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Sep 30, 2021
SM Energy Q3 2021 Earnings Report
SM Energy reported strong Q3 2021 results with production outperformance and cash flow exceeding expectations.
Key Takeaways
SM Energy reported a strong third quarter in 2021, driven by production outperformance and higher realized prices. The company's cash flow beat expectations, and they met their year-end 2022 leverage target more than one year early. They are increasing guidance for 2021 production volumes to 49.5-50.0 MMBoe.
Production exceeded expectations at 14.3 MMBoe, with 56% oil, leading to increased full-year guidance.
Net income was $85.6 million, or $0.69 per diluted common share.
Free cash flow reached $147.1 million, and Adjusted EBITDAX was $346.7 million.
Net debt-to-Adjusted EBITDAX was less than 2 times, meeting the year-end 2022 target early.
Forward Guidance
SM Energy provided guidance for the full year and fourth quarter of 2021.
Positive Outlook
- Production guidance range is increased and narrowed to 49.5-50.0 MMBoe.
- Capital expenditure guidance is narrowed to $670-675 million.
- LOE per Boe is reduced to $4.50-$4.60.
- Transportation per Boe is reduced to ~$2.75.
- DD&A expense per Boe is reduced to $15.00-$15.50.
Challenges Ahead
- Production range reflects timing of new wells being turned-in-line.
- Approximately 70-75% of expected 4Q oil production is hedged to WTI at an average price of $41.70/Bbl.
- Approximately 60% of expected 4Q Midland Basin oil production is hedged to the local price point at a positive $0.71/Bbl basis.
- Approximately 80% of expected 4Q natural gas production is hedged (based on dry gas volumes).
Historical Earnings Impact
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Avg. Return Before/After Earnings
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