SM Energy (SM) Q4 Results - Feb 19

[dan_s]

SM Energy Company (the "Company") (NYSE: SM) today announces certain fourth quarter and full year 2024 operating and financial results, year-end 2024 estimated net proved reserves and its 2025 operating plan.

In 2024, SM Energy met all of its strategic objectives and delivered certain record results. Financial and operational highlights included:

Record oil production for the full year 2024 of 29.4 MMBbls, or 80.2 MBbls/d, up 23% from 2023. Total net production for the full year 2024 was 62.4 MMBoe, or 170.5 MBoe/d, up 12% from 2023. < YOY production growth of 12.2%, but slightly below my forecast 171,522 Boepd for the year, 80,464 bbls per day of oil.

Record year-end estimated net proved reserves of 678 MMBoe, up 12% from year-end 2023. The ratio of estimated net proved reserves at year-end 2024 to 2024 net production was 10.9 years. < Good.

Record dividends paid. The Company's sustainable fixed dividend was increased to an annualized rate of $0.80 per share, commencing in the fourth quarter of 2024. The fixed dividend combined with share buybacks returned $169.0 million to stockholders in 2024, an approximate 4% yield to current market capitalization. The Company has repurchased approximately 10.1 million shares from announcement of its return of capital program on September 7, 2022, through year-end 2024.

Inventory/gross drilling locations increased by approximately 40% at year-end 2024 from year-end 2023, primarily driven by the Uinta Basin acquisitions, organic growth in the Woodford-Barnett and continued expansion of the South Texas Austin Chalk.

Reduced the balance on the revolving credit facility by $121.5 million from $190.0 million at October 1, 2024, to $68.5 million at year-end 2024, making progress towards the Company's target leverage.

Substantial production growth expected in 2025 with the addition of the Uinta Basin program. The 2025 operating plan is designed to optimize capital efficiency across the Company's three core assets and results in a step-change in scale. The addition of the Uinta Basin program is expected to increase year-over-year net production by more than 20% on a Boe basis and increase oil production by more than 30%.

Net income for the full year 2024 was $770.3 million, or $6.67 per diluted common share, and for the fourth quarter 2024 was $188.3 million, or $1.64 per diluted common share.
Adjusted net income was $6.80 per diluted common share for the full year 2024 and $1.91 per diluted common share for the fourth quarter 2024. < Q4 net income beat my forecast of $1.76 EPS.

Adjusted EBITDAX was $2.0 billion for the full year 2024 and $610.8 million for the fourth quarter 2024.

At SM Energy, employees are recognized as the Company's most valuable asset. In 2024, the Company was honored with two distinguished Leadership Development awards from the Brandon Hall Group. The Gold Award recognized our innovative approach to building competencies and skills, while the Bronze Award celebrated overall excellence in leadership development. These accolades underscore the Company's commitment to cultivating a thriving corporate culture and leadership values that rank among the nation's best.

The Company's 2025 strategy and operational plan is intended to support long-term profitability and value creation by:

Focusing on operational execution to realize a step change in scale through the successful integration of the Company's recently acquired Uinta Basin assets; delivering low breakeven, high return wells across the portfolio by optimizing capital efficiency; demonstrating innovation; and remaining a leader in stewardship.

Returning capital to stockholders by generating free cash flow to support our increased $0.80 per share annual fixed dividend, transferring enterprise value to equity holders by pursuing reduced debt to a target of 1 times leverage; and resuming the Company's share buyback program, as appropriate, given $500.0 million in authorization.

Expanding our portfolio of top-tier economic drilling inventory through acquisition and exploration, and the application of advanced analytics, new technologies and development optimization.

Chief Executive Officer Herb Vogel comments: "2024 was an outstanding year. The SM Energy team delivered a significant increase in scale as measured by the 23% increase in daily oil production, 12% increase in estimated net proved reserves, approximate 40% increase in gross drilling locations and 24% expansion in our core portfolio net acreage. We remained focused on operational execution, continuing to deliver superior well performance and organically growing our portfolio while also delivering return of capital equating to an approximate 4% yield to market capitalization.

As we commence 2025, we are first focused on the integration of our Utah operations where results are expected to be accretive to all financial metrics. The balance sheet is in excellent shape, and we intend to prioritize the generation of free cash flow to pay our fixed dividend and reduce debt, followed by share repurchases once we achieve target leverage. We designed our 2025 operational plan to optimize free cash flow, considering a multi-year period, which will employ our differential technical capabilities to deliver superior well performance and drive capital efficiency. We are well poised for an excellent 2025."

Bottomline: Good Q4 results and there is lots of upside for this one in 2025. My valuation is $81/share.