SM Energy (SM) 7 Aug 24 2024 Q2 Earnings call transcript

In the latest earnings call, SM Energy showcased a robust Q2 2024 performance, underscoring the company's operational excellence and strategic acquisitions. The call, led by President and CEO, Herbert Vogel, and CFO, Wade Pursell, provided insights into the company's financial health, growth prospects, and strategic initiatives.

Strategic Acquisitions and Portfolio Expansion

One of the key highlights of the call was the announcement of the acquisition of 26,100 net acres adjacent to the XCL acquisition in Utah, commonly referred to as the Altamont acquisition. This strategic acquisition, for approximately $70 million, adds 63,300 net acres to the company's portfolio, including approximately 44,000 BOE per day of high oil content production and an initial estimate of 465 net locations. This move is expected to be highly accretive to financial metrics, including NAV, and aligns with the company's objective to expand its top-tier portfolio.

Operational Performance and Return of Capital

The operational performance in Q2 2024 surpassed the midpoint of guidance by about 2,500 BOE per day, with higher oil content, demonstrating the company's focus on operational execution. SM Energy also reported successful test results from its first Woodford Barnett test wells in the Midland Basin, adding to the company's confidence in the prospectivity of the Woodford Barnett formation.

In line with its return of capital objective, SM Energy repurchased more than 1 million shares in the second quarter and returned approximately $72 million to stockholders. The company's strong financial position allowed for an 11% increase in the quarterly dividend to $0.20 per share and a reloaded share repurchase authorization of $500 million through 2027.

Financial Results and Guidance

The financial results for Q2 2024 were marked by strong performance, with adjusted EBITDAX at $486 million and adjusted free cash flow of $98 million. This success is expected to continue into the second half of 2024 and beyond, with the pending close of the Uinta acquisition adding substantial scale in terms of production, inventory, and cash flow.

Looking Ahead

With the Uinta acquisition on the horizon, SM Energy is well-positioned for enhanced scale and growth in the coming years. The company's focus on operational excellence, strategic acquisitions, and return of capital to shareholders underscores its commitment to delivering value to stakeholders. As SM Energy continues to execute its strategic initiatives and navigate the evolving energy landscape, investors and analysts will be closely watching its performance and future prospects.