SM Energy at Barclays Conference: Strategic Growth and Returns Focus

On Tuesday, 02 September 2025, SM Energy (NYSE:SM) presented at the Barclays 39th Annual CEO Energy-Power Conference 2025, highlighting its strategic focus on returns-based technical expertise and operational efficiency. The company underscored significant production growth, a strong balance sheet, and potential for future capital returns, while also addressing challenges related to leverage and transportation costs.

Key Takeaways

• SM Energy achieved over 60% growth in production and proved reserves over the past five years.
• The company maintains a strong balance sheet with a $2 billion borrowing base and minimal leverage.
• SM Energy is considering resuming share buybacks and possibly increasing dividends.
• The Uinta Basin acquisition is pivotal, offering high oil content and comparable margins to the Midland Basin.
• The company prioritizes accretive acquisitions and aims to maintain operational efficiency without increasing leverage.

Financial Results

• Production & Reserves Growth:

- Production increased by over 60%, with oil production growing more than 70% over five years.

- Proved reserves also grew by over 60%, reflecting significant asset development.

• Capital Efficiency:

- SM Energy avoided share dilution, maintaining 114 million shares outstanding.

- Leverage decreased from 2.3 times to approximately 1 time.

• Balance Sheet Strength:

- The company has a $2 billion undrawn borrowing base and $100 million in cash.

- Targeting bond maturities in 2026 and 2027, callable at par.

• Leverage and Capital Returns:

- Leverage was at 1.2 times by the end of Q2, expected to reach 1 time by year-end.

- A $500 million share buyback program has been reloaded, with $370 million executed from 2022 to 2024.

Operational Updates

• Technical Focus:

- Emphasizes a returns-based technical focus with a strong team in geosciences, engineering, and data analytics.

- Achieved a 15% reduction in drilling and completion costs over four years.

• Asset Performance:

- Howard County in the Midland Basin expanded from 3 to 9 intervals, with over 5,000 wells drilled.

- The Austin Chalk in South Texas offers returns comparable to the Permian Basin.

• Uinta Basin Innovation:

- Features 4,000 feet of stacked pay with 90% oil content.

- Cost reductions achieved through owning a sand mine and centralized frac operations.

Future Outlook

• Growth Strategy:

- Plans to continue growth in existing basins without increasing leverage.

- Potential for further M&A in the Uinta Basin, focusing on accretive opportunities.

• Capital Allocation:

- Prioritizing free cash flow for debt reduction and potential share buybacks.

- Evaluating the possibility of raising the fixed dividend as business size and free cash flow increase.

Q&A Highlights

• Uinta Basin Acquisition:

- The technical team is optimistic about the stacked pay and high returns.

- Plans to explore additional intervals in the upper cube next year.

• M&A Strategy:

- Open to opportunities that meet returns-based criteria, while mindful of regulatory concerns.

- Emphasizes acquisitions that are accretive and maintain leverage discipline.

• Cash Return Strategy:

- As leverage approaches 1 time, the company considers prioritizing share buybacks.

- Open to increasing the fixed dividend based on business performance.

Readers are encouraged to refer to the full transcript for a more detailed account of SM Energy’s presentation at the conference.

Full transcript - Barclays 39th Annual CEO Energy-Power Conference 2025:

Wade, SM Energy Company: Thank you, Betty. Good afternoon, everyone. Good to be here. Thanks for inviting us this year. Thanks. It’s always good to be in New York City this time of year. Beautiful place. Thank you for joining me today for the update on SM Energy Company. I’ll just jump past that slide. I’m still not a prophet, if you’ve heard me speak before. I’m going to be talking about the future today, but just, you know, take that for what it is. If you’ve heard us talk before, I know you’ve heard us describe SM Energy Company. So here’s SM Energy Company. I know you’ve heard us describe ourselves this way: premier operator of top-tier assets, delivering a sustainable return of capital, and then empowered by a world-class technical team and strong balance sheet. We’re poised to repeat that success. That’s kind of who we are.

I want to focus today on just one of those pieces, and that is the world-class technical team part of that. If you want to think of just four words, why is SM Energy Company different? Why should I invest in SM Energy Company versus other companies, other E&P companies? Think of returns-based technical focus. That’s really what differentiates us, we think, especially from companies our size, and that is that focus on technical expertise. I’ll talk about that as we go through the presentation more. I said top-tier assets. We’re in three top-tier assets, two of them in Texas, one in the Midland Basin, one in South Texas, and then most recently in the Uinta Basin. I’ll actually tell, they all tell a really good, unique story on their own about us being technical focused, returns-based technical focused. I’ll get into that.

We believe that’s the only way you can generate a slide like this. This slide, it’s a really important one. If you just take one home today, take this one home. If you look at the last five years, these are simple metrics for an E&P company, very, very rooted in what we do, and that is production and proved reserves. What you see from this slide is that over the last five years, since coming out of COVID, we’ve grown production well over 60%, oil over 70%, proved reserves well over 60%. In that period, you would imagine there must have been a lot of capital involved in doing that. If I go to the capital structure and if I look at total shares outstanding at the beginning of that period and at the end of that period, it’s exactly the same, 114 million shares outstanding.

No dilution for that growth. If you think, well, maybe you levered up to do it, if you look at our leverage at the beginning of that period, it was 2.3 times. Standing here today, it’s closer to one time. We’ve actually delevered during that period also. That’s who we are, and that’s the output of what we do. If you ask me what the next five years should look like, we plan on it looking like that: continued growth, capital efficient, without diluting, and without levering up the balance sheet to do it. How do we do that? It’s a great question. Technical team. I would say that over the last 17 to 20 years, SM Energy Company has been very focused on building muscle in all of the areas that we think are really critical to being a successful resource play company, especially in the technical area.

That means geosciences. That means engineering. That means data analytics team. Means systems, processes, back office, everywhere. Really building muscle technically and with people that are attracted to that. I think we have a culture that attracts people to that environment and a leadership development culture that attracts people in all areas, frankly, of the company. Our attrition is really low compared to our peers. I said that the three top-tier assets really tell unique stories around that technical expertise, and they do. Starting with the two in Texas, the two older stories. I’ll start in the Midland Basin in Howard County. If you go back to 2016 or 2015, and you looked at a map of the Midland Basin, Howard County would be outside the map. It’d be off the map.

Our technical team had done a lot of work and had gotten very excited about that area, saying that this is great rock. This is a great, great part of the Midland Basin. Back then, you would have seen maybe three intervals in Howard County. This is a good visual. The map on the left is Howard County back then and the level of activity. Maybe three intervals, not that many wells drilled, but a lot of verticals. A lot of data to study. Fast forward 10 years later, and, wow, what a different image, right? Over 5,000 wells drilled, nine intervals now. It’s truly been a success, wonderfully successful acquisition for us and truly a top-tier asset. The next story is the Austin Chalk. In West Chat, over near the, actually in South Texas, near the border, the Rio Grande, we have what’s called here the West Austin Chalk.

That’s important because back in 2018, if I said Austin Chalk, when we said Austin Chalk, everyone said that’s a, they almost said it’s a four-letter word because the history of the Austin Chalk was not a good history. It was further east. It would have a good well come on, but then it would go away too quickly, and then the next one wouldn’t work. You know, the P10, the P90 was just really, really high, lots of variability. This Austin Chalk was very different. Our technical team said, "This is just a completely different play altogether. We truly should have renamed it the Wolf Chalk or something like that, but we didn’t." It took time to prove again to folks.

If you look at the slide on the left and the picture on the right, you see that eventually, we’re drilling wells that the returns are very similar to the Permian Basin. Great asset. Lots of inventory. We’re now saying 465 locations, and we’re just a little over 100 into that. Another great story, top-tier assets driven by the technical focus. Just an update on both of these assets. They continue to perform really well, and they both continue to have a lot of inventory in them. These charts, we just, we typically update these periodically. It’s third-party data. Enverus actually gives us the data for this, and it compares the one on the left is Howard County versus our peers. The one on the right is the Austin Chalk versus our peers.

It’s just a cumulative production plot showing the average performance of the wells versus the peers in those areas. This is an enormous amount of data. These are wells going back to 2021 for Howard County and 2018 for the Austin Chalk. Just enormous sample size and just continued outperformance versus the peers in both of these basins. I said premier operator. That’s an important part of the mix also. That technical DNA is also in the operations of the company. That’s all the data driven, before the well is even drilled, making sure we hit the landing zone perfectly, drilling longer laterals, trying something new on every completion, bigger completions. What you see is over the last four years, our average time to drill a well, our average time to complete a well has just gone down and down and down and down.

The result is 15% lower DNC cost over that period of time, just based on premier operations. Great, great work there. The insets in the green, I’ll let you read those yourself. Those are some examples of some things that have been that they’ve been doing this year to improve those results as well. Let’s move on to the third story, the Uinta Basin. The technical team looks for opportunities to add to our inventory, to add to our top-tier assets, not just in the areas that we’re in. They certainly do a lot of that, and we’re able to organically add inventory. We’re able to add an Austin Chalk interval on top of the Eagleford, which is what happened in South Texas. They also look in other basins where there is opportunity to deploy our expertise in a new area if the opportunity presents itself.

That happened a little over a year ago in the Uinta Basin. What we identified in the Uinta was an asset that, again, not well known, not unknown by everyone, but not well known, an area that might look a little smaller to majors, certainly. To others that might have looked, they might have heard, noticed things like waxy crude, having to rail out of the area. Things that we think are opportunities that might have looked as deterrents. What the technical team really loved and loves is the characteristics of the reservoir. This is 4,000 feet of stacked pay, potentially 17 intervals. You can imagine the opportunities and the wonderful playground, if you will, to really deploy our expertise into.

That excitement met opportunity, which it has to, when a private called XCL Resources was selling the asset by design, by plan, and we were able to acquire this position, 63,000 net acres for a couple of billion dollars a little over a year ago. Very excited about it. All the reasons that I just told you we love about it, we still believe that. The integration is complete. We were able to hire essentially everyone that we hoped to. The cultures were very similar. I think the new employees love working for SM Energy Company. It’s just really a match made very well. There’s a lot of innovation going on in the area, and I’ll talk about that on a later slide, but the performance has been very good so far. We’re very excited about this asset. This is just showing you some production.

This is, again, a similar chart to what I showed you earlier on Howard County and Austin Chalk. Third-party data. Again, this is Inverus data, cumulative production plot. What you see is the production out of this basin, the top two lines, the dark blue and the not-so-dark blue line. One is what’s called the upper cube. One is called the lower cube. There’s also a third cube I’ll talk about, which is the deep cube. What you see is the production profile of this asset is very, very similar or better than the Midland Basin. What we’ve been showing the last few quarters, we’ve been saying, but we’ve been actually showing the results. It’s really important to remember, despite the additional cost involved for transportation out of the basin of the oil, the waxy oil, there’s high demand for that oil, by the way.

Despite that additional cost, the margin per BOE in the Uinta is almost the same as our Midland Basin margins. That’s because mainly the high oil content. This is 90% oil in the Uinta. Some nice innovation and some opportunities to continue to drive cost, we believe, in the Uinta Basin asset. The folks at XCL, a lot of XEOG people, really innovative, I would say, very well-run operation. Things like owning our own sand mine, we’re excited about that. Really, we’ve seen how that really lowers the cost per well. Some centralized frac operations where you have the completion spread in one spot, able to run lines and actually frac other areas without moving, mowing, and demowing. Not lots of nice savings there.

You can see a picture of us sending the sand, you know, versus having to put it on a truck, on a little rail that’s been built. Just a lot of innovative things that have been done in the basin already, that we’re continuing to do a lot of simul fracking too. A lot of examples. Premier operator, I think we’ve been saying this at least since I’ve been here. You can’t call yourself a premier operator if you’re not a top steward, a top protector of people and the environment. That truly is part of our DNA. We’re very proud to deliver that result. If you want to look into that further, there’s just a ton of data on our website updated with a lot of those statistics. I said strong balance sheet.

That’s obviously a very, very important part of being an E&P company and being able to repeat the success that we’ve been talking about. Our balance sheet is currently very strong. I like to talk about balance sheets in terms of liquidity, maturities, and total leverage. Starting with liquidity, lots of liquidity. A $2 billion borrowing base, which is undrawn. You see it matures way out in the future. It’s that really tall bar. That was recently redetermined at lower prices. The borrowing base is actually $3 billion. The bank commitment is $2 billion undrawn. Again, we’re actually building cash currently, $100 million of cash at the end of last quarter. You can see the maturities of the debt that we do have is staggered out reasonably well. We’re in debt reduction mode currently.

Obviously, we’ll be targeting that next maturity, the bonds that are in 2026 and then the ones in 2027. Both of those are callable at par currently, so we can take those out whenever we wish. Kind of philosophically, we’ve been very clear about this certainly since 2022. When our leverage is above one times, we prioritize free cash flow to reducing debt to getting it back below one times. When it’s below one times, we prioritize that free cash flow to return of capital. We do that in the form of share buyback. Where we are currently is getting back really close to that one times area, 1.2 times at the end of the second quarter. If you look at that pro forma for the Uinta acquisition, it’s 1.1 times.

I think we said on the call that if you just assume the strip to the end of the year, right at one times at the end of the year. We’re kind of in that zone right now where we would be considering getting back into share buyback. The way we look at return of capital is, and we kind of began this in a big way back in 2022. After we got below one times, we said that’s what we’re doing first. Once we got below it, we announced a fixed dividend and a share buyback program. We believe that’s the right way to return capital. A fixed dividend that you can count on that hopefully will grow with the growth of the business.

When we announced it back in 2022, we came out at $0.15 a quarter, and we’ve been able to increase that twice since then, once to $0.18 and most recently to $0.20 per quarter. That’s the current fixed dividend. We announced a $500 million share buyback. During the last few years, from 2022 to 2024, when we were below one times, I think we acquired $370 million of that $500 million during that period. Pulled in a little over 10 million shares during that period. Did the Uinta acquisition, used all cash for that acquisition. Leverage went back up closer to one and a half times. Since then, we’ve been working it back down to the one times. The board has announced a reloaded $500 million share buyback, which we are anxious to get back into as we get into this near one times or below area.

That’s our philosophy for return on capital. With that, I’ll close. If you’re just going to remember four words, it’s returns-based technical focus. That’s who we are, premier operator of top-tier assets. With that, I’ll close it up, Betty, and open it up for questions.

Operator: We’ll open up for Q&A, but I’ll kick it off, Wade. When you guys first looked at the Uinta Basin, was that something that you actively pursued in the Uinta Basin? What did you see at the time of the acquisition? What did you underwrite, and how did reality compare to what you underwrite, and how do you think about the potential or undiscovered potential from here?

Wade, SM Energy Company: Yeah. No, that’s a great question. Thank you for asking. I’ll just kind of walk through that again. It’s all about the technical team and looking for areas that are very similar characteristics, frankly, to the Permian Basin, the stack pay, very oily, areas that we can deploy our technical abilities on and generate a return. It’s not just technical focus. It’s a returns-based technical focus. It would be very hard to replicate what we were able to acquire in the Uinta in the Permian, for example. So competitive, it would be very hard to replicate those returns. What did they see? What did the technical team see? They map everything. I shouldn’t say everything. It’s not a, we’re not looking all around the world. Let’s just say North America, not offshore. Areas like the Uinta, they get very excited about when they see these characteristics.

That is primarily, again, the very, very thick stack pay, the 4,000 feet of oil, 90% oil, with all the potential of the intervals. Remember when we talked about Howard County, the industry thought maybe three intervals, and now we’ve seen 10 years later, nine intervals. Things like that, all the upside of the intervals. You got, so you got it, kind of those 17 intervals are kind of broken up in three cubes, we call them, right? The upper cube, the lower cube, which is in the middle, sorry. The deep cube is the deepest. That lower cube is what was mostly underwritten in the acquisition. That was the most known. That’s where there’s clear value, and that’s where 90% of our capital is going this year. We’re very excited about the potential in the upper cube.

Even the deep cube is just really, really upside, right, to be really explored. That’s kind of the makeup of it. You’ll see us testing more of the upper cube next year. I’m quite sure. A lot of the things that when you said, "What can we do?" I talk about the technical team, and it’s not just the way we drill and complete the wells, but it’s our kind of our philosophy of co-developing. We think we’ll also make the overall asset much more valuable at the end of the day versus just focusing on intervals that we know first, but actually co-developing intervals together. We think works very well. That’s generally it.

Operator: Yeah. I mean, I do think you guys have the credibility in Howard County because, as you said, the three intervals, I didn’t even know we’re at nine now. That’s quite impressive. Maybe from an M&A standpoint, do you think you have scale in Uinta now? Would you want bigger? Is there other parts of the U.S. that the technical team have looked at that found interesting?

Wade, SM Energy Company: Yeah. Obviously, it’s always better to have more. Would we like to grow in the Uinta? Sure. We knew going into that acquisition that we really wouldn’t have to. It’s a really good size position, certainly for a company our size. We will look for opportunities, though, if they can meet the criteria that we have for being returns-based. The assets need to, you know, they need to be what we consider top-tier assets, and that means they generate really good returns at commodity prices, oil prices much lower than certainly where we are now. We’ll look, there’s other people around us, and we will look for those opportunities. I think, you know, there would have been a lot of concern a few years ago, FTC concerns with respect to getting too large in the area. That’s something to factor in. We think we don’t know.

We think that’s probably a little bit easier than it would have been, just given the dynamics of the basin, mainly that so much of the crude is now drained out, railed out of the, actually out of the state, and the administration may be a little friendlier to that, but we don’t know. We wouldn’t count on it, but it feels intuitively like it probably is. We would look for that. Do we look in other basins? Yeah. I mean, we’re very happy in the basins we’re in, and the plan would be to be able to grow in those. We’re not against looking in other basins. It just wouldn’t be the, I don’t think it would be the near-term plan to do that, but that’s possible. On M&A, we certainly appreciate the benefits of scale from an investability standpoint, from a valuation standpoint.

We look at every possible way that we could take advantage of that, but we don’t believe in doing something just to do it. We don’t believe in scale just for the sake of scale. It needs to meet criteria of being accretive, again, assets that compete, assets that are top-tier assets. Certainly not seeing the balance sheet the other direction from a leverage standpoint is not something we’re interested in. That’s kind of how we view all of that.

Operator: It’s interesting to hear the Uinta margin is actually comparable to the Permian. From a return standpoint, like maybe where is the well cost now, and how quickly that could come down? Do you expect the full cycle or half cycle return could be can be competitive as well?

Wade, SM Energy Company: Yeah. We certainly think so. I mean, from a well cost standpoint, I think, company-wide, we’ve, I think the most recent number we put out is around $725 a foot. That’s company-wide on average. We didn’t report it by basin, and the Uinta is probably a little north of that, but not significantly. Yeah, no, we completely believe that we have the ability to drive costs down, drive efficiencies down. You know, that slide we showed, and it was just the Texas assets, the drilling and completion and the lower cost that’s resulted from what we’ve been able to do in that area. No reason to believe that we can’t continue to do, in a new basin. Yeah.

Operator: Makes sense. Maybe, wrapping up with the cash return, I think you have reached your net leverage target at the end of 2Q with a $1.2 leverage. How do you think about the allocation of free cash flow from here? I don’t think you have an explicit free cash flow return of figures. How do you think about balancing the buyback versus raising base dividend versus just putting it on the balance sheet?

Wade, SM Energy Company: Great question. I’ll just repeat. As we approach one times, that’s kind of the area where we start looking at prioritizing free cash flow toward return of capital. As we get, we’re not there yet, but we’re close enough to where we’re considering visibility and how well we, I mean, if you go back to 2022, if you think about how we did that, we were on our way to one times, and we actually started the return of capital program as we were approaching it because we felt so strong about the environment, and the sentiment and the visibility we had. Things are pretty uncertain right now in the macro. We know that. We might be a little more cautious. However, we feel really strong about our program and the returns and the cash flow we’re generating.

As we start moving some cash flow to share buybacks, that would be the first choice. The way we did it before, nothing’s changed. We don’t have any programs. During open window periods, you might see us in the market supporting the stock, certainly on weaker days. That’s just kind of our philosophy. You might start seeing some of that anytime. With respect to doing that versus the fixed dividend, we’re happy that we’ve been able to raise the fixed dividend twice. We kind of look at that in the context of overall size of the business, how much free cash flow we’re generating. Again, visibility, what yield does that show versus our market cap and enterprise values. There’s nothing magical about when we would raise the fixed dividend.

It would just be more of a, this is a time where we feel very strong about where we are in the visibility we have coming. For now, I would anticipate the share buyback will be the choice, but we’ll continue to evaluate that.

Operator: Great. All right. I think without any questions, we’ll wrap it up. Wade, thank you so much for the update. It’s a lot of momentum across the business. You get to see that.

Wade, SM Energy Company: Thank you. Thanks, everyone.

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