SM Energy(US:SM)2022-08-04 19:14Financial Data and Key Metrics Changes - The company has raised its capital expenditure (CapEx) budget for 2022, attributing part of the increase to inflation expectations of around 10% to 15% and the remainder to ongoing operational activities [9][19] - The company is on track to achieve a net debt target of below $1 billion, which is seen as a significant milestone [20] Business Line Data and Key Metrics Changes - The company plans to complete five additional wells in South Texas, increasing the total to 43, while reducing the number of wells in the Permian by two due to timing issues [11][12] - Improved drilling penetration rates have been noted, contributing positively to operational efficiency [8] Market Data and Key Metrics Changes - The company has secured commitments for sand and other materials for 2023, indicating proactive management of supply chain challenges [28] - The overall market for acquisitions and divestitures (A&D) is currently challenging due to a wide bid-ask spread between buyers and sellers, influenced by commodity prices [34] Company Strategy and Development Direction - The company is focused on enhancing its asset base in two key basins, emphasizing low breakeven costs and strong performance from existing wells [37] - There is an ongoing evaluation of potential acquisition opportunities, particularly in the Austin Chalk area, although the current market conditions are not favorable for A&D activities [33][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's operational performance and the potential for returning capital to shareholders, highlighting the strong performance of their assets [19][20] - The company is preparing for potential inflation impacts in 2023 but has locked in many costs to mitigate risks [28] Other Important Information - The company has a drilling inventory that spans approximately 13 years in the Midland Basin, with ongoing assessments to expand this inventory based on new zones [29][30] Q&A Session Summary Question: Details on CapEx increase and inflation impact - Management explained that the CapEx increase is partly due to inflation and ongoing operational activities, with a specific focus on drilling and completion activities [7][9] Question: Changes in well completion plans - The shift in well completion plans was primarily due to timing and operational adjustments in South Texas and the Permian [11][12] Question: Cash return strategy and shareholder returns - Management indicated that they are ahead of schedule in returning capital to shareholders and are considering a fixed dividend increase and stock buybacks [20][21] Question: Contracting and supply chain management - The company has secured contracts for drilling and pumping services through the end of the year and into 2023, ensuring operational continuity [25][24] Question: A&D market outlook - Management noted that the current A&D market is challenging due to commodity price fluctuations and a wide bid-ask spread, but they remain open to evaluating opportunities [34][35]