SM Energy Company (NYSE:SM) Q2 2024 Earnings Conference Call August 7, 2024 4:15 PM ET

Company Participants

Jennifer Martin Samuels - Vice President-Investor Relations and ESG Stewardship
Herb Vogel - President and CEO
Wade Pursell - CFO

Conference Call Participants

Jennifer Martin Samuels

Good afternoon and welcome to SM Energy’s Second Quarter 2024 Results Webcast. Before we get started on our prepared remarks, I remind you that our discussion today will include forward-looking statements. I direct you to Slide 2 of the accompanying slide deck, Page 6 of the accompanying earnings release, and the risk factors section of our most recently filed 10-K, which describe risks associated with forward-looking statements that could cause actual results to differ. We will also discuss non-GAAP measures and metrics. Definitions and reconciliations of non-GAAP measures and metrics, to the most directly comparable GAAP measures, and discussion of forward-looking non-GAAP measures, can be found in the back of the slide deck and earnings release.

Today’s prepared remarks will be given by our President and CEO, Herb Vogel, and our CFO, Wade Pursell.

I will now turn the call over to Herb.

Herb Vogel

Thank you, Jennifer. Good afternoon and thank you for your interest in SM Energy. We had a terrific second quarter and have enjoyed excellent operational performance year-to-date. We have also successfully been expanding our top-tier portfolio while managing a very strong balance sheet.

Turning to Slide 4. Every quarter I speak to progress we are making on our core objectives for the year. I’ll start with our objective to expand our high-quality portfolio with low breakevens. Today we announced that we are exercising our option to acquire 26,100 net acres adjacent to the XCL acquisition in Utah, commonly referred to as the Altamont acquisition, for approximately $70 million. Combined with the XCL acquisition, we are adding 63,300 net acres in the core, over-pressured oil window of the Uinta Basin, including approximately 44,000 Boe per day of high oil content production and an initial estimate of 465 net locations. Assuming PDP valued at $35,000 per Boe per day, we paid around $1.25 million per location, based on our preliminary counts, including Altamont. This is highly accretive to financial metrics including NAV.

Second, production performance exceeded the mid-point of guidance by about 2,500 Boe per day with higher oil content, successfully demonstrating our core objective to focus on operational execution. In addition, we turned-in-line our first Woodford-Barnett test wells in the Midland Basin and are very pleased with early results and the potential to add more than 20,000 prospective net acres in this deeper formation. More about that in a minute.