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Dec 31, 2021
SM Energy Q4 2021 Earnings Report
Reported strong Q4 2021 results driven by production outperformance, strong commodity prices and capital discipline.
Key Takeaways
SM Energy Company reported a net income of $424.9 million for the fourth quarter of 2021, a significant increase compared to the net loss of $(165.2) million for the same period in 2020. The company's production volumes were up 29% compared to the prior year period, with oil volumes from South Texas increasing by 147%. The company generated free cash flow of $259.5 million and ended the year with cash and cash equivalents of $332.7 million.
Proved reserves growth with estimated proved reserves at year-end 2021 totaling 492 MMBoe, up 22% from year-end 2020.
Capital efficiency and discipline with capital expenditures in the fourth quarter 2021 totaling $104.9 million.
Well performance above expectations with production in the fourth quarter 2021 being 14.6 MMBoe (158.3 MBoe/d) and was 53% oil.
Significant cash flow generation with fourth quarter free cash flow of $259.5 million.
SM Energy
SM Energy
SM Energy Revenue by Geographic Location
Revenue by Geographic Location
Midland Basin Revenue
CapyFin.comSouth Texas Revenue
CapyFin.com Forward Guidance
SM Energy provided guidance for the full year 2022, including production of approximately 51-54 MMBoe, capital expenditures of ~$750 million, and various cost projections. The company also provided guidance for the first quarter 2022, including capital expenditures of $180-190 million and production of 13.5-13.8 MMBoe.
Positive Outlook
- Production: Approximately 51-54 MMBoe or 140-148 MBoe/d at 46-47% oil; assumes ethane processing for the full year. This projection implies low single-digit production growth year-over year.
- This projects an approximate 75% increase in oil production from South Texas and overall growth in natural gas production due to the increased allocation to South Texas.
- Capital expenditures: ~$750 million, excluding acquisitions.
- Production costs: LOE $4.50-$4.75/Boe, which includes workover activity; transportation ~$3.00/Boe; production and ad valorem taxes: ~$3.25/Boe.
- G&A: ~$110 million.
Challenges Ahead
- The Company is unable to provide reconciliations of these forward-looking non-GAAP measures because components of the calculations are inherently unpredictable, such as changes to current assets and liabilities, the timing of changes in capital accruals, unknown future events, and estimating certain future GAAP measures.
- The allocation of drilling and completion capital is roughly a 55%/45% split between Midland and South Texas, respectively.
- South Texas drilling and completion capital includes approximately $18 million for additional science and completion testing in order to optimize landing zones and completions design in the Austin Chalk.
- Due to the high oil content of the South Texas production program, the Company also plans to invest in expanded oil handling facilities and infrastructure to accommodate higher oil volumes from the region, which is estimated at an incremental $20 million.
- Midland Basin: anticipate drilling approximately 55 net wells and completing approximately 40 net wells.
Revenue & Expenses
Visualization of income flow from segment revenue to net income