SM Energy at EnerCom Denver: Strategic Growth and Innovation

On Monday, 18 August 2025, SM Energy (NYSE:SM) presented at the EnerCom Denver – The Energy Investment Conference, delivering a confident overview of its strategic growth and technological advancements. While celebrating significant increases in production and reserves, CEO Herb Vogel also addressed challenges such as oil takeaway capacity in the Uinta Basin. The company remains committed to reducing debt and enhancing shareholder value.

Key Takeaways

• SM Energy increased its SEC proved reserves by 68% and oil equivalent production by 64% since 2020.
• The company reduced its leverage from 2.3x to 1.2x EBITDAX, aiming for less than 1x by year-end.
• Plans to restart stock buybacks under a $500 million authorization once leverage goals are met.
• Over 40% of free cash flow has been returned to stockholders since September 2022.
• The Uinta Basin’s operational innovations have delivered higher margins than the Midland Basin.

Financial Results

• SEC Proved Reserves: Increased from 405 million to 678 million barrels of oil equivalent since 2020.
• Oil Equivalent Production: Grew from 127,000 to 208,000 barrels per day.
• Oil Production: Rose from 63,000 to 111,000 barrels per day.
• Leverage: Reduced to 1.2x EBITDAX, with a target below 1x by year-end.
• Cash on Hand: Over $100 million as of the second quarter end.
• Return of Capital: More than 40% of free cash flow returned since September 2022.
• Dividends: Increased twice since September 2022, currently at $0.20 per share per quarter.
• Share Buybacks: $370 million in shares bought back from September 2022 to June 2024.

Operational Updates

• Howard County: Wells produced 31% more oil than peers after 24 months.
• Western Eagle Ford: Wells produced 43% more oil than nearby peers after 22 months.
• Drilling and Completion: Improved times and reduced well cost per foot from 2022 to 2025.
• Uinta Basin: Production doubled from 80,000 to 160,000 barrels per day since 2021.
• Innovations: Continued focus on market access and longer lateral drilling.

Future Outlook

• Debt Reduction: Aim to achieve leverage below 1x by year-end.
• Share Buybacks: To restart once leverage goals are met.
• Uinta Basin: Ongoing innovation and potential exploration of the deep cube.
• Technology: Continued use of advanced technologies and data analytics for optimization.

For a deeper dive into SM Energy’s strategic plans and financial performance, refer to the full conference call transcript below.

Full transcript - EnerCom Denver – The Energy Investment Conference:

Eric, Enercom Host, Enercom: Alright. You ready? Yeah. Okay. The next company to present is SM Energy.

SM is an independent E and P based in Denver with operations in the Midland Basin in West Texas, the Maverick Basin in South Texas, and the Uinta Basin in Northeast Utah. Please join me in welcome Herb Vogel, SM Energy’s CEO.

Herb Vogel, CEO, SM Energy: Thanks, Eric. And good morning, everyone. And thanks Enercom for the invitation to speak also. And you know, I’m going to give a lot of remarks here. It’s probably going take fifteen or twenty minutes and we’re a technology based company.

So just know that if you run run this through MS Copilot, you can probably get it all summarized in about third of a page and it’ll hit all the highlights really well for you. So if you’re technology based, could go that route. But what I hope you’ll take away from what I covered today is that SM Energy is one of the companies of our scale best positioned to thrive in the current environment. We’re a company that has built the people capability and technical tools over many years to assess, explore, and develop plays on oftentimes overlooked acreage to benefit all benefit all our stakeholders. And this approach enables us to achieve higher returns and importantly generate more inventory organically and through appropriately sized and targeted low PDP acquisitions with upside potential.

That’s really what we’re looking for. To give you a bit of a roadmap on what I’m going to cover, I’ll talk about our recent growth, our pursuit of differentiating technologies and then we’ll get specific about the track record that we have developed in unconventional resource development focusing on the Midland Basin, the Maverick Basin in South Texas before I get to the Uinta Basin in Utah that we entered last year. But as a public company, first note that I’ll be making some forward looking statements and please read these disclaimers. So most of you know us well, but for those who don’t, we’re a 117 year old company and I’ll just point out that we have focused over the past decade on identifying, owning and developing high return assets, operating them well for capital efficiency and free cash flow generation and maintaining a leadership position among peers in sustainability and stewardship. So quick summary is we’re a premier operator of top tier assets that focuses on operational execution, returns capital to stockholders and drives for expansion of our portfolio of top tier inventory.

So many of you follow the E and P industry closely and will recognize how meaningful this slide slide is in summarizing our growth over the past five years. You’ll see that in the four years from year end 2020 to year end 2024, our SEC proved reserves increased by 68% from four zero five million to six seventy eight million barrels of oil equivalent. In terms of oil equivalent production in the five years from full year 2020 to our latest guidance for 2025, we grew 64% from 127,000 barrels a day to 208,000 barrels a day now. And finally just focusing on oil production, we’re growing 76% during those same years from 63,000 to a 111,000 barrels of oil per day. So also really important to note that during the same time frame we did not dilute our shareholders.

We had around 114,000,000 shares in 2020 and are around that same level today. Furthermore, we reduced our leverage by more than a full turn from around 2.3 times EBITDAX at year end twenty twenty to about 1.2 times today. So if you look at our per share metrics, you’d be really happy to see this sort of growth. Clearly we focused on building shareholder value and these are the metrics that show that clearly, Significant growth while delivering value and not diluting shareholders. So let me just wrap up on this slide by saying that this is a company that you should want to own.

Very unique to other companies, particularly ones of our size, the difference is a returns based technical focus. Let me repeat that. It’s a returns based technical focus. I believe that’s the only way you achieve what I just covered. So how do we do that and how will we continue to do that in the future?

I’m really glad you asked that. So over the past seventeen years, we’ve focused on developing muscle in all the areas critically important to unconventional resource development. This involves developing our people, developing and utilizing better and better technologies and growing differentiating abilities in data analytics. And we’ve done that over a sustained period of time. We have an exceptional staff that is focused on critical aspects of geosciences, engineering, data analytics and execution in ways that deliver value.

Well, you might say and I’ve heard this before, doesn’t everyone do that and just say that? Well, maybe. But what I’m going do is show you the results in a forward plan that shows that differentiation. This slide focuses on two specific examples where our team was able to recognize highly economic plays on previously underappreciated acreage. There were other operators who owned this acreage but they chose to exit and missed the opportunity.

So first let’s look at Howard County in the Northeastern part of the Midland Basin. We started looking at this county in 2015 when there were only 79 industry horizontal wells producing from three intervals. We are fortunate in that we had an incredible wealth of vertical well data that we looked into closely and mapped in detail. Based on our technical assessment, we recognized significant untapped potential and subsequently acquired significant acreage in 2016. When we acquired the acreage to enter this part of the Midland Basin, given the limited horizontal data and activity, economics were really questionable.

And frankly, there was industry skepticism. Once we acquired the acreage and delivered some outstanding well results, notably the Viper well in 02/2017, peers followed us quickly. That acreage grab was fast. Fast forward today, where we are developing is recognized as top tier with really low breakevens. We added significant inventory over the nine years since we entered this part of the basin.

Now there are over 5,150 industry horizontal wells producing in that area from nine intervals. So from seventy nine and three intervals to 5,150 from nine and and we were part of that whole run up. So second, let’s look at the Austin Chalk in the Western Eagle Ford in Webb County, Texas. Here again, it’s a similar story and really what our forte is. In 02/2018, there were only eight eight industry horizontal wells in the area and they were kind of dismissed by the industry as sub economic with about $80 barrel break evens.

And I’ll just point out that there were 600 we had drilled 600 Eagle Ford wells right through this Austin Chalk. So again, we had a wealth of data we could look at. So fast forward to today and now there are over 500 industry horizontal wells in a fairly limited area. We see 465 locations just on our acreage of which we have already drilled and completed nearly a 150. And just last week, Envers published that our breakevens here are about $44 per barrel, Clearly top tier.

That’s really what we focus on to be enduring through the downturns in commodity prices is to go with those less than $50 breakevens. So how is it possible? And I’ll just elaborate on South Texas for a minute here. We had one geologist who was looking and couldn’t understand why seven of our 600 Eagle Ford wells had higher yields. Went back and he looked at the well tracks and these were all five to 10,000 foot laterals and some of them had drifted up into the Austin Chalk.

He noted that the yields were higher in those wells. So he he put together a proposal to get some core and wanted to see what did the Austin Chalk really look like. So we did our first Eagle Austin Chalk targeted well in 02/2018. And that first target hit well. It was a quite economic well with yields significantly higher.

Then he also from the core of this whole team recognized that there was a much better interval to land and that became the middle Austin Chalk which is when we were off to the races because these are the wells that really get got to in the low $30 barrel breakevens at the time. So that’s really what it comes down to is having that geoscience insight and then being able to optimize from there. So let me turn now to the performance of these assets. So we have a pretty extensive team with, on the petrotechnical side that look at data in-depth and we have a lot of tools that have been developed over multi generations to simulate fracs and the co developments. So given our data analytics tools and our ability to simulate and with co development, we’ve been able to optimize well placements and completion designs to maximize the value achieved from our developments.

On the left, can see how our wells perform on average relative to our peers in Howard County. After twenty four months, our wells will have produced 31% more oil than the average of 16 of our peers. That’s where the value is. You can be a low cost operator and focus on the low cost. We really focus on getting the most value out of our wells and that takes quite a bit more advanced technical planning on the completion designs.

Similarly, you go to the West Condensate Austin Chalk, after twenty two months our wells will have produced 43% more oil than the average of our peers nearby in that basin. And this doesn’t just happen. It’s a concerted effort to continue to refine our tools, accurately forecast production, and repeat over time to deliver. And as many of you are aware, our industry We need some help here. There we go.

Got it. Our industry doesn’t sit still. We’re continuously looking for ways to get faster and more efficient. At SM we’re really no exception. Our operations teams in Texas continue to set new records.

On the slide you’ll see several improvements from 2022 to year end to date in 2025. We’re drilling quite a bit faster, completing much faster and reducing well cost per foot. On the right you’ll just see some specific drivers this year that led to cost improvements. So so far I’ve talked about Texas and our track record there over many years and how we recognize potential that was overlooked by others. Now let me turn to the Uinta Basin where we added over 63,000 acres last year.

Most of you know this, but for those who don’t, we acquired XCL Resources, an end cap company last year announcing the transaction in 2024, closed October 1 and took over operations January 1. We hired all the field staff from XCL along with quite a few of their technical staff and leadership. And I’ll just start on the slide by pointing out that this is not a new basin. It was new to quite a few people but it’s not a new basin. It’s been producing for over seventy five years.

There’s a lot of subsurface data from over 8,500 vertical wells. But there was relatively limited activity. There were perceptions that oil takeaway capacity was constrained, that economics were questionable and as we’ve seen before general industry skepticism. Well, to me that sounds exactly like what we’re looking for at SM. We saw over 4,000 feet of stacked pay and over pressured source rocks.

This was bolstered by a lower cube with over 800 industry horizontal wells and an upper cube with 18 horizontal wells. We saw 17 potential producing horizons including a deep cube which had been undrilled only with vertical wells. And this is all right up our alley in terms of our team’s ability to optimize co development using the tools we’ve developed for stacked pay, early stages in a basin that has all the elements we see as necessary for highly economic development. Since perceptions from several years ago, oil takeaway has grown dramatically with the basin shipping twice as much oil to market in 2025 than it did in 2021. So this is a waxy crude.

It was delivering about 80,000 barrels a day to Salt Lake City refineries in 2020, 2021 timeframe. And that’s the capacity of the Salt Lake refineries. Since then it’s been opened up and we’re now, the industry is producing about 160,000 barrels a day of waxy crude. So the roadblocks there were eliminated with the addition of rail terminals. So the inventory is really high quality with low break evens and it’s fully competitive with top tier basins like the Permian.

Finally, we see a lot of upside. So if I go here, on the right side on this slide is a figure of cumulative oil production from the Uinta Lower, that’s the top line, and upper cubes relative to the Midland Basin and Western Gulf Coast from Enverus. Here you can see just how competitive this basin is and the cost per foot are right in there with the Permian. I’d like to point out that if you were watching our second quarter results, would have seen that our Uinta Basin delivered higher margins than the Midland Basin. That’s a big surprise to a lot of investors, but it’s really high margin and that’s the oily nature.

So per BOE it’s about it’s almost 90% crude oil. And I believe those lot of people haven’t updated their views on the Uinta Basin. And as they look more closely, I just encourage them to look closely at at our results, particularly in the last couple years. So and I want to acknowledge that our predecessor operator in the Uinta, XCL, did a phenomenal operational job in the basin and I’d call this a necessity as the mother of invention and did they ever deliver operational innovation after commodity price cash of 2020 when they acquired the asset. They drove down the cost of every aspect in the operational supply chain to drive improved margins.

From recycling water to using residue gas to power gas turbine to drive an e fleet, to remote double barrel fracking, to developing a sand mine on location, to contracting for expanded takeaway capacity, they really drove performance well beyond where offset operators were. And that doesn’t mention that the acreage in the rock is in the best part of the basin for unconventional resource development. This really plays to our strengths in subsurface optimization. So that’s what we’re really bringing the table now is the optimization from here. So you’ll start to see our well designs in there coming online in 2026.

But the core operations, the lower cost of operation in the area, that came from XEL coming into this. So we haven’t stopped the track record of innovation. In fact, we’ve continued. We are optimizing market access. We’re drilling longer laterals.

We’re hitting new records on execution. Just note on the slide that pro frac hit simul frac records in March And we’re driving the cost down further with innovations like investing even in a conveyor belt to reduce sand trucking within the field. You can do this when you have concentrated 4,000 feet of pay. You can put a lot of wells into a small area really cut down on your infrastructure costs. So let me just wrap up on the Uinta by saying that we see an excellent future in this basin by a continued operational innovation coupled with subsurface optimization and recognition of more inventory as we obtain and analyze more data throughout the basin.

And that includes the deep cube below what’s been developed. So part of being a premier operator is always striving to do the right thing. With this slide, I just want you to know that we work closely with the community in Utah. During May, our board visited the location to see firsthand the quality of our operations. I’d encourage you all to take a look at our most recent sustainability report which we just published on our website last week.

There you’ll see some excellent outcomes including an A rating from MSCI, remember we’re an oil company, which is simply a result of a company culture focused on doing the right thing for all of our stakeholders. So let me just wrap up by covering our balance sheet and return to capital program. On this slide, you can see we have a strong balance sheet with debt maturity spread over several years and an undrawn revolver. This gives us plenty of liquidity and as of second quarter end we had over $100,000,000 in cash on hand. At quarter end, our leverage was 1.2 times and that only includes nine months of Uinta contribution over the trailing twelve months since we closed the acquisition on October 1.

Pro form a with a full twelve months of Uinta contributions, would be just under 1.1 times levered. We’re prioritizing debt reduction with a plan to get below one times levered by year end at current commodity prices. And we’ve said that once we get to around one times levered, we’d restart our stock buybacks and we have $500,000,000 available that was authorized by our board of directors last year. So our return of capital program was designed based on feedback from investors that we solicited in late twenty twenty one and early twenty twenty two when our high return drilling program coupled with lower leverage made it clear that we had the capacity to return capital to stockholders. We increased our dividend from a very low level previously to $0.15 per share per quarter in September 2022.

We’ve since increased it twice to the current $0.20 per share per quarter. And from September 2022 to June 2024, we bought back about $370,000,000 in shares and then reloaded with the new $500,000,000 authorization. Overall, since September 2022, we’ve returned over 40% of our free cash flow to stockholders. So this program is underpinned by our confidence in the high quality and longevity of our asset base and balance sheet strength. It’s designed with the potential to grow given a supportive macro environment.

So I hope once you study our company and the specific examples I just reviewed, you’ll agree that SM Energy is one of the companies of our scale best positioned to sustain returns over the long term. We’ve long maintained our focus on being a premier operator of top tier assets made possible by the underlying technical strengths of our team. We drive for capital efficiency, own high quality inventory with a long runway, we’re a leader in sustainability and stewardship. So if there’s one takeaway message for you today, just remember that a returns based technical focus is what differentiates SM Energy. Thank you.

Unidentified speaker, Speaker: And SM’s breakout room is gonna be in Platte River A. Just a few announcements before lunch. Last year we had some demonstrators and I believe I think this year we might have few others. So for Augusta, the lunch room will be the doors will close at 12:20 for the people that are in there. They will not be open until after lunch, so, feel free to there’s an outside area, and then there’s Molly Brown if it’s if you reach go down there before 12:20.

And also if you see any people with no name tags, please let me or somebody at Entercom know or the hotel staff and help us be a little bit more vigilant and make sure that everything goes as scheduled. Thank you very much.

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