SM Energy(SM)2024-10-31 22:25Financial Data and Key Metrics Changes - The company reported strong production volumes, exceeding the high end of guidance and consensus expectations, with production volumes 3% ahead of the midpoint of guidance [24][25] - Notable beats were achieved in consensus EBITDAX, adjusted EPS, and adjusted free cash flow due to higher than expected production and lower than expected costs [26] Business Line Data and Key Metrics Changes - The Uinta acquisitions resulted in a significant increase in core acreage by over 93,000 net acres, or about 40%, and an expected sequential increase in net oil production of around 40% [5][8] - In the Midland Basin, new Woodford-Barnett tests showed that the company's two test wells outperformed peer tests by more than 50% normalized to 10,000 foot laterals [16] - In South Texas, the Austin Chalk wells demonstrated strong performance, with two wells averaging 2,317 Boe per day, per well, with 22% oil and 63% liquids [20][22] Market Data and Key Metrics Changes - The Uinta Basin's high-quality crude oil, with around 40 degrees API, is expected to attract a premium to WTI due to its low sulfur and low nitrogen content [11] - The company anticipates that Utah oil realizations will reflect a couple of dollars off WTI [36] Company Strategy and Development Direction - The company aims to expand its high-quality, low breakeven cost portfolio, focusing on operational execution to deliver high returning wells and returning capital to stockholders through dividends and share repurchases [4][7] - Following the Uinta acquisitions, the company is emphasizing debt reduction and plans to return the leverage ratio closer to one times before resuming share buybacks [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational execution and financial results, positioning the company for substantially increased inventory and scale going forward [24][41] - The fourth quarter production guidance is set at 205,000 to 220,000 Boe per day, which would be the highest production rate in the company's history [33] Other Important Information - The company completed successful upsized bond offerings totaling 349 million of senior notes due in 2025 [27][28] - The company has a cash balance of 36 million following the Uinta acquisitions [28] Q&A Session Summary Question: What are the expectations for production growth in the fourth quarter? - The company expects production volumes to increase sequentially by around 25% on a Boe basis and around 40% on oil, with the highest production rate in company history anticipated [32] Question: How will the Uinta Basin acquisitions impact operational costs? - Operating costs for the fourth quarter are expected to range between 5.10 per Boe, incorporating efficiencies gained in the third quarter [37]