SM Energy(US:SM)2024-05-03 19:08Financial Data and Key Metrics Changes - The company reported adjusted EPS of $1.41 per share, adjusted EBITDAX of $409 million, and adjusted free cash flow of $68 million, all exceeding street consensus [22] - Production guidance was increased by 2% to a range of 57 to 60 MMBoe, reflecting better performance of new wells and completion cadence [24] - Capital expenditure guidance was lowered by 2% to a range of $1.14 billion to $1.18 billion, with first-quarter capital on track at around $300 million [42] Business Line Data and Key Metrics Changes - The company achieved a 10% improvement in feet drilled per day in Midland Basin and a 20% improvement in South Texas operations compared to 2022 [2] - Feet completed per day improved by 85% in Midland Basin and 30% in South Texas due to better efficiency of simul-frac and zipper fleets [17] - New Briscoe C wells outperformed expectations by 5% to 10%, with an average peak IP30 of just over 2,000 Boe/d per well [19] Market Data and Key Metrics Changes - The company noted that Midland Basin gas accounted for only 7% of first-quarter oil and gas revenue, with approximately 50% of Midland gas hedged to basis, mitigating exposure to weak regional pricing [45] - Transportation expense guidance was lowered by 9% to a midpoint of $2.10 to $2.20 per Boe due to reduced fuel gas costs [37] Company Strategy and Development Direction - The company aims to maintain an attractive return of capital to stockholders through dividends and share repurchases, returning about $54 million or 79% of free cash flow in the first quarter [9] - A new agreement allows the company to increase its South Texas Austin Chalk position by 8,000 net acres, indicating a focus on expanding high-quality asset portfolio [15] - The company is focused on operational execution to deliver low-breakeven, high-return wells, with better-than-expected well performance driving improved bottom-line results [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in production performance and capital cost savings, leading to positive updates in guidance [35] - The company is well positioned for an excellent 2024, with operational performance year-to-date being very strong [10] - Management highlighted the importance of safety and stewardship, receiving a CDP score of A- for supplier engagement [21] Other Important Information - The company completed 27 net wells in the first quarter, exceeding the expectation of 20 net wells [42] - The company has about $182 million in share repurchase authorization remaining for 2024, with a plan for a generally ratable repurchase rate over the next three quarters [23] Q&A Session Summary Question: What is the outlook for production in the upcoming quarters? - The expectation for second-quarter production is a 7% sequential increase to a range of 14.1 to 14.3 MMBoe, with about 44% oil [44] - The third quarter is expected to be flat to slightly up compared to the second quarter, with another step up anticipated in the fourth quarter [44] Question: How does the company plan to manage capital expenditures? - Capital expenditure guidance for the second quarter is set at $315 million to $325 million, including an expected 31 net wells to be drilled and 38 net wells completed [46] - The company is realizing capital efficiencies and cost savings, contributing to the reduction in capital expenditure guidance [36]