EXHIBIT 99.1


SM ENERGY COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information is presented to illustrate the effect of the sale by SM Energy Company (the “Company”) of its remaining assets in the Williston Basin located in Divide County, North Dakota (“Divide County” or the “Divestiture”) on its historical financial position and operating results. The Divestiture had an effective date of January 1, 2018, and was completed on May 30, 2018. Net cash proceeds received at closing from the Divestiture, after agreed upon purchase price adjustments and estimated selling costs, totaled $160.9 million. The Divestiture is subject to final purchase price adjustments that have not yet been finalized.

The unaudited pro forma condensed consolidated balance sheet as of March 31, 2018, is based on the historical financial statements of the Company as of March 31, 2018, after giving effect to the Divestiture as if it had occurred on March 31, 2018. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2018, and the year ended December 31, 2017, are based on the historical financial statements of the Company for such periods after giving effect to the Divestiture as if it had occurred on January 1, 2017. The pro forma adjustments are based on available information and certain assumptions that the Company believes are reasonable as of the date of this Current Report on Form 8-K. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial statements.

The preparation of the unaudited pro forma condensed consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States. These principles require the use of estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. The Company determined that the Divestiture does not qualify for discontinued operations accounting under financial statement presentation authoritative guidance.

The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to indicate the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the Divestiture been consummated on the date or for the periods presented. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the Company’s historical consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed on February 21, 2018, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed on May 4, 2018.

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SM ENERGY COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2018
(in thousands, except share data)
 
As Reported
 
Pro Forma Adjustments
 
Notes
 
As Adjusted
 ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
643,337

 
$
160,944

 
(a)
 
$
804,281

Accounts receivable
192,562

 
 
 
 
 
192,562

Derivative assets
77,296

 
 
 
 
 
77,296

Prepaid expenses and other
9,997

 
 
 
 
 
9,997

Total current assets
923,192

 
160,944

 
 
 
1,084,136

Property and equipment (successful efforts method):
 
 
 
 
 
 
 
Proved oil and gas properties
5,824,014

 
 
 
 
 
5,824,014

Accumulated depletion, depreciation, and amortization
(2,893,674
)
 
 
 
 
 
(2,893,674
)
Unproved oil and gas properties
1,986,070

 
 
 
 
 
1,986,070

Wells in progress
405,549

 
 
 
 
 
405,549

Oil and gas properties held for sale, net
234,618

 
(211,696
)
 
(b)
 
22,922

Other property and equipment, net of accumulated depreciation of $52,483
112,972

 
 
 
 
 
112,972

Total property and equipment, net
5,669,549

 
(211,696
)
 
 
 
5,457,853

Noncurrent assets:


 


 
 
 


Derivative assets
35,128

 
 
 
 
 
35,128

Other noncurrent assets
32,119

 
 
 
 
 
32,119

Total noncurrent assets
67,247

 

 
 
 
67,247

Total assets
$
6,659,988

 
$
(50,752
)
 
 
 
$
6,609,236

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 


Current liabilities:


 


 
 
 


Accounts payable and accrued expenses
$
468,108

 
$
(1,655
)
 
(c)
 
$
466,453

Derivative liabilities
181,068

 
 
 
 
 
181,068

Total current liabilities
649,176

 
(1,655
)
 
 
 
647,521

Noncurrent liabilities:
 
 
 
 
 
 


Revolving credit facility

 
 
 
 
 

Senior Notes, net of unamortized deferred financing costs
2,770,979

 


 
 
 
2,770,979

Senior Convertible Notes, net of unamortized discount and deferred financing costs
141,269

 
 
 
 
 
141,269

Asset retirement obligations
85,407

 
 
 
 
 
85,407

Asset retirement obligations associated with oil and gas properties held for sale
23,139

 
(19,696
)
 
(d)
 
3,443

Deferred income taxes
178,423

 
(6,468
)
 
(e)
 
171,955

Derivative liabilities
53,712

 
 
 
 
 
53,712

Other noncurrent liabilities
45,786

 
 
 
 
 
45,786

Total noncurrent liabilities
3,298,715

 
(26,164
)
 
 
 
3,272,551

 
 
 
 
 
 
 


Commitments and contingencies
 
 
 
 
 
 


 
 
 
 
 
 
 


Stockholders’ equity:
 
 
 
 
 
 


Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 111,687,016
1,117

 


 
 
 
1,117

Additional paid-in capital
1,747,035

 
 
 
 
 
1,747,035

Retained earnings
980,444

 
(22,933
)
 
(f)
 
957,511

Accumulated other comprehensive loss
(16,499
)
 
 
 
 
 
(16,499
)
Total stockholders’ equity
2,712,097

 
(22,933
)
 
 
 
2,689,164

Total liabilities and stockholders’ equity
$
6,659,988

 
$
(50,752
)
 
 
 
$
6,609,236



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SM ENERGY COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2018
(in thousands, except per share data)

 
As Reported
 
Pro Forma Adjustments
 
Notes
 
As Adjusted
Operating revenues and other income:
 
 
 
 
 
 
 
Oil, gas, and NGL production revenue
$
382,886

 
$
(29,060
)
 
(g)
 
$
353,826

Net gain on divestiture activity
385,369

 
24,097

 
(h)

 
409,466

Other operating revenues
1,340

 
 
 
 
 
1,340

Total operating revenues and other income
769,595

 
(4,963
)
 

 
764,632

Operating expenses:
 
 
 
 
 
 
 
Oil, gas, and NGL production expense
120,879

 
(11,838
)
 
(g)
 
109,041

Depletion, depreciation, amortization, and asset retirement obligation liability accretion
130,473

 
(4,622
)
 
(i)
 
125,851

Exploration
13,727

 
 
 
 
 
13,727

Abandonment and impairment of unproved properties
5,625

 
 
 
 
 
5,625

General and administrative
27,682

 
 
 
 
 
27,682

Net derivative loss
7,529

 
 
 
 
 
7,529

Other operating expenses
4,612

 
 
 
 
 
4,612

Total operating expenses
310,527

 
(16,460
)
 

 
294,067

Income from operations
459,068

 
11,497

 

 
470,565

Interest expense
(43,085
)
 

 
 
 
(43,085
)
Loss on extinguishment of debt

 
 
 
 
 

Other non-operating income (expense), net
409

 

 
 
 
409

Income before income taxes
416,392

 
11,497

 

 
427,889

Income tax expense
(98,991
)
 
(2,529
)
 
(j)
 
(101,520
)
Net income
$
317,401

 
$
8,968

 

 
$
326,369

 
 
 
 
 
 
 
 
Basic weighted-average common shares outstanding
111,696

 
 
 
 
 
111,696

Diluted weighted-average common shares outstanding
112,879

 
 
 
 
 
112,879

Basic net income per common share
$
2.84

 


 
 
 
$
2.92

Diluted net income per common share
$
2.81

 


 
 
 
$
2.89


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SM ENERGY COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2017
(in thousands, except per share data)
 
As Reported
 
Pro Forma Adjustments
 
Notes
 
As Adjusted
Operating revenues and other income:
 
 
 
 
 
 
 
Oil, gas, and NGL production revenue
$
1,253,783

 
$
(123,727
)
 
(g)
 
$
1,130,056

Net gain (loss) on divestiture activity
(131,028
)
 
523,618

 
(h)

 
392,590

Other operating revenues
6,621

 
 
 
 
 
6,621

Total operating revenues and other income
1,129,376

 
399,891

 
 
 
1,529,267

Operating expenses:
 
 
 
 
 
 

Oil, gas, and NGL production expense
507,906

 
(50,084
)
 
(g)
 
457,822

Depletion, depreciation, amortization, and asset retirement obligation liability accretion
557,036

 
(18,811
)
 
(i)
 
538,225

Exploration
56,179

 
 
 
 
 
56,179

Impairment of proved properties
3,806

 
 
 
 
 
3,806

Abandonment and impairment of unproved properties
12,272

 
 
 
 
 
12,272

General and administrative
120,585

 
 
 
 
 
120,585

Net derivative loss
26,414

 
 
 
 
 
26,414

Other operating expenses
13,667

 
 
 
 
 
13,667

Total operating expenses
1,297,865

 
(68,895
)
 
 
 
1,228,970

Income (loss) from operations
(168,489
)
 
468,786

 
 
 
300,297

Interest expense
(179,257
)
 
 
 
 
 
(179,257
)
Loss on extinguishment of debt
(35
)
 
 
 
 
 
(35
)
Other non-operating income (expense), net
3,968

 
 
 
 
 
3,968

Income (loss) before income taxes
(343,813
)
 
468,786

 
 
 
124,973

Income tax benefit
182,970

 
(144,686
)
 
(k)
 
38,284

Net income (loss)
$
(160,843
)
 
$
324,100

 
 
 
$
163,257

 
 
 
 
 
 
 
 
Basic weighted-average common shares outstanding
111,428

 
 
 
 
 
111,428

Diluted weighted-average common shares outstanding
111,428

 
264

 
(l)
 
111,692

Basic net income (loss) per common share
$
(1.44
)
 

 
 
 
$
1.47

Diluted net income (loss) per common share
$
(1.44
)
 

 
 
 
$
1.46




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NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma condensed consolidated financial statements reflect the following adjustments:

Pro Forma Condensed Consolidated Balance Sheet

The “As Reported” column represents the historical condensed consolidated balance sheet of the Company as of March 31, 2018.

a.
To adjust cash and cash equivalents for net cash proceeds received at closing from the sale of the Company’s remaining assets located in the Williston Basin in Divide County, North Dakota. The effective date of the Divestiture was January 1, 2018; therefore, agreed upon purchase price adjustments related to the effective period are reflected in the pro forma adjustments.
b.
To eliminate oil and gas properties related to the assets sold, which were previously classified as assets held for sale.
c.
To reflect working capital transfered to the buyer.
d.
To eliminate the asset retirement obligation liability related to the assets sold.
e.
To reflect the estimated change in deferred income taxes related to the properties sold at a 22 percent blended federal and state statutory rate.
f.
To record the loss on sale of oil and gas properties, net of tax effect, as illustrated in the table below. As the loss is directly attributable to the Divestiture and is not expected to have a continuing impact on Company’s operations, the estimated loss is only reflected in retained earnings on the unaudited pro forma condensed consolidated balance sheet.
 
For the Three Months Ended March 31, 2018
 
(in thousands)
Gross purchase price
$
192,000

Less: agreed upon purchase price adjustments
(29,424
)
Less: estimated selling costs
(1,632
)
Net cash proceeds received at closing
160,944

 
 
Working capital transferred to the buyer
1,655

Net divestiture proceeds
162,599

 
 
Less: cost basis of assets sold
(192,000
)
Net loss on the Divestiture, before tax
(29,401
)
 
 
Plus: tax benefit
6,468

Net loss on the Divestiture, after tax
$
(22,933
)

Pro Forma Condensed Consolidated Statement of Operations

The “As Reported” column represents the historical condensed consolidated statement of operations of the Company for the three months ended March 31, 2018, and the year ended December 31, 2017.

g.
To eliminate the revenues and direct operating expenses for the assets sold.
h.
To eliminate the historical write down of the assets while held for sale.
i.
To eliminate depletion, depreciation, amortization, and asset retirement obligation liability accretion expense based on production volumes attributable to the assets sold.
j.
To adjust the income tax expense for the effects of the March 31, 2018, pro forma adjustments using a 22 percent blended federal and state statutory rate. The cumulative effect is reflected in the unaudited pro forma condensed consolidated balance sheet, but not in the unaudited pro forma condensed consolidated statements of operations.
k.
To adjust the income tax benefit for the effects of the December 31, 2017, pro forma adjustments using a net 30.9 percent rate, consisting of a 36.1 percent blended federal and state statutory rate and a 5.2 percent adjustment for the enactment of the 2017 Tax Cut and Jobs Act which reduced the Company’s federal tax rate for future tax year from 35

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percent to 21 percent. The cumulative effect is reflected in the unaudited pro forma condensed consolidated balance sheet, but not in the unaudited pro forma condensed consolidated statements of operations.
l.
The pro forma adjustments made for the year ended December 31, 2017, resulted in changing net loss to net income. As a result, the diluted weighted-average common shares outstanding for the year ended December 31, 2017, have been adjusted to include the impact of dilutive securities which had originally been excluded from the calculation of diluted weighted-average common shares outstanding.

No pro forma adjustment was made for historical overhead costs reflected in general and administrative and exploration expense or for interest expense, as these costs are not directly attributable to the assets sold. The Divestiture proceeds are planned to be used to fund the Midland Basin and Eagle Ford shale capital programs, and for general corporate purposes, including debt reduction. Additionally, there were no impacts to the Company’s oil, gas, and NGL commodity derivative contracts as they are not directly attributable to the assets sold.

6