SM Energy(SM) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - Over the last five years, production has grown over 60%, with oil production increasing over 70% and proved reserves also rising over 60% [3][4] - The total shares outstanding remained unchanged at 114 million, indicating no dilution during this growth period [4] - Leverage decreased from 2.3 times to closer to one time, demonstrating a deleveraging trend [4][19] Business Line Data and Key Metrics Changes - The company operates in three top-tier assets: Midland Basin, South Texas, and Uinta Basin, each showcasing unique technical success stories [2][9] - In the Midland Basin, the number of wells drilled increased from a few to over 5,000, with production outperforming peers [6][10] - The Austin Chalk asset has shown significant improvement, with 465 locations identified and returns comparable to the Permian Basin [9][10] Market Data and Key Metrics Changes - The Uinta Basin has been identified as a promising area with a production profile similar to the Midland Basin, despite transportation challenges [14][15] - The Uinta Basin's margin per barrel of oil equivalent (BOE) is nearly the same as that of the Midland Basin, primarily due to high oil content [15] Company Strategy and Development Direction - The company emphasizes a returns-based technical focus, differentiating itself from competitors by leveraging technical expertise [2][22] - Future plans include continued growth without dilution or increased leverage, focusing on capital efficiency [4][19] - The company is open to M&A opportunities that meet their criteria for top-tier assets, but does not seek scale for its own sake [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the technical team's ability to identify and develop high-potential assets, particularly in the Uinta Basin [24][25] - The company is cautious about macroeconomic uncertainties but remains optimistic about its cash flow generation and return of capital strategy [32][33] Other Important Information - The company has a strong balance sheet with a $2 billion undrawn borrowing base and $100 million in cash [18][19] - A fixed dividend has been established, currently at $0.20 per quarter, with a $500 million share buyback program in place [21][22] Q&A Session Summary Question: What did the company see at the time of the Uinta Basin acquisition? - The technical team identified characteristics similar to the Permian Basin, including thick stack pay and high oil content, which justified the acquisition [23][24] Question: Does the company see potential for further growth in the Uinta Basin? - The company is open to expanding its position in the Uinta Basin if opportunities arise that meet their returns-based criteria [27][28] Question: How does the company plan to allocate free cash flow moving forward? - As leverage approaches one time, the company will prioritize share buybacks, while also considering dividend increases based on cash flow visibility [32][33]