SM Energy Reports Results for Fourth Quarter of 2011 and 2011 Proved Reserves; Provides Operational Update

• Record quarterly average daily production of 557.9 MMCFE/d (93.0 MBOE/d); exceeds guidance of 479 - 509 MMCFE/d

• GAAP net loss of $(120.7) million, or $(1.89) per diluted share; adjusted net income of $40.9 million, or $0.60 per diluted share

• Record proved reserves of 1,259 BCFE (210 MMBOE) at year-end 2011, up 28% from 2010; proved liquids reserves grow 73% year over year; 310% drilling reserve replacement, excluding revisions for the year.

DENVER--(BUSINESS WIRE)-- SM Energy Company (NYSE: SM) ("SM Energy" or the "Company") today reports financial results for the fourth quarter of 2011 and provides an update on the Company's operating and financial activities. In addition, a new presentation for the fourth quarter earnings and operational update 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 23, 2012. Information for the earnings call can be found below.

MANAGEMENT COMMENTARY

Tony Best, President and CEO, remarked, "During 2011, SM Energy set many records, including record quarterly production for each of the previous four quarters, record proved reserves at year end of 1.3 TCFE or approximately 210 MMBOE, and nearly $1 billion in property transactions. This past year, we set out with the ambitious goal to grow the Company's production by 50% through economically sound projects. We executed on that plan by leveraging off of the significant ground work set up in the preceding years in our Eagle Ford and Bakken Three Forks programs. Though 2011 was a great year, our management team is always looking to the future. For 2012, we intend to maintain our growth trajectory while generating superior returns. We believe we have the capital program, financial strength, and asset base in liquid rich plays to deliver on that plan."

FOURTH QUARTER 2011 RESULTS

SM Energy posted a net loss for the fourth quarter of 2011 of $(120.7) million, or $(1.89) per diluted share. Adjusted net income for the fourth quarter was $40.9 million, or $0.60 per adjusted diluted share. 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. A summary of the adjustments made to arrive at adjusted net income is presented in the table below:

During the fourth quarter of 2011, SM Energy recorded a proved property impairment of $170.5 million. This non-cash charge related to dry gas properties in the Company's ArkLaTex region, including properties targeting the Haynesville and Cotton Valley intervals. The impairment was triggered by lower natural gas prices at the end of the fourth quarter. The Company also took a loss on divestiture activity of $25.0 million in the fourth quarter. This loss relates to the Company's Marcellus shale assets and arises from Endeavour Operating Corporation's ("Endeavour") failure to consummate its agreements with the Company to purchase such assets. Due to Endeavour's failure, accounting guidance requires that these assets be reclassified as held for use at their accounting fair value at the end of the quarter, which resulted in a non-cash charge. Additionally, DD&A expense associated with these assets for the period that they were classified as assets held for sale of approximately $14.7 million is required to be captured in the current period. The Company has initiated litigation in Harris County, Texas against Endeavour, asserting that Endeavour breached its agreements with the Company by failing to close and is seeking specific performance or, in the alternative, damages.

SM Energy's net cash provided by operating activities for the fourth quarter of 2011 was $270.8 million. Operating cash flow was $275.1 million for the same period.

Adjusted net income and operating cash flow are non-GAAP financial measures - please refer to the respective reconciliation in the accompanying Financial Highlights section at the end of this release for additional information about these measures.

SM Energy's average daily production of 557.9 MMCFE/d (93.0 MBOE/d) for the fourth quarter of 2011 was 13% above the midpoint of the Company's guidance range of 479 to 509 MMCFE/d. The production mix for the quarter was 29% oil, 56% gas, and 15% NGLs. Production growth was driven by strong results in the Company's Eagle Ford shale and Bakken/Three Forks programs. Production grew 21% sequentially in the fourth quarter of 2011 over the preceding quarter and 62% over the fourth quarter of 2010. When taking into account production attributable to divested properties, the Company grew production by 65% from the fourth quarter of 2010 to the fourth quarter of 2011.

Total operating revenues and other income for the fourth quarter of 2011 were $379.5 million. The following table displays, by product type, the average realized price received by the Company, as well as the adjusted price received after taking into account cash settlements for derivative transactions:

The table below presents actual production and per MCFE cost metrics for the quarter, along with previously issued fourth quarter guidance for 2011:

PROVED RESERVES AND COSTS INCURRED

The table below reconciles the changes in the Company's proved reserves from year-end 2010 to year-end 2011:

SM Energy's estimate of proved reserves as of December 31, 2011, was 1,259.2 BCFE (209.9 MMBOE), which is an increase of 28% from 984.5 BCFE (164.1 MMBOE) at the end of 2010. These reserves are comprised of 71.7 MMBbl of oil, 664.0 Bcf of natural gas, and 27.5 MMBbl of NGLs, and are 67% proved developed, compared to 70% proved developed at the end of 2010. The percentage of proved liquids reserves increased 73% to 595.2 BCFE (99.2 MMBOE) and reflects the impact of the Company's focus on liquids rich plays and the conversion in 2011 to three-stream production reporting to show volumes consistent with the title transfer for each product. Drilling reserve replacement, excluding revisions was 310% for the year. The before income tax PV-10 value of the Company's estimated proved reserves at December 31, 2011, was $3.5 billion, which was roughly $1.1 billion higher than the prior year. Approximately 80% of SM Energy's estimated proved reserves by value were audited by an independent reserve engineering firm.

Prices used at year-end to calculate the Company's estimate of proved reserves were $96.19 per barrel of oil, $4.12 per MMBTU of natural gas, and $59.37 per barrel of NGL, using the trailing 12-month arithmetic average of the first of month price. These prices are 21% higher and 6% lower than the prices used at the end of 2010 for oil and natural gas, respectively. As the Company did not report its production in three streams during 2010 there is no comparative data for NGL pricing.

In 2011, SM Energy's finding and development costs from drilling, excluding revisions, was $2.85 per MCFE or $17.10 per BOE. Drilling and development reserve replacement, excluding revisions, was 310% in 2011. Finding costs and reserve replacement ratios are non-GAAP financial measures; please refer to the respective definitions in the accompanying Financial Highlights section at the end of this release.

Below is a table detailing the Company's costs incurred in oil and gas producing activities for the year ended December 31, 2011:

FINANCIAL POSITION AND LIQUIDITY

As of December 31, 2011, SM Energy had total long-term debt of $985.1 million. This was comprised of $285.1 million, net of debt discount, related to the Company's 3.50% Senior Convertible Notes, $350.0 million of its 6.625% Senior Notes, and $350.0 million of its 6.50% Senior Notes. As of December 31, 2011, the Company had no borrowings under its long-term secured credit facility and its gross debt-to-book ratio was 40%. When taking into consideration cash on hand at December 31, 2011, of $119.2 million, the Company's net debt-to-book capitalization ratio was 37% as of the end of the year.

OPERATIONAL UPDATE

Revised 2012 Capital and Performance Guidance

SM Energy is presenting updated 2012 capital program guidance in the table below:

Eagle Ford Shale

The Company had 84 wells drilled and completed in its operated Eagle Ford shale program as of the end of 2011. Of this amount, 44 were drilled and completed during 2011. SM Energy slowed the rate of increase in operated Eagle Ford activity in the second half of 2011 to accommodate continued investment in the non-operated Eagle Ford program until the Acquisition and Development Agreement ("ADA") with Mitsui E&P Texas L.P. (“Mitsui”) was completed.

SM Energy is currently operating five drilling rigs on its operated acreage in South Texas. The Company plans to operate a five to six drilling rig program throughout 2012 and has allocated between $650 million and $700 million to drilling and completion activities. During 2012, the drilling program will include three drilling rigs that are designed for pad drilling.

In the non-operated Eagle Ford program, SM Energy expects substantially all drilling and completion costs will be carried pursuant to the terms of the ADA with Mitsui. The Company will, however, remain responsible for investments in items such as infrastructure net to its proportional ownership.

Bakken / Three Forks

SM Energy is currently operating four drilling rigs in the Williston Basin with a focus on horizontal development of the Bakken and Three Forks formations. The Company has allocated between $160 million to $185 million to drilling and completion activities in its operated Bakken/Three Forks program. The Company will focus its drilling program in its Raven and Gooseneck prospects and will begin drilling infill locations in its Bear Den prospect.

Granite Wash

SM Energy currently has three operated drilling rigs in its Granite Wash program, which are focused on the shallower, more liquid rich washes. The Company has allocated between $60 million and $70 million for its 2012 operated program in the Granite Wash.

Haynesville Shale

As gas prices deteriorated in recent months, SM Energy has made the decision to scale back its operated program in the Haynesville by removing four of the wells the Company had previously planned to drill in 2012. As a result of the reduced 2012 drilling activity in the Haynesville, SM Energy has reduced the capital allocated for this program to $35 million to $40 million. After the completion of the currently planned drilling, SM Energy will have approximately 80% of its operated Haynesville shale acreage held by production.

Performance Guidance

The production forecast for 2012 is being reduced slightly to a range of 220 BCFE to 227 BCFE from 225 BCFE to 232 BCFE. The reduction is due to the aforementioned reduction of activity from our operated Haynesville shale program.

Due to the ADA with Mitsui, DD&A expense increases significantly in the first quarter of 2012 as a result of the Company's transfer of proved reserves to Mitsui; the Company however retains the associated costs of those transferred proved reserves on its balance sheet. As SM Energy adds proved reserves related to its non-operated Eagle Ford program at essentially no cost, the Company's DD&A rate will decline over the course of the development of the associated assets.

EARNINGS CALL INFORMATION

The Company has scheduled a teleconference to discuss these results and other operational matters for February 23, 2012, at 8:00 a.m. Mountain time (10:00 a.m. Eastern time). The call participation number is 877-445-0811 and the conference ID number is 48119439. An audio replay of the call will be available approximately two hours after the call at 855-859-2056, with the conference ID number 48119439. International participants can dial 617-401-8115 to take part in the conference call, using the conference ID number 48119439, and can access a replay of the call at 404-537-3406, using conference ID number 48119439. Replays can be accessed through March 9, 2012.

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 9, 2012.

INFORMATION ABOUT FORWARD LOOKING STATEMENTS

This release contains forward looking statements within the meaning of securities laws, including forecasts and projections. The words “will,” “believe,” “budget,” “anticipate,” “plan,” “intend,” “estimate,” “forecast,” and “expect” 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 uncertainty of negotiations to result in an agreement or a completed transaction, the uncertain nature of the expected benefits from the actual or expected acquisition, divestiture, farm down or joint venture of oil and gas properties, the uncertain nature of announced divestiture, joint venture, farm down or similar efforts and the ability to complete such transactions, 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 property acquisition opportunities for future growth and any necessary financings, unexpected drilling conditions and results, unsuccessful exploration and development drilling, 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 2011 Annual Report on Form 10-K which is expected to be filed with the Securities and Exchange Commission on or around February 23, 2012. 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 value, 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 value 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 value 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 value for estimated proved reserves as of December 31, 2011 may be reconciled to its standardized measure of discounted future net cash flows as of December 31, 2011 by reducing the Company's pre-tax PV-10 value by the discounted future income taxes associated with such reserves, and a reconciliation is provided below.

Reconciliation of standardized measure (GAAP) to PV-10 value (Non-GAAP):

Additionally, the Company believes its use of an independent reserve auditor is a fact of interest to investors and analysts who follow the Company. More information on these items will be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, to be filed with the Securities and Exchange Commission on or around February 23, 2012.

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.