Exhibit 99.1

FOR IMMEDIATE RELEASE
May 2, 2017
SM ENERGY REPORTS FIRST QUARTER OF 2017 RESULTS
HIGHER PRODUCTION, LOWER CAPITAL VERSUS PLAN
PRODUCTION GUIDANCE RAISED
•
Production of 12.1 MMBoe, well ahead of guidance
◦
55% sequential growth in Midland Basin
◦
Full year production guidance increased by 1.5 MMBoe to 41.5-44.5 MMBoe
•
Costs incurred $282 MM (includes acquisitions); total capital spend $193 MM, 4% less than projected (see GAAP reconciliation below)
◦
Full year total capital spend (excluding acquisitions) guidance of $875 MM unchanged
•
Balance sheet strengthened further with closing of non-op Eagle Ford divestiture
◦
Net debt reduced by 22%
•
EPS of $0.67; Adjusted EPS (loss) ($0.18), ahead of expectations (see GAAP reconciliation below)

Denver, Colorado May 2, 2017 - SM Energy Company ("SM Energy" or the “Company”) (NYSE: SM) announced today financial results and operations highlights from the first quarter of 2017. In conjunction with this release, the Company posts an investor presentation to its website at sm-energy.com with additional first quarter results and operational detail. This presentation will be referenced during the earnings webcast and conference call scheduled for 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on May 3, 2017. Further information on the earnings webcast and conference call can be found below.
MANAGEMENT COMMENTARY
President and Chief Executive Officer Jay Ottoson comments: “We have laid out a solid three year plan that we expect to create substantial value for our shareholders, and the first quarter results demonstrate our commitment and ability to execute on this plan. We have met or exceeded expectations across the board to-date in 2017 and are confident in our ability to meet or exceed plan expectations going forward. On the operations front, new Midland Basin wells continue to outperform, with all SM-completed RockStar wells to date exceeding acquisition performance metrics, and we are only months into our expanded Midland Basin program. In addition, our financial strategy is right on track with the closing of the sale of our third party-operated Eagle Ford assets, which provided the Company with $1.6 billion of liquidity at quarter-end.”


FIRST QUARTER 2017 RESULTS
PRODUCTION - SEQUENTIAL COMPARISON:
TOTAL COMPANY PRODUCTION - MMBoe
 
First Quarter 2017
Fourth Quarter 2016
Oil (MMBbls)
3.5
4.0
Natural gas (Bcf)
33.9
35.2
NGLs (MMBbls)
2.9
3.5
Total MMBoe
12.1
13.4
•
Production includes production from assets sold (through the closing date) or pending sale
REGIONAL PRODUCTION - MMBoe
 
First Quarter 2017
Fourth Quarter 2016
Eagle Ford (operated)
7.3
7.6
Permian Basin
2.1
1.4
Rocky Mountain (PRB)
0.3
0.2
Production - Retained Assets
9.7
9.2
Assets sold and for sale
2.4
4.2
Total MMBoe
12.1
13.4
•
Eagle Ford (operated) includes nominal other production from the region

First quarter production of 12.1 MMBoe significantly exceeded guidance of 11.0-11.4 MMBoe, due to higher than expected initial rates from new operated Eagle Ford wells, early completion timing and continued outperformance from wells in the Midland Basin. Midland Basin production increased 55% sequentially and production from retained assets increased 5% sequentially. As a result of first quarter production outperformance, the Company is raising full year production guidance by 1.5 MMBoe.
Total Company production of 12.1 MMBoe was down 10% compared with both the fourth quarter of 2016 and the first quarter of 2016, affected by producing asset sales completed in December 2016 and early March 2017.
REALIZED PRICES - 1Q17 PRE/POST-HEDGE:
REALIZED PRICES
 
Pre-Hedge
Post-Hedge
Oil (per Bbl)
$ 47.55
 $44.97
Natural gas (per Mcf)
2.98
3.50
NGLs (per Bbl)
22.06
19.18
Average per Boe
 $ 27.55
$ 27.55

The average realized price per Boe before the effects of commodity hedges was $27.55, the highest average realized in nine quarters due to higher benchmark prices for oil and NGLs, as well as an increasing percentage of higher value oil produced in the Midland Basin where differentials averaged less than $2 per Bbl.
Cash production costs totaled $11.42 per Boe, compared with $11.34 per Boe in the fourth quarter of 2016 and up $0.64, or 6%, from $10.78 per Boe in the first quarter of 2016, due primarily to higher taxes associated with higher commodity prices. Production costs per unit are expected to decline in the second half of 2017, due to both the completion of asset divestitures that consist of higher cost assets and also the benefits of increased scale in the Midland Basin program.


Net income for the first quarter was $74.4 million, or $0.67 per diluted common share, compared with a net loss of $347.2 million, or ($5.10) per diluted common share, in the first quarter of 2016. Net income in the first quarter of 2017 reflects a near four-fold increase in the Company’s pre-hedge cash operating margin from the prior year period, which increased from $40.1 million to $169.9 million. The 2017 period also includes a significant reduction in DD&A expense per Boe from $15.96 to $11.39 and a non-cash derivative gain of $114.8 million. Net cash provided by operating activities was $135.0 million.
As discussed below, adjusted EBITDAX, adjusted net income (loss) and adjusted net income (loss) per diluted common share are non-GAAP measures. Please reference the reconciliations to the most directly comparable GAAP financial measures at the end of this release.
Adjusted EBITDAX for the first quarter was $172.2 million, compared with $182.3 million in the prior year period. While the pre-hedge operating margin was significantly higher in the first quarter of 2017, the prior year period benefited from a $147 million derivative settlement gain.
Adjusted net loss for the first quarter was $19.6 million, or $0.18 per diluted common share, compared with an adjusted net loss of $56.6 million, or $0.83 per diluted common share, in the first quarter of 2016. The calculation of adjusted net loss excludes non-recurring items and items difficult to estimate in order to present results that can be more consistently compared with prior periods and peer results.
FINANCIAL POSITION AND LIQUIDITY
At March 31, 2017, the outstanding principal balance on the Company’s long-term debt included $2.8 billion in senior notes plus $172.5 million in senior convertible notes, with zero drawn on the Company’s senior secured credit facility. At quarter-end, the Company had a cash balance of $659.1 million, providing for net debt of $2.3 billion. During the quarter, as part of the regularly scheduled redetermination process, the lenders on the Company’s credit facility set the borrowing base and aggregate commitments at $925 million. In addition, the lenders agreed to certain modifications to the credit agreement, including permission to hedge up to 85% of projected production volumes for 36 months.
CAPITAL ACTIVITY AND OPERATIONS
Costs incurred for the first quarter of 2017 were $281.5 million, which included $85.8 million (of which $24.5 million was non-cash) of proved and unproved property acquisitions. First quarter total capital spend (see below for GAAP reconciliation) was $192.9 million. During the quarter, the Company drilled or participated in 26 net wells and completed 33 net wells. The Company completed a number of wells ahead of schedule at quarter-end.
Please refer to the Total Capital Spend Reconciliation at the end of this release for a reconciliation to Costs Incurred in oil and gas activities (GAAP).
The Company is conducting a sales process for its Divide County, North Dakota assets. The Company has extended the bid date and data room access due to new entrants to the process but continues to assume a mid-year close date for planning purposes.
PERMIAN BASIN
In the first quarter of 2017, production from the Company’s Midland Basin assets was 2.1 MMBoe and was 77% oil. Production was up 55% sequentially as the Company’s capital program is concentrated in the region. The Company is currently running six horizontal rigs in the basin, with two in the Sweetie Peck area and four in the RockStar area, and one vertical rig dedicated to data acquisition, as well as running three completion crews. The first quarter production margin for this area was $33.05 per Boe.
The Company is focused on optimizing drilling and completion operations across the basin in order to identify the appropriate number of wells per section and optimize production performance in preparation for increased development activity in 2018. The Company is actively testing different pay intervals, well spacing per interval,


fracture stimulation stage spacing, perforation cluster configurations, fluid volumes and sand volumes. In addition, the Company seeks to drill 10,000 foot laterals to maximize net asset value per well and is actively trading and acquiring bolt-on land positions to enable longer laterals.
The Company currently has approximately 88,000 net acres in the Midland Basin, which includes approximately 1,300 additional net acres acquired year-to-date through acreage trades and other transactions.
EAGLE FORD
In the first quarter of 2017, production from the Company’s operated Eagle Ford assets was 7.3 MMBoe and included 61% natural gas, 33% NGLs, and 6% oil. Production was down slightly from the fourth quarter of 2016 as the Company re-initiated drilling activity in the quarter. The Company is currently running one horizontal rig in the Eagle Ford and has a dedicated completion crew reducing its inventory of drilled but uncompleted wells.
First quarter activity in the Eagle Ford is highlighted by a six-well pad in the Company’s northern acreage area brought on-line in the quarter with drilling and completion costs 8% under budget. The pad included completions in the Upper Eagle Ford and Lower Eagle Ford in a stacked configuration at 625 foot spacing, implementing co-development in the area.
The Company has approximately 166,760 net acres in its operated Eagle Ford program.
GUIDANCE
Full year 2017 guidance is revised as follows:

•
Total capital spend (before acquisitions) ($MM)                $875 (unchanged)
•
Total production (MMBoe)                            41.5-44.5
◦Increased 1.5 MMBoe
◦Oil 29% of commodity mix
◦Full year production assumes sale of Divide County assets mid-year
•
LOE including ad valorem ($/Boe)                    ~$4.00 (unchanged)
◦Expected to exceed the average 1H17, be below average 2H17
•
Transportation ($/Boe)                            $5.50-5.75 (unchanged)
•
Production taxes ($/Boe)                        ~$1.25/4.0-4.5% (unchanged)
•
G&A ($MM)                                $120-130 (unchanged)
◦Includes approximately $21-23 MM non-cash,
stock-based compensation expense
•
Capitalized overhead/Exploration before dry hole expenses ($MM)    $65-70 (unchanged)
◦This amount is a component of capital guidance
•
DD&A ($/Boe)                                $13.00-15.00 (unchanged)
Second quarter of 2017 production is expected to range between 10.3 and 10.7 MMBoe (or 113-118, MBoe/d), which will vary depending upon the ultimate timing of capital activity.
Total capital spend (before acquisitions) is a non-GAAP measure. The Company is unable to present a quantitative reconciliation of this forward-looking non-GAAP financial measure without unreasonable effort because acquisition costs are inherently unpredictable.


COMMODITY DERIVATIVES
As of April 26, 2017.
For the last nine months of 2017, the Company has commodity derivatives in place for approximately 70% of expected oil production, 85% of expected natural gas production and 80% of expected NGL production.
 
OIL SWAPS
OIL COLLARS
NATURAL GAS SWAPS
NGL SWAPS
 
Volume/Average Price
Volume/Avg. Ceiling - Floor
Volume /Average Price
Volume/Average Price
Period
(MBbls/$Bbl)
(MBbls/$Bbl)
(BBtu/$MMBtu)
(MBbls/$Bbl)
2Q17
1,444/$46.44
636/$54.10 - $45.00
26,205/$3.98
2,114/$21.40
 
 
 
 
 
3Q17
1,340/$46.66
583/$54.05 - $45.00
23,657/$4.01
2,019/$20.89
 
 
 
 
 
4Q17
1,254/$46.35
1,086/$56.05 - $47.51
22,001/$3.98
1,996/$20.18
 
 
 
 
 
1Q18
0
1,026/$58.46 - $50.00
19,628/$3.25
1,828/$21.45
 
 
 
 
 
2Q18
0
1,004/$58.37 - $50.00
13,052/$2.85
1,438/$16.26
 
 
 
 
 
3Q18
0
1,393/$57.93 - $50.00
14,241/$2.87
1,414/$16.53
 
 
 
 
 
4Q18
0
1,607/$57.75 - $50.00
15,487/$2.90
1,416/$16.72
Notes: The volumes above represent fixed swap and collar contracts the Company has in place through 4Q18. Volumes for 2Q17 include all commodity contracts for settlement any time during the second quarter of 2017; prices are weighted averages; natural gas contracts reflect regional contract positions and are no longer adjusted to a NYMEX equivalent; NGL prices are at Mt. Belvieu and reflect specific NGL components, 2017 and 2018 quarters include ethane, propane, butanes and gasoline. In addition to the volumes above, the Company has oil basis swaps in place through 4Q18. See 1Q17 Earnings Presentation for contract details on the oil basis swaps.


UPCOMING EVENTS
EARNINGS WEBCAST AND CALL
As previously announced, SM Energy will host a webcast and conference call to discuss first quarter 2017 results at 8:00 a.m. Mountain Time/10:00 a.m. Eastern Time tomorrow, May 3, 2017. Please join us via webcast at www.SM-Energy.com or by telephone 877-870-4263 (toll free) or 412-317-0790 (international), and indicate SM Energy earnings call. The webcast and call will also be available for replay. The dial-in replay number is 877-344-7529 (toll free) or 412-317-0088 (international) with passcode 10104227 and is available through May 10, 2017.
A presentation will be posted to the Company’s website to accompany this call at www.SM-Energy.com
UPCOMING CONFERENCE PARTICIPATION
•
June 6, 2017 - RBC Global Energy & Power Conference. Executive Vice President and Chief Financial Officer Wade Pursell will participate in investor meetings at this event.
•
June 7, 2017 - BAML 2017 Energy Credit Conference. Executive Vice President and Chief Financial Officer Wade Pursell will present at 8:50 a.m. Eastern Time. This event will be webcast.

An investor presentation for these events will be posted to the Company’s website on June 5, 2017 at www.SM-Energy.com.
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the meaning of securities laws. These statements involve known and unknown risks, which may cause SM Energy's actual results to differ materially from results expressed or implied by the forward-looking statements. Forward-looking statements in this release include, among other things, guidance estimates for the second quarter and full year 2017. General risk factors include the availability, proximity and capacity of gathering, processing and transportation facilities; the volatility and level of oil, natural gas, and natural gas liquids prices, including any impact on the Company’s asset carrying values or reserves arising from price declines; uncertainties inherent in projecting future rates of production or other results from drilling and completion activities; the imprecise nature of estimating oil and gas reserves; uncertainties inherent in projecting future drilling and completion activities, costs or results; the uncertainty of negotiations to result in an agreement or a completed transaction; the uncertain nature of divestiture, joint venture, farm down or similar efforts and the ability to complete any such transactions; the uncertain nature of expected benefits from the actual or expected divestiture, joint venture, farm down or similar efforts; the availability of additional economically attractive exploration, development, and acquisition opportunities for future growth and any necessary financings; unexpected drilling conditions and results; unsuccessful exploration and development drilling results; the availability of drilling, completion, and operating equipment and services; the risks associated with the Company's commodity price risk management strategy; uncertainty regarding the ultimate impact of potentially dilutive securities; and other such matters discussed in the “Risk Factors” section of SM Energy's 2016 Annual Report on Form 10-K, as such risk factors may be updated from time to time in the Company's other periodic reports filed with the Securities and Exchange Commission. The forward-looking statements contained herein speak as of the date of this announcement. Although SM Energy may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by securities laws.
ABOUT THE COMPANY
SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in onshore North America. SM Energy routinely posts important information about the Company on its website. For more information about SM Energy, please visit its website at www.SM-Energy.com.


SM ENERGY CONTACTS
INVESTORS: Jennifer Martin Samuels, jsamuels@sm-energy.com, 303-864-2507













SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
March 31, 2017
 
 
 
 
 
 
 
For the Three Months Ended March 31,
 
 
Production Data
2017
 
2016

Percent Change
Average realized sales price, before the effects of derivative settlements:
 
 
 
 
 
Oil (per Bbl)
$
47.55

 
$
25.67

 
85
 %
Gas (per Mcf)
2.98

 
1.87

 
59
 %
NGLs (per Bbl)
22.06

 
11.76

 
88
 %
Equivalent (per BOE)
$
27.55

 
$
15.78

 
75
 %
Average realized sales price, including the effects of derivative settlements:
 
 
 
 
 
Oil (per Bbl)
$
44.97

 
$
49.94

 
(10
)%
Gas (per Mcf)
3.50

 
3.02

 
16
 %
NGLs (per Bbl)
19.18

 
13.54

 
42
 %
Equivalent (per BOE)
$
27.55

 
$
26.74

 
3
 %
Production:
 
 
 
 
 
Oil (MMBbl)
3.5

 
4.1

 
(14
)%
Gas (Bcf)
33.9

 
35.7

 
(5
)%
NGLs (MMBbl)
2.9

 
3.3

 
(13
)%
MMBOE (6:1)
12.1

 
13.4

 
(10
)%
Average daily production:
 
 
 
 
 
Oil (MBbl/d)
39.2

 
45.3

 
(13
)%
Gas (MMcf/d)
376.6

 
392.2

 
(4
)%
NGLs (MBbl/d)
32.5

 
36.8

 
(12
)%
MBOE/d (6:1)
134.4

 
147.5

 
(9
)%
Per BOE data:
 
 
 
 
 
Realized price, before the effects of derivative settlements
$
27.55

 
$
15.78

 
75
 %
Lease operating expense
3.82

 
3.79

 
1
 %
Transportation costs
5.88

 
6.06

 
(3
)%
Production taxes
1.17

 
0.66

 
77
 %
Ad valorem tax expense
0.55

 
0.27

 
104
 %
General and administrative (excluding stock-compensation)
2.08

 
2.01

 
3
 %
Net, before the effects of derivative settlements
$
14.05

 
$
2.99

 
370
 %
Derivative settlement gain
—

 
10.96

 
(100
)%
Margin, including the effects of derivative settlements
$
14.05

 
$
13.95

 
1
 %
 
 
 
 
 
 
Depletion, depreciation, amortization, and
asset retirement obligation liability accretion
$
11.39

 
$
15.96

 
(29
)%



SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS (UNAUDITED)
March 31, 2017
Condensed Consolidated Balance Sheets
 
 
 
(in thousands, except share amounts)
March 31,
 
December 31,
 ASSETS
2017
 
2016
Current assets:
 
 
 
Cash and cash equivalents
$
659,147

 
$
9,372

Accounts receivable
108,368

 
151,950

Derivative asset
73,978

 
54,521

Prepaid expenses and other
8,053

 
8,799

Total current assets
849,546

 
224,642

 
 
 
 
Property and equipment (successful efforts method):
 
 
 
Total property and equipment, net
5,450,120

 
6,081,354

 
 
 
 
Noncurrent assets:
 
 
 
Derivative asset
84,195

 
67,575

Other noncurrent assets
15,847

 
19,940

Total other noncurrent assets
100,042

 
87,515

Total Assets
$
6,399,708

 
$
6,393,511

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
299,676

 
$
299,708

Derivative liability
53,809

 
115,464

Total current liabilities
353,485

 
415,172

 
 
 
 
Noncurrent liabilities:
 
 
 
Revolving credit facility
—

 
—

Senior Notes, net of unamortized deferred financing costs
2,765,714

 
2,766,719

Senior Convertible Notes, net of unamortized discount and deferred financing costs
132,889

 
130,856

Asset retirement obligation
83,160

 
96,134

Asset retirement obligation associated with oil and gas properties held for sale
16,056

 
26,241

Deferred income taxes
304,331

 
315,672

Derivative liability
81,306

 
98,340

Other noncurrent liabilities
47,252

 
47,244

Total noncurrent liabilities
3,430,708

 
3,481,206

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 111,258,225 and 111,257,500 shares, respectively
1,113

 
1,113

Additional paid-in capital
1,723,010

 
1,716,556

Retained earnings
906,515

 
794,020

Accumulated other comprehensive loss
(15,123
)
 
(14,556
)
Total stockholders’ equity
2,615,515

 
2,497,133

Total Liabilities and Stockholders’ Equity
$
6,399,708

 
$
6,393,511




SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS (UNAUDITED)
March 31, 2017
 
 
 
 
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
For the Three Months Ended March 31,
 
2017
 
2016
Operating revenues and other income:
 
 
 
Oil, gas, and NGL production revenue
$
333,198

 
$
211,823

Net gain (loss) on divestiture activity
37,463

 
(69,021
)
Other operating revenues
2,077

 
274

Total operating revenues and other income
372,738

 
143,076

 
 
 
 
Operating expenses:
 
 
 
Oil, gas, and NGL production expense
138,046

 
144,543

Depletion, depreciation, amortization, and asset retirement obligation liability accretion
137,812

 
214,207

Exploration(1)
11,978

 
15,273

Impairment of proved properties
—

 
269,785

Abandonment and impairment of unproved properties
—

 
2,311

General and administrative (including stock-based compensation)(1) 
29,224

 
32,238

Net derivative gain(2)
(114,774
)
 
(14,228
)
Other operating expenses
4,859

 
5,672

Total operating expenses
207,145

 
669,801

 
 
 
 
Income (loss) from operations
165,593

 
(526,725
)
 
 
 
 
Non-operating income (expense):
 
 
 
Interest expense
(46,953
)
 
(31,088
)
Gain (loss) on extinguishment of debt
(35
)
 
15,722

Other, net
335

 
6

 
 
 
 
Income (loss) before income taxes
118,940

 
(542,085
)
Income tax (expense) benefit
(44,506
)
 
194,875

 
 
 
 
Net income (loss)
$
74,434

 
$
(347,210
)
 
 
 
 
Basic weighted-average common shares outstanding
111,258

 
68,077

Diluted weighted-average common shares outstanding
111,329

 
68,077

Basic net income (loss) per common share
$
0.67

 
$
(5.10
)
Diluted net income (loss) per common share
$
0.67

 
$
(5.10
)
 
 
 
 
(1) Non-cash stock-based compensation component included in:
 
 
 
Exploration expense
$
1,408

 
$
1,662

G&A expense
$
4,047

 
$
5,206

 
 
 
 
(2)  The net derivative gain line item consists of the following:
 
 
 
Settlement gain
$
(7
)
 
$
(147,028
)
(Gain) loss on fair value changes
$
(114,767
)
 
$
132,800

Total net derivative gain:
$
(114,774
)
 
$
(14,228
)


SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS (UNAUDITED)
March 31, 2017
 
Condensed Consolidated Statement of Stockholders' Equity
(in thousands, except share amounts)
 
 
 
Additional Paid-in Capital
 
 
 
Accumulated Other Comprehensive Loss
 
 Total Stockholders’ Equity
 
Common Stock
 
 
Retained Earnings
 
 
 
Shares
 
Amount
 
 
 
 
Balances, December 31, 2016
111,257,500

 
$
1,113

 
$
1,716,556

 
$
794,020

 
$
(14,556
)
 
$
2,497,133

Net income
—

 
—

 
—

 
74,434

 
—

 
74,434

Other comprehensive loss
—

 
—

 
—

 
—

 
(567
)
 
(567
)
Dividends declared, $ 0.05 per share
—

 
—

 
—

 
(5,563
)
 
—

 
(5,563
)
Issuance of common stock upon vesting of restricted stock units, net of shares used for tax withholdings
725

 
—

 
(11
)
 
—

 
—

 
(11
)
Stock-based compensation expense
—

 
—

 
5,455

 
—

 
—

 
5,455

Cumulative effect of accounting change
—

 
—

 
1,108

 
43,624

 
—

 
44,732

Other
—

 
—

 
(98
)
 
—

 
—

 
(98
)
Balances, March 31, 2017
111,258,225

 
$
1,113

 
$
1,723,010

 
$
906,515

 
$
(15,123
)
 
$
2,615,515




SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS (UNAUDITED)
March 31, 2017
 
 
 
 
Condensed Consolidated Statements of Cash Flows
 
 
 
(in thousands)
For the Three Months Ended March 31,
 
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income (loss)
$
74,434

 
$
(347,210
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Net (gain) loss on divestiture activity
(37,463
)
 
69,021

Depletion, depreciation, amortization, and asset retirement obligation liability accretion
137,812

 
214,207

Impairment of proved properties
—

 
269,785

Abandonment and impairment of unproved properties
—

 
2,311

Stock-based compensation expense
5,455

 
6,868

Net derivative gain
(114,774
)
 
(14,228
)
Derivative settlement gain
7

 
147,028

Amortization of discount and deferred financing costs
4,946

 
(920
)
Non-cash (gain) loss on extinguishment of debt, net
22

 
(15,722
)
Deferred income taxes
33,225

 
(195,039
)
Plugging and abandonment
(1,191
)
 
(604
)
Other, net
4,567

 
(1,151
)
Changes in current assets and liabilities:
 
 
 
Accounts receivable
30,407

 
26,922

Prepaid expenses and other
178

 
4,984

Accounts payable and accrued expenses
(5,497
)
 
(52,294
)
Accrued derivative settlements
2,838

 
4,318

Net cash provided by operating activities
134,966

 
118,276

 
 
 
 
Cash flows from investing activities:
 
 
 
Net proceeds from the sale of oil and gas properties
744,333

 
1,206

Capital expenditures
(154,401
)
 
(176,370
)
Acquisition of proved and unproved oil and gas properties
(75,105
)
 
(15,044
)
Other, net
2,486

 
885

Net cash provided by (used in) investing activities
517,313

 
(189,323
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from credit facility
397,500

 
317,000

Repayment of credit facility
(397,500
)
 
(226,000
)
Cash paid to repurchase Senior Notes
(2,344
)
 
(19,917
)
Other, net
(160
)
 
(3
)
Net cash provided by (used in) financing activities
(2,504
)
 
71,080

 
 
 
 
Net change in cash and cash equivalents
649,775

 
33

Cash and cash equivalents at beginning of period
9,372

 
18

Cash and cash equivalents at end of period
$
659,147

 
$
51




SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS (UNAUDITED)
March 31, 2017
Adjusted EBITDAX(1)
 
 
 
(in thousands)
 
 
 
 
 
 
 
Reconciliation of net income (loss) (GAAP) to adjusted EBITDAX (Non-GAAP) to net cash provided by operating activities (GAAP)
For the Three Months Ended March 31,
 
2017
 
2016
Net income (loss) (GAAP)
$
74,434

 
$
(347,210
)
Interest expense
46,953

 
31,088

Other non-operating income, net
(335
)
 
(6
)
Income tax expense (benefit)
44,506

 
(194,875
)
Depletion, depreciation, amortization, and asset retirement obligation liability accretion
137,812

 
214,207

Exploration(2)
10,570

 
13,611

Impairment of proved properties
—

 
269,785

Abandonment and impairment of unproved properties
—

 
2,311

Stock-based compensation expense
5,455

 
6,868

Net derivative gain
(114,774
)
 
(14,228
)
Derivative settlement gain
7

 
147,028

Net (gain) loss on divestiture activity
(37,463
)
 
69,021

(Gain) loss on extinguishment of debt
35

 
(15,722
)
Other
4,986

 
432

Adjusted EBITDAX (Non-GAAP)
$
172,186

 
$
182,310

Interest expense
(46,953
)
 
(31,088
)
Other non-operating income, net
335

 
6

Income tax (expense) benefit
(44,506
)
 
194,875

Exploration(2)
(10,570
)
 
(13,611
)
Amortization of discount and deferred financing costs
4,946

 
(920
)
Deferred income taxes
33,225

 
(195,039
)
Plugging and abandonment
(1,191
)
 
(604
)
Other, net
(432
)
 
(1,583
)
Changes in current assets and liabilities
27,926

 
(16,070
)
Net cash provided by operating activities (GAAP)
$
134,966

 
$
118,276

 
 
 
 
(1) Adjusted EBITDAX represents net income (loss) before interest expense, other non-operating income and expense, income taxes, depletion, depreciation, amortization and asset retirement obligation liability accretion expense, exploration expense, property impairments, non-cash stock-based compensation expense, derivative gains and losses net of settlements, change in the Net Profits Plan liability, gains and losses on divestitures, gains or losses on extinguishment of debt, and materials inventory impairments and losses on sale. Adjusted EBITDAX excludes certain items that the Company believes affect the comparability of operating results and can exclude items that are generally one-time in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that is presented because the Company believes it provides useful additional information to investors and analysts, as a performance measure, for analysis of the Company's ability to internally generate funds for exploration, development, acquisitions, and to service debt. The Company is also subject to financial covenants under its Credit Agreement based on adjusted EBITDAX ratios. In addition, adjusted EBITDAX is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Adjusted EBITDAX should not be considered in isolation or as a substitute for net income (loss), income (loss) from operations, net cash provided by operating activities, or profitability or liquidity measures prepared under GAAP. Because adjusted EBITDAX excludes some, but not all items that affect net income (loss) and may vary among companies, the adjusted EBITDAX amounts presented may not be comparable to similar metrics of other companies. Under the terms of the Company’s credit agreement, if the Company fails to comply with the covenants that establish a maximum permitted ratio of senior secured debt to adjusted EBITDAX and a minimum permitted ratio of adjusted EBITDAX to interest, it will be in default, an event that would prevent it from borrowing under its credit facility and would therefore materially limit the Company’s sources of liquidity.  In addition, if the Company was in default under its credit facility and unable to obtain a waiver of that default from its lenders, the lenders under that facility and under the indentures governing the Company’s outstanding Senior Notes and Senior Convertible Notes would be entitled to exercise all of their remedies for a default.
(2) Stock-based compensation expense is a component of exploration expense and general and administrative expense on the accompanying statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the accompanying statements of operations for the component of stock-based compensation expense recorded to exploration expense.




SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS (UNAUDITED)
March 31, 2017
Adjusted Net Loss (Non-GAAP)
 
 
 
(in thousands, except per share data)
 
 
 
 
For the Three Months Ended March 31,
 
 
2017
 
2016
Net income (loss) (GAAP)
$
74,434

 
$
(347,210
)
Net derivative gain
(114,774
)
 
(14,228
)
Derivative settlement gain
7

 
147,028

Net (gain) loss on divestiture activity
(37,463
)
 
69,021

Impairment of proved properties
—

 
269,785

Abandonment and impairment of unproved properties
—

 
2,311

(Gain) loss on extinguishment of debt
35

 
(15,722
)
Other, net(2)
4,986

 
(508
)
Tax effect of adjustments(1)
53,142

 
(167,056
)
Adjusted net loss (Non-GAAP)(3)
$
(19,633
)
 
$
(56,579
)
 
 
 
 
Diluted net income (loss) per common share (GAAP)
$
0.67

 
$
(5.10
)
Net derivative gain
(1.03
)
 
(0.21
)
Derivative settlement gain
—

 
2.16

Net (gain) loss on divestiture activity
(0.34
)
 
1.01

Impairment of proved properties
—

 
3.96

Abandonment and impairment of unproved properties
—

 
0.03

(Gain) loss on extinguishment of debt
—

 
(0.23
)
Other, net(2)
0.04

 
(0.01
)
Tax effect of adjustments(1)
0.48

 
(2.44
)
Adjusted net loss per diluted common share (Non-GAAP)(4)
$
(0.18
)
 
$
(0.83
)
 
 
 
 
Basic weighted-average common shares outstanding (GAAP)
111,258

 
68,077

Diluted weighted-average common shares outstanding (GAAP)
111,329

 
68,077

 
 
 
 
(1) The tax effect of adjustments is calculated using a tax rate of 36.1% and 36.5% for the three-month periods ended March 31, 2017 and March 31, 2016, respectively. These rates approximate the Company's statutory tax rate for the respective periods, as adjusted for ordinary permanent differences.
(2) For the three-month periods ended March 31, 2017 and March 31, 2016 the adjustment is related to materials inventory loss and the change in the Net Profits Plan liability. Additionally, for the three-month period ended March 31, 2016, adjustments relating to claims on royalties on certain Federal and Indian leases are included. These items are included in other operating expenses on the Company's condensed consolidated statements of operations.
(3) Adjusted net loss excludes certain items that the Company believes affect the comparability of operating results. Items excluded generally are non-recurring items or are items whose timing and/or amount cannot be reasonably estimated. These items include non-cash and other adjustments, such as derivative gains and losses net of settlements, impairments, net (gain) loss on divestiture activity, materials inventory loss, and gains or losses on extinguishment of debt. The non-GAAP measure of adjusted net income (loss) is presented because management believes it provides useful additional information to investors for analysis of SM Energy's fundamental business on a recurring basis. In addition, management believes that adjusted net income (loss) is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Adjusted net income (loss) should not be considered in isolation or as a substitute for net income (loss), income (loss) from operations, cash provided by operating activities, or other income, profitability, cash flow, or liquidity measures prepared under GAAP. Since adjusted net income (loss) excludes some, but not all, items that affect net income (loss) and may vary among companies, the adjusted net income (loss) amounts presented may not be comparable to similarly titled measures of other companies.
(4) For periods where the Company reports adjusted net loss, basic weighted-average common shares outstanding are used in the calculation of adjusted net loss per diluted common share.


SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS (UNAUDITED)
March 31, 2017
 
 
Total Capital Spend Reconciliation
 
(in millions)
 
 
 
Reconciliation of costs incurred in oil & gas activities (GAAP)
For the Three Months Ended March 31,
to total capital spend (Non-GAAP)(1)
 
2017
Costs incurred in oil and gas activities (GAAP):
$
281.5

Less:
 
Asset retirement obligation
(0.9
)
Capitalized interest
(2.2
)
Proved property acquisitions(2)
(2.2
)
Unproved property acquisitions(3)
(83.6
)
Other
0.3

Total capital spend (Non-GAAP):
$
192.9

 
 
(1) The non-GAAP measure of total capital spend is presented because management believes it provides useful information to investors for analysis of SM Energy's fundamental business on a recurring basis. In addition, management believes that total capital spend is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Total capital spend should not be considered in isolation or as a substitute for Costs Incurred or other capital spending measures prepared under GAAP. The total capital spend amounts presented may not be comparable to similarly titled measures of other companies.
(2) Includes approximately $800,000 of ARO associated with proved property acquisitions for the three-month period ended March 31, 2017.
(3) Includes approximately $24.5 million related to the fair value attributed to the properties surrendered in the non-monetary acreage trade that completed during the three-month period ended March 31, 2017.