SM Energy Company (NYSE: SM) announces that its board of directors
approved a revised capital expenditure budget for 2014. The Company is
also providing updated 2014 production and cost guidance, as well as
production growth expectations for 2015 and 2016.
MANAGEMENT COMMENTARY
Tony Best, CEO, remarked, "I am pleased to share an improved production
outlook that reflects the combination of our strong operational
performance and our deep inventory of high return projects. Recent
enhancements in our completion techniques are improving the value and
quantity of drilling inventory across our portfolio, which has been
further bolstered by our recent acquisition activity in oil-weighted
areas of our Rocky Mountain region. It's an exciting time at SM Energy
and one that I think will generate significant value for our
stockholders."
REVISED CAPITAL PROGRAM
Capital Expenditures
SM Energy has updated its 2014 capital expenditure budget. The majority
of the capital increase is attributable to approximately $430 million of
un-budgeted acquisitions in the Powder River and Williston Basins and
additional activity related to those acquisitions in the second half of
2014. Changes from the original 2014 budget are summarized in the table
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original Budget
|
|
|
|
Incremental Capital
|
|
|
|
Updated Budget
|
Program
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
Eagle Ford
|
|
|
|
$
|
900
|
|
|
|
$
|
30
|
|
|
|
$
|
930
|
Bakken/TFS
|
|
|
|
|
350
|
|
|
|
|
30
|
|
|
|
|
380
|
Powder River
|
|
|
|
|
140
|
|
|
|
|
30
|
|
|
|
|
170
|
Permian
|
|
|
|
|
155
|
|
|
|
|
|
|
|
|
155
|
Other
|
|
|
|
|
115
|
|
|
|
|
|
|
|
|
115
|
Drilling and completion subtotal
|
|
|
|
$
|
1,660
|
|
|
|
$
|
90
|
|
|
|
$
|
1,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Ventures and non-drilling
|
|
|
|
|
265
|
|
|
|
|
40
|
|
|
|
|
305
|
Acquisitions
|
|
|
|
|
|
|
|
|
430
|
|
|
|
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
1,925
|
|
|
|
$
|
560
|
|
|
|
$
|
2,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in Eagle Ford investment reflects higher levels of activity
in the Company's non-operated Eagle Ford program than were assumed in
its original budget. In the Bakken/Three Forks program, the increase in
capital relates to drilling and completion activity in the fourth
quarter associated with the Company's previously announced pending
acquisition in its Gooseneck area in North Dakota, which is expected to
close during the third quarter of 2014. In the Powder River Basin, the
Company is increasing capital to reflect accelerated activity in the
second half of 2014 due to strong results from its Frontier program. The
increase in New Ventures and non-drilling is primarily due to
construction of a gathering system in its East Texas program.
The Company will use cash on hand and its revolving credit facility to
fund the increase in capital expenditure in 2014. Based on current
commodity prices, the Company expects its year-end 2014 debt to trailing
twelve month adjusted EBITDAX to be approximately 1.2 times.
REVISED PRODUCTION AND COST GUIDANCE
The Company is providing updated production and cost guidance for the
third quarter and full year 2014 in the table below. Production guidance
for 2014 has increased by approximately 3%, which is in line with the
associated increase in drilling and completion capital outlined above.
|
|
|
|
|
|
|
|
|
|
|
3Q14
|
|
|
|
|
|
FY2014
|
Production (MMBOE)
|
|
|
|
13.1 - 13.8
|
|
|
|
|
|
53.5 - 54.9
|
Average daily production (MBOE/d)
|
|
|
|
143 - 150
|
|
|
|
|
|
146 - 150
|
|
|
|
|
|
|
|
|
|
|
|
LOE ($/BOE)
|
|
|
|
$4.60 - $4.85
|
|
|
|
|
|
$4.60 - $4.75
|
Transportation ($/BOE)
|
|
|
|
$5.90 - $6.20
|
|
|
|
|
|
$6.05 - $6.20
|
Production taxes (% of pre-derivative oil, gas, and NGL revenue)
|
|
|
|
5.0% - 5.5%
|
|
|
|
|
|
5.0% - 5.5%
|
|
|
|
|
|
|
|
|
|
|
|
G&A - Cash ($/BOE)
|
|
|
|
$2.30 - $2.50
|
|
|
|
|
|
$2.20 - $2.45
|
G&A - Cash NPP ($/BOE)
|
|
|
|
$0.15 - $0.30
|
|
|
|
|
|
$0.15 - $0.30
|
G&A - Non-cash ($/BOE)
|
|
|
|
$0.45 - $0.65
|
|
|
|
|
|
$0.35 - $0.55
|
Total G&A ($/BOE)
|
|
|
|
$2.90 - $3.45
|
|
|
|
|
|
$2.70 - $3.30
|
|
|
|
|
|
|
|
|
|
|
|
DD&A ($/BOE)
|
|
|
|
$14.00 - $14.75
|
|
|
|
|
|
$14.15 - $14.35
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate range
|
|
|
|
|
|
|
|
|
|
37.0% - 37.5%
|
% of income tax that is current
|
|
|
|
|
|
|
|
|
|
<3%
|
|
|
|
|
|
|
|
|
|
|
|
The Company's production guidance for the remainder of 2014 incorporates
downtime expected in its operated Eagle Ford asset in the 3rd quarter
due to temporary well shut-ins during offset completion work.
The Company is increasing its expected annual 2015 production growth
target to approximately 20%, up from its previously announced target of
15%. Additionally, SM Energy expects approximately 15% annual production
growth for 2016. The aggregate annual capital investment program for
each 2015 and 2016 is expected to be similar to the revised 2014
program, excluding the impact of 2014 acquisitions and non-operated
Eagle Ford carried capital.
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,”
"target," “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; 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 2013 Annual Report on Form 10-K. 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.
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.
Copyright Business Wire 2014