SM Energy Provides 2015 Guidance, Operational Update, and Reports Results for Fourth Quarter and Full-Year 2014

• 2015 capital budget of $1.2 billion, a 43% reduction from 2014 CAPEX, excluding acquisitions.
• Production guidance of 60.4 - 63.5 MMBOE, or 12% production growth year over year at the midpoint.
• Fourth quarter GAAP net income of $331.7 million or $4.91 per diluted share; adjusted net income of $70.9 million, or $1.05 per diluted share.
• Fourth quarter GAAP net cash provided by operating activities of $381.5 million; quarterly adjusted EBITDAX of $419.0 million.

DENVER--(BUSINESS WIRE)-- SM Energy Company (NYSE: SM) ("SM Energy" or the "Company") provides 2015 capital, production, and performance guidance, provides an update on the Company's operating activities, and reports financial results for the fourth quarter of 2014. In addition, a presentation regarding the aforementioned items has been posted on the Company's website at www.sm-energy.com. This presentation will be referenced during the conference call scheduled for 8:00 a.m. Mountain Time (10:00 a.m. Eastern time) on February 25, 2015. Information concerning access to the Company's earnings call can be found below.

MANAGEMENT COMMENTARY

Jay Ottoson, President and CEO, remarked, "SM Energy had a strong finish to 2014 as we continued to deliver on improvements in the productivity of our core development assets. We entered 2015 with a strong balance sheet and ample liquidity. Our entire focus now is to translate these competitive advantages into differential returns for our shareholders in what we believe will be a period of dramatic transition in our industry. We intend to accomplish this by rapidly reducing our activity level and positioning ourselves to generate strong, peer leading returns after costs adjust to the lower oil price environment."

CAPITAL, PRODUCTION, AND PERFORMANCE GUIDANCE

In the table below, SM Energy provides 2015 capital expenditure guidance:

In 2015, the Company plans to invest approximately $1.0 billion in drilling and completion ("D&C") capital, an approximately 44% reduction from $1.9 billion of D&C expenditures in 2014. SM Energy began 2015 with 17 operated rigs running and plans to reduce operated rig activity throughout the year, exiting 2015 with an expected 7 rigs. The capital allocation for the year focuses on minimizing outspend to protect the balance sheet and maintaining a level of activity that preserves the value of the Company's asset base. In its capital budget, the Company has assumed D&C cost reductions of 15% to 20% by year-end, depending on the basin. At recent strip pricing, the Company expects its 2015 capital expenditures to exceed 2015 adjusted EBITDAX by approximately $150 million and exit 2015 with a debt to trailing adjusted EBITDAX ratio of approximately 2.5 times without consideration for proceeds related to the previously announced Mid-Continent asset divestiture, which is expected to occur later this year.

Eagle Ford

The Company made 90 flowing completions in its operated Eagle Ford shale program in 2014, 23 of which were in the fourth quarter. At year-end 2014, SM Energy had 334 net wells producing. The Company's recent wells in this program, which have incorporated longer laterals and larger sand loadings, continue to meet or exceed Company expectations. In 2015, the Company plans to make approximately 75 flowing completions on its operated Eagle Ford shale acreage. Nearly all of the planned activity in 2015 will take advantage of enhanced well design, similar to wells drilled and completed in the second half of 2014.

In the Company's non-operated Eagle Ford program, the operator completed 86 gross wells in the fourth quarter of 2014. SM Energy has assumed a reduced level of activity in 2015.

Bakken/Three Forks

SM Energy made 46 gross flowing completions in its operated Bakken/Three Forks program in 2014, 13 of which were completed in the fourth quarter. At year-end 2014, SM Energy had 205 net wells producing. The Company's recent Three Forks and Bakken wells in its Gooseneck asset continue to meet or exceed Company expectations. In 2015, the Company plans to make approximately 40 gross flowing completions on its operated Bakken/Three Forks acreage in the Williston Basin, with approximately 70% of the activity focused on its Gooseneck asset in Divide County, North Dakota.

Other

Of the remaining D&C capital for 2015, a majority will be allocated early in the year to the Company's operated PRB Frontier program. The capital allocated to this program will allow SM Energy to retain essentially all of its acreage.

Production

Based on the capital budget and program discussed above, SM Energy anticipates full-year 2015 production to range from 60.4 to 63.5 MMBOE (165 - 174 MBOE/d). The midpoint of the Company's provided guidance represents annual production growth of approximately 12% year over year. Production for the first quarter of 2015 is expected to be essentially flat to the fourth quarter of 2014, with production declining approximately 1% per quarter for the remainder of the year due to the reduction in rig activity and deferral of well completions throughout the year. The Company's production mix for 2015 is expected to be similar to that of 2014.

Production and cost guidance for full-year 2015 is provided in the table below:

General and administrative - cash for 2015 includes approximately $12.5 million, or $0.20/BOE, of non-recurring costs related to the expected mid-year closure of the Company's office in Tulsa, Oklahoma.

FOURTH QUARTER 2014 RESULTS

SM Energy posted GAAP net income for the fourth quarter of 2014 of $331.7 million, or $4.91 per diluted share, compared to net income of $7.0 million, or $0.10 per diluted share, for the same period of 2013. Adjusted net income for the fourth quarter was $70.9 million, or $1.05 per diluted share, compared to adjusted net income of $85.9 million, or $1.26 per adjusted diluted share, in the same period of 2013. Adjusted net income excludes certain items that the Company believes affect the comparability of operating results. Items excluded are generally one-time items or are items whose timing and/or amount cannot be reasonably estimated. Earnings before interest, taxes, depreciation, depletion, amortization, accretion, and exploration expense ("adjusted EBITDAX") were $419.0 million for the fourth quarter of 2014, an increase of 6% from $395.5 million for the same period in 2013.

Adjusted net income and adjusted EBITDAX are non-GAAP financial measures; please refer to the reconciliations in the accompanying Financial Highlights section at the end of this release for additional information about these measures.

SM Energy had average daily production of 176 MBOE/d for the fourth quarter of 2014. The production mix for the quarter was 32% oil/condensate, 45% gas, and 23% NGLs.

The table below presents actual production and per BOE cost metrics for the fourth quarter and full-year 2014, along with previously issued guidance for the fourth quarter and full-year 2014:

In the fourth quarter of 2014, cash G&A expenses per unit were higher than guidance due to performance-based bonus compensation, which was better than projected for the year as a result of Company performance exceeding its 2014 targets.

PROVED RESERVES AND COSTS INCURRED

SM Energy's estimate of proved reserves as of December 31, 2014, was 547.7 MMBOE, which is an increase of 28% from 428.7 MMBOE at the end of 2013. These reserves are comprised of 169.7 MMBbl of oil/condensate, 1,466.5 Bcf of natural gas, and 133.5 MMBbl of NGLs.

The standardized measure of discounted future net cash flows at December 31, 2014, was $5.7 billion. The PV-10 of the Company's estimated proved reserves at December 31, 2014, was $7.6 billion, which was 38% greater than the prior year PV-10 of $5.5 billion. More than 80% of SM Energy's estimated proved reserves by value were audited by an independent reserve engineering firm. The Company believes its use of an independent reserve auditor is a matter of interest to current and potential shareholders, as well as investment professionals who follow the Company. More information on these items are included in the Company's Form 10-K for the year ended December 31, 2014, which is to be filed with the Securities and Exchange Commission on or around February 25, 2015.

Total costs incurred for 2014 were $2.7 billion and were unchanged from the Company's previous release dated February 2, 2015. See the financial highlights section at the end of this release for details concerning costs incurred.

FINANCIAL POSITION AND LIQUIDITY

As of December 31, 2014, SM Energy had total long-term debt of $2.4 billion, which included $166.0 million of outstanding borrowings on its revolving credit facility. At year-end, SM Energy's debt to trailing twelve month adjusted EBITDAX was 1.4 times and debt-to-book capitalization ratio was 51%. As of the end of the fourth quarter, SM Energy was in compliance with all covenants associated with its long-term debt.

EARNINGS CALL INFORMATION

The Company has scheduled a teleconference to discuss these results and other operational matters on February 25, 2015 at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time). Conference dial-in information is included below. A telephonic replay of the call will be available approximately two hours after the call through March 11, 2015.

This call is being webcast live and can be accessed at SM Energy Company's website at www.sm-energy.com. An audio recording of the conference call will be available at that site through March 11, 2015.

INFORMATION ABOUT FORWARD LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of securities laws, including forecasts and projections. The words “anticipate,” “assume,” “believe,” “budget,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “project,” “will” and similar expressions are intended to identify forward-looking statements. 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. These risks include factors such as the availability, proximity and capacity of gathering, processing and transportation facilities; the uncertainty of negotiations to result in an agreement or a completed transaction; the uncertain nature of announced acquisition, 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 acquisition, divestiture, joint venture, farm down or similar efforts; the volatility and level of oil, natural gas, and natural gas liquids prices; uncertainties inherent in projecting future rates of production from drilling activities and acquisitions; the imprecise nature of estimating oil and gas reserves; 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 and uncertainties related to the costs of such 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 2014 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.

INFORMATION ABOUT PROVED RESERVES

This press release contains references to certain items pertaining to the process used to estimate the Company's proved reserves and their PV-10, which is equal to the standardized measure of discounted future net cash flows from proved reserves on the applicable date, before deducting future income taxes, discounted at 10 percent. SM Energy believes that the presentation of pre-tax PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to the Company's proved reserves prior to taking into account future corporate income taxes and the Company's current tax structure. The Company further believes investors and creditors use pre-tax PV-10 as a basis for comparison of the relative size and value of the Company's proved reserves to other peer companies. SM Energy's pre-tax PV-10 for estimated proved reserves as of December 31, 2014, may be reconciled to its standardized measure of discounted future net cash flows as of December 31, 2014, by reducing the Company's pre-tax PV-10 by the discounted future income taxes associated with such reserves. A reconciliation of these adjustments is provided below.

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
Media:
Patty Errico, 303-830-5052
perrico@sm-energy.com
or
Investors:
Brent Collins, 303-863-4326
ir@sm-energy.com
or
James Edwards, 303-837-2444
ir@sm-energy.com

Source: SM Energy

Released February 24, 2015