SM Energy Company (SM) on Q1 2024 Results - Earnings Call Transcript
Operator: Greetings, and welcome to the SM Energy's First Quarter 2024 Financial and Operating Results Q&A. At this time, all participants are in a listen-only. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jennifer Samuels, Vice President of Investor Relations and ESG Stewardship. Thank you. You may begin. Jennifer Samuels: Thank you, Maria. Good morning everyone. In today's call, we may reference the earnings release IR presentation or prepared remarks. All of which are posted to our website. Thank you for joining us to answer your questions today, we have our President and CEO, Herb Vogel; and CFO, Wade Pursell. Before we get started, I need to remind you that our discussion today may include forward-looking statements and discussion of non-GAAP measures. I direct you to Slide 2 of the accompanying slide deck, Page 5 of the accompanying earnings release, and the Risk Factors section of our most recently filed 10-K, which described risks associated with forward-looking statements that could cause actual results to differ. We may also refer to non-GAAP measures, please see the slide deck appendix and earnings release for definitions and reconciliations of non-GAAP measures to the most directly comparable GAAP measures and discussion of forward-looking non-GAAP measures. Got that out of the way. Also, look for our first quarter 10-Q filed this morning. And with that, I will turn it over to Herb for just a brief opening comment. Herb? Herbert Vogel: Thanks Jennifer and good morning. Thanks for joining us. We're obviously very excited about how 2024 is shaping up for SM Energy. So, let's go ahead and get started. I'll turn the call back to Maria to start taking your questions. Maria? Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Zach Parham with JPMorgan. Please proceed with your question. Zach Parham: Thanks for taking my questions. Just wanted to ask on the buyback first. You talked about in the prepared remarks a ratable pace for the buyback for the remainder of the year, that would imply around $60 million in buybacks per quarter. At current commodity prices, it seems like you'll have a significant amount of free cash flow that will allow you to build a lot of cash even after paying the base dividend and finishing off that buyback authorization. How do you think about using that excess cash, could further accelerating that buyback make sense? Just trying to get a sense of what happens with that cash? Wade Pursell: Yes. Good question, Zach. This is Wade. Good morning. Yes, we just -- the guidance on assuming ratable buybacks, I think it's just the best way to model it right now. Obviously, things never happen that ratably, right? And as we go through the quarters, we opportunistically repurchased during the open windows and you could see under your scenario with higher commodity prices, that's generating more free cash flow, you could see us buying back at a little bit more accelerated pace than that given what the opportunity set is before us. So, that could happen. And many people have asked, what are you going to do when you get through the commitment and the Board will consider that. And I can imagine it being possible that we would continue on with a new buyback. But certainly no guarantees of that at this point. Zach Parham: Thanks Wade. And then just a follow-up. In the prepared remarks, you mentioned flattish production in 3Q and then kind of another step up in 4Q. That seems to indicate you would exit the year with oil in the upper 70s. Is that a fair number? Just trying to get a little bit more color on what that trajectory of volumes would look like through the back half of the year? Wade Pursell: Yes, I think that's reasonable, mid-70s-ish given what we said. What we said about the third quarter being flattish, I mean it will be up. I think what's changed a little bit is the second quarter is obviously with acceleration higher than it was before in our guidance. So, you're -- I think you're reading that pretty well. But you can assume the third quarter is up somewhat over the second quarter. Zach Parham: Thanks Wade. Appreciate the color. Operator: Our next question comes from Gabe Daoud with TD Cowen. Please proceed with your question. Gabe Daoud: Thanks. Hey good morning guys. Thanks for time. Maybe I was hoping if we could start at Klondike. You mentioned you did some signs there during the quarter and maybe starting to complete those eight to nine wells, where I think results should be ready by the third quarter call. But just curious if you can maybe talk a little bit about some of the Science work there, some of the Deans in the area look quite prolific on oil productivity per foot basis. So, just trying to get a sense if we could assume or expect similar results out of your program. Herbert Vogel: Yes, Gabe, this is Herb. Yes, we're quite excited about the Klondike acreage, and we've already drilled a four-well pad and completing it right now. I will say on the Science side, we did take a vertical pilot hole down quite deep and did a lot of sidewall cores and high-end logs through that interval, so we could assess all the intervals that are potentially prospective up there. But we're focused now on the development of those -- initially the Dean and those eight to nine wells this year and the first four will be online during the second quarter. So, it looks like a great play for us. And you know we have quite wells offsetting it to the southeast plus the wells we -- that came with the acquisition in Reliance -- from Reliance. Gabe Daoud: Yes. No, that's right. Thanks. That's helpful. I guess as a quick follow-up to that, just taking to Klondike, 20,000 net acres. If you were to progress towards a true development program, is there any type of infrastructure spend that we should be thinking about there? Herbert Vogel: There is quite a bit of infrastructure there, but mainly it's the -- getting the gathering lines in place, so we don't have to truck as much in getting the gas lines built to the scale, which is a lot of the midstream. And then -- but otherwise, it's just pretty much normal equipment out there. Gabe Daoud: Okay, great. And then just the last one, the South Texas drill-to-earn any additional color you can provide on that? Herbert Vogel: Yes. A lot of people wonder how does the drill-to-earn works if they're not familiar with it? And generally, drill-to-earn is where you agree to drill a well or wells and return for acreage. In this case, we're going to operate and drill wells to gain a 50% working interest in around a 16,000 acre block, so that will get us about 8,000 net acres. The other details around that drill-to-earn really are kept confidential between us and the company that farmed out to us. Gabe Daoud: Okay, got it. Thanks guys. Operator: Our next question comes from Tim Rezvan with KeyBanc Capital Markets. Please proceed with your question. Tim Rezvan: Good morning folks. Thanks for taking the question. I want to follow-up on Gabe's question on Klondike. We did analysis of the area. And I know you all have talked about the Middle Spraberry and the Dean. The Wolfcamp A looks extremely strong with sort of offset results. And so I was curious kind of among these three initial wells being completed, excluding the Science well. Can you talk about what intervals you're targeting? And kind of maybe why you haven't talked about the Wolfcamp A as a primary target on that acreage? Herbert Vogel: Sure Tim. But one thing I want to correct you on that there, there would be four producers, just one when we took a pilot hole down first, then we plugged back and drilled the lateral. So, there are four wells there. Just one of them we have that vertical that we just got the data on. So, it's great to hear that there's prospectivity in the Wolfcamp A. I would say we are not counting that. If we're surprised and that the maturity is higher for some reason there than we expected to be, that would be great news. But we're really counting on this being more a migrated oil play, which I've talked about before, which is oil comes for a bit deeper in the basin and migrates into the sandstone intervals. And that's why they are so prolific up there. Tim Rezvan: Okay. And then are these initial four wells Dean? All Dean or-- Herbert Vogel: Yes, they are. They're all Dean wells. Tim Rezvan: Okay, that's great. Appreciate that. And then as a follow-up, I think the comments on the Briscoe pad and the stacked pay opportunities are pretty interesting. Some other public companies are talking about that. I know it's early days from one pad, but big marketplace debate was on the validity of your claims that you had 300 locations there. And I guess just to help kind of frame a resource, if the stack pay proves to be something you can replicate, does that 300 location count kind of move up dramatically? I'm just trying to understand sort of what the significance is of this test that you're doing that you disclosed? Thank you. Herbert Vogel: Yes, Tim, I would say it's not that much of a big increment in the test. The only difference is that the lower wells are fully bounded versus other places, they've been half bounded. But we've had fully bounded in the upper interval and several other pads. The thing to note is these are space is about 625 feet and we've done that before. These go between 2 different -- subtle differences in the landing zone in the upper Austin Chalk or the middle Austin Chalk and the upper interval that we've developed. So, it's just really exciting because of how productive they are, how oily they are and how NGL-rich they are. And those wells on that one pad are between 11,600 and 14,500 feet long. So, we didn't have difficulty executing there. And the other three are between 11,900 and 14,000 feet. But there are long laterals, too, and that just really helps the economics also and their oil rig. So, really excited about it on that area, and you can see the strength of the wells and just how they started. But it's not like they're a really big step in any way other than the bounding of the lower Austin Chalk wells. Tim Rezvan: Appreciate the color. Thank you. Herbert Vogel: You bet. Operator: [Operator Instructions] Our next question comes from Oliver Huang with Tudor, Pickering, Holt & Co. Please proceed with your question. Oliver Huang: Good morning all and thanks for taking my questions. Just wanted to start on the efficiencies. Certainly good to see the continued capture there. I was just kind of wondering of what you all have kind of achieved in Q1? Is it something that's already been baked in for new plant activity starting in Q2 when you're kind of providing the quarter ahead of full year outlook? Or is there kind of a wait-and-see aspect to it since it's only a quarter before kind of taking that fully on that incrementally faster case that we saw? Herbert Vogel: Yes, Oliver, when we change guidance, that means we've got a lot of confidence that it's appropriate to include it. So, we're continually working new aspects of efficiencies in and we have quite a laundry list that our team is running through right now. That looks attractive, but we're not counting once unless we see them working. So, the big ticket items for us right now are the increased substitution of natural gas for diesel and frac pumping operations on those DGB fleets that we're employing. And Wade mentioned those on the prepared remarks. And that has the added benefit of the reduced CO2 emissions from completion operations. Then we're seeing quite a bit in the way of efficiency gains in drilling. So this translates to number of feet we drill per day. They're really -- it's more advanced and reliable downhole equipment, so you don't have to trip the bit as much. And we're using rotary steerable assembly, so we can keep the bid on bottom longer. That helps also. Then on the efficiency -- cost efficiency side, a big one is using existing central production facilities that now are sitting there with some latent capacity and that avoids the need for capital into new facilities. We knew all along about what's going to happen, and we're just starting to see it really happen in a pretty significant way now. And then we're also bundling some services between South Texas and Permian. So we've got the benefits of the scale of the full operation between the two areas and that helps. And then you know how activity has reduced, so rig counts are down, frac spread counts are down. So, we're actively rebidding services and seeing discounts that way. And I can't tell you when that will stop or how much more we'll get there. But that obviously is a contributor. So, that's a list of things that I'd say we're highly confident and not a list of things that we're still pursuing. Oliver Huang: Okay, that's super helpful. And maybe for a follow-up, you mentioned earlier some of the details that are confidential on that drill-to-earn. But I just wanted to try and clarify, are you all responsible for 100% of the D&C for that 50% working interest that you kind of referenced? And is there any sort of details in terms of how many wells you're planning to do on that acreage this year and if that's already embedded within the full year well count out of the South Texas region? Herbert Vogel: Yes. Okay, you got two questions there. The first, we can't reveal or divulge details on the deal. But I'd say no is the simple answer to your first question there. No, we're not saying everything for the 50%. And then the second question was, have we baked this in? Yes, we knew the deal was far enough along when we set the budget in February that we integrated that into our plans for the year. The three wells that we'll drill there this year. Oliver Huang: Awesome. Thanks for the time guys. Operator: There are no further questions at this time. I would now like to turn the floor back over to Herb Vogel for closing comments. Herbert Vogel: Thanks Maria and thank you for joining us and we look forward to seeing a number of you at upcoming events. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
SM Energy (NYSE:SM) Quarterly Earnings Preview
- SM Energy is set to release its quarterly earnings on May 1, 2025, with an expected EPS of $1.57 and revenue of approximately $819.8 million.
- The company's valuation is highlighted by a P/E ratio of 3.47 and a price-to-sales ratio of 1, indicating a potentially attractive investment opportunity.
- Concerns regarding liquidity are noted with a current ratio of 0.55, suggesting potential challenges in meeting short-term obligations.
SM Energy (NYSE:SM) is preparing to release its quarterly earnings on May 1, 2025. Analysts predict an earnings per share (EPS) of $1.57, with revenue expected to reach approximately $819.8 million. SM Energy is a company involved in the exploration and production of oil and natural gas, competing with other energy firms in the industry.
The anticipated year-over-year increase in earnings for SM is driven by higher revenues for the quarter ending March 2025. This positive outlook is supported by the consensus, which suggests a favorable earnings picture. However, the actual results compared to these estimates will play a crucial role in influencing the stock's near-term price movement.
SM's financial metrics provide insight into its valuation. The company has a price-to-earnings (P/E) ratio of 3.47, indicating a relatively low valuation compared to its earnings. Additionally, the price-to-sales ratio is about 1, suggesting that its market value is nearly equal to its sales. These figures highlight the company's current market position.
The enterprise value to sales ratio of 2.01 and the enterprise value to operating cash flow ratio of 3.01 reflect SM's valuation in relation to its cash flow. The earnings yield of 28.86% measures the return on investment for shareholders, indicating a potentially attractive investment opportunity. However, the debt-to-equity ratio of 0.64 shows a moderate level of debt compared to equity.
Despite these positive indicators, SM's current ratio of 0.55 suggests potential liquidity concerns, as it is below the standard threshold of 1. This means the company may face challenges in meeting its short-term obligations. The management's discussion during the earnings call will be crucial in determining the sustainability of any immediate price changes and future earnings expectations.
SM Energy (NYSE:SM) Quarterly Earnings Preview
- SM Energy is set to release its quarterly earnings on May 1, 2025, with an expected EPS of $1.57 and revenue of approximately $819.8 million.
- The company's valuation is highlighted by a P/E ratio of 3.47 and a price-to-sales ratio of 1, indicating a potentially attractive investment opportunity.
- Concerns regarding liquidity are noted with a current ratio of 0.55, suggesting potential challenges in meeting short-term obligations.
SM Energy (NYSE:SM) is preparing to release its quarterly earnings on May 1, 2025. Analysts predict an earnings per share (EPS) of $1.57, with revenue expected to reach approximately $819.8 million. SM Energy is a company involved in the exploration and production of oil and natural gas, competing with other energy firms in the industry.
The anticipated year-over-year increase in earnings for SM is driven by higher revenues for the quarter ending March 2025. This positive outlook is supported by the consensus, which suggests a favorable earnings picture. However, the actual results compared to these estimates will play a crucial role in influencing the stock's near-term price movement.
SM's financial metrics provide insight into its valuation. The company has a price-to-earnings (P/E) ratio of 3.47, indicating a relatively low valuation compared to its earnings. Additionally, the price-to-sales ratio is about 1, suggesting that its market value is nearly equal to its sales. These figures highlight the company's current market position.
The enterprise value to sales ratio of 2.01 and the enterprise value to operating cash flow ratio of 3.01 reflect SM's valuation in relation to its cash flow. The earnings yield of 28.86% measures the return on investment for shareholders, indicating a potentially attractive investment opportunity. However, the debt-to-equity ratio of 0.64 shows a moderate level of debt compared to equity.
Despite these positive indicators, SM's current ratio of 0.55 suggests potential liquidity concerns, as it is below the standard threshold of 1. This means the company may face challenges in meeting its short-term obligations. The management's discussion during the earnings call will be crucial in determining the sustainability of any immediate price changes and future earnings expectations.
SM Energy Company (NYSE:SM) Stock Price Target Trends and Earnings Expectations
- The consensus price target for SM Energy Company (NYSE:SM) has gradually decreased over the past year, indicating analysts' adjusted expectations.
- Analysts predict a decline in earnings for SM Energy in its upcoming report, influencing target price adjustments.
- Investors should consider various factors, including target price trends, company news, and industry developments, to make informed decisions.
SM Energy Company (NYSE:SM), based in Denver, Colorado, is an independent energy company that focuses on the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids. The company operates primarily in Texas, with a significant presence in the Midland Basin and South Texas. Over the past year, SM Energy's stock has experienced fluctuations in its consensus target price, reflecting changes in market conditions and company performance.
The consensus price target for SM Energy's stock has shown a gradual decrease over the past year. Last month, the average price target was $51.5, down from $53 in the previous quarter, and $55.09 a year ago. This trend suggests that analysts have adjusted their expectations, possibly due to various factors affecting the energy sector. As highlighted by Zacks, analysts are predicting a decline in earnings for SM Energy in its upcoming report, which may have influenced these target price adjustments.
John Gerdes from MKM Partners has set a price target of $52 for SM Energy, indicating a cautious outlook. Investors should be aware of the key expectations surrounding the company's upcoming earnings report. SM Energy plans to release its third quarter 2024 financial and operating results after market hours on October 31, 2024. The release will include an earnings report, a pre-recorded webcast discussing the results, and an associated presentation, all of which will be available on the company's website.
Investors interested in SM Energy should consider these target price trends alongside other factors, such as recent company news, earnings reports, and industry developments, to make informed decisions. The anticipated decline in earnings, as noted by Zacks, may impact investor sentiment and influence future price targets. Keeping an eye on the company's performance and market conditions will be crucial for those looking to invest in SM Energy.
SM Energy Company (NYSE:SM) Stock Price Target Trends and Earnings Expectations
- The consensus price target for SM Energy Company (NYSE:SM) has gradually decreased over the past year, indicating analysts' adjusted expectations.
- Analysts predict a decline in earnings for SM Energy in its upcoming report, influencing target price adjustments.
- Investors should consider various factors, including target price trends, company news, and industry developments, to make informed decisions.
SM Energy Company (NYSE:SM), based in Denver, Colorado, is an independent energy company that focuses on the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids. The company operates primarily in Texas, with a significant presence in the Midland Basin and South Texas. Over the past year, SM Energy's stock has experienced fluctuations in its consensus target price, reflecting changes in market conditions and company performance.
The consensus price target for SM Energy's stock has shown a gradual decrease over the past year. Last month, the average price target was $51.5, down from $53 in the previous quarter, and $55.09 a year ago. This trend suggests that analysts have adjusted their expectations, possibly due to various factors affecting the energy sector. As highlighted by Zacks, analysts are predicting a decline in earnings for SM Energy in its upcoming report, which may have influenced these target price adjustments.
John Gerdes from MKM Partners has set a price target of $52 for SM Energy, indicating a cautious outlook. Investors should be aware of the key expectations surrounding the company's upcoming earnings report. SM Energy plans to release its third quarter 2024 financial and operating results after market hours on October 31, 2024. The release will include an earnings report, a pre-recorded webcast discussing the results, and an associated presentation, all of which will be available on the company's website.
Investors interested in SM Energy should consider these target price trends alongside other factors, such as recent company news, earnings reports, and industry developments, to make informed decisions. The anticipated decline in earnings, as noted by Zacks, may impact investor sentiment and influence future price targets. Keeping an eye on the company's performance and market conditions will be crucial for those looking to invest in SM Energy.
SM Energy Reports Q1 EPS Beat But Revenues Lower Than Expected
SM Energy (NYSE:SM) reported its Q1 results, with EPS of $1.62 beating the Street estimate of $1.28. Revenue was $573.5 million, coming in worse than the Street estimate of $584.7 million.
Production outperformance in Q1 was largely related to improved well performance and bringing on 7 new wells a week early.
The strong performance from the South Texas wells and a good base decline on PDP wells bode well for free cash flow in 2023. Operational efficiency is also improving with faster drilling times resulting from co-development.
SM Energy Reports Q1 EPS Beat But Revenues Lower Than Expected
SM Energy (NYSE:SM) reported its Q1 results, with EPS of $1.62 beating the Street estimate of $1.28. Revenue was $573.5 million, coming in worse than the Street estimate of $584.7 million.
Production outperformance in Q1 was largely related to improved well performance and bringing on 7 new wells a week early.
The strong performance from the South Texas wells and a good base decline on PDP wells bode well for free cash flow in 2023. Operational efficiency is also improving with faster drilling times resulting from co-development.
