Year Ended | ||||||||||||||||||||
December 31, 2014 | ||||||||||||||||||||
Oil or Condensate | Gas | NGLs | Equivalents | Proved Developed | Proved Undeveloped | |||||||||||||||
(MMBbl) | (Bcf) | (MMBbl) | (MMBOE) | (MMBOE) | (MMBOE) | |||||||||||||||
Total proved reserves | ||||||||||||||||||||
Beginning of year | 126.6 | 1,189.3 | 103.9 | 428.7 | 208.9 | 219.9 | ||||||||||||||
Revisions of previous estimates | (5.1 | ) | 46.0 | 7.8 | 10.4 | 8.1 | 2.3 | |||||||||||||
Discoveries and extensions | 15.0 | 103.5 | 10.5 | 42.7 | 14.7 | 28.0 | ||||||||||||||
Infill | 32.0 | 270.8 | 24.1 | 101.2 | 16.2 | 85.0 | ||||||||||||||
Sales of reserves | (1.9 | ) | (1.1 | ) | — | (2.1 | ) | (2.1 | ) | — | ||||||||||
Purchases of minerals in place | 19.8 | 10.9 | 0.2 | 21.9 | 7.9 | 13.9 | ||||||||||||||
Production | (16.7 | ) | (152.9 | ) | (13.0 | ) | (55.1 | ) | (55.1 | ) | — | |||||||||
Conversions | — | — | — | — | 88.2 | (88.2 | ) | |||||||||||||
End of year | 169.7 | 1,466.5 | 133.5 | 547.7 | 286.8 | 260.9 | ||||||||||||||
PV-10 (in millions) | $ | 7,616.9 | $ | 5,253.0 | $ | 2,363.9 | ||||||||||||||
Proved developed reserves | ||||||||||||||||||||
Beginning of year | 70.2 | 569.2 | 43.8 | 208.9 | ||||||||||||||||
End of year | 89.3 | 784.6 | 66.7 | 286.8 | ||||||||||||||||
*Totals may not sum due to rounding. | ||||||||||||||||||||
Regional proved oil and gas reserve quantities: | |||||||||||||||
South Texas & Gulf Coast | Rocky Mountain | Permian | Mid-Continent | Total | |||||||||||
Year-end 2014 proved reserves | |||||||||||||||
Oil (MMBbl) | 64.5 | 91.5 | 13.5 | 0.2 | 169.7 | ||||||||||
Gas (Bcf) | 1,193.3 | 89.6 | 38.9 | 144.8 | 1,466.5 | ||||||||||
NGL (MMBbl) | 131.2 | 2.0 | — | 0.4 | 133.5 | ||||||||||
Total (MMBOE) | 394.6 | 108.4 | 20.0 | 24.7 | 547.7 | ||||||||||
% Proved developed | 48 | % | 56 | % | 76 | % | 83 | % | 52 | % | |||||
Year-end 2013 proved reserves | |||||||||||||||
Oil (MMBbl) | 50.6 | 64.0 | 11.8 | 0.2 | 126.6 | ||||||||||
Gas (Bcf) | 947.3 | 72.1 | 26.9 | 142.9 | 1,189.3 | ||||||||||
NGL (MMBbl) | 102.7 | — | — | 1.2 | 103.9 | ||||||||||
Total (MMBOE) | 311.2 | 76.0 | 16.3 | 25.2 | 428.7 | ||||||||||
% Proved developed | 42 | % | 59 | % | 91 | % | 78 | % | 49 | % | |||||
*Totals may not sum due to rounding. | |||||||||||||||
14
SM ENERGY COMPANY | |||
FINANCIAL HIGHLIGHTS | |||
December 31, 2014 | |||
Costs incurred in oil and gas producing activities: | |||
(in thousands) | |||
For the Year Ended December 31, 2014 | |||
Development costs (1) | $ | 1,782,324 | |
Exploration costs | 288,270 | ||
Acquisition costs: | |||
Proved properties | 272,902 | ||
Unproved properties | 368,208 | ||
Total, including asset retirement obligation (2)(3) | $ | 2,711,704 | |
(1) Includes facility costs of $75.1 million. | |||
(2) Includes capitalized interest of $16.0 million. | |||
(3) Includes amounts relating to estimated asset retirement obligations of $11.4 million. | |||
15