Sign in

You're signed outSign in or to get full access.

SE

SM Energy Co (SM)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a step-change in scale post-Uinta close: total operating revenue rose to $852.2M with net production up 36% YoY to 19.1 MMBoe (208.0 MBoe/d), 51% oil; sequential growth was 22% on Boe and 38% on oil, despite ~3 MBoe/d downtime from third‑party takeaway and ethane rejection decisions .
  • GAAP diluted EPS was $1.64 and adjusted EPS was $1.91; Adjusted EBITDAX increased to $610.8M vs $445.1M in Q4 2023, reflecting higher volumes and realized pricing after hedges (post‑hedge $44.85/boe) .
  • 2025 initial guidance: 200–215 MBoe/d (51–52% oil), ~$1.3B capex, LOE $5.30–$5.50/boe; 105 net wells drilled/150 completed; management targets ~1x leverage in H2 2025 before resuming buybacks more meaningfully .
  • Estimates context: S&P Global consensus data could not be retrieved; beat/miss vs. Street cannot be assessed (see Estimates Context). Management highlighted a planned ~40% increase in 2025 free cash flow and reiterated deleveraging then buybacks as capital return catalysts .

What Went Well and What Went Wrong

  • What Went Well

    • Scale and mix inflection: Q4 production 19.1 MMBoe (208.0 MBoe/d), 51% oil; net production +36% YoY, and oil volumes +62% YoY, driven by Uinta; post‑hedge realized price/boe rose to $44.85 .
    • Strong profitability metrics: Adjusted EBITDAX rose to $610.8M (+37% YoY) and adjusted EPS to $1.91 vs $1.56 in Q4 2023; adjusted FCF was $188.9M in Q4 .
    • Management tone on 2025: “SM’s 2025 plan is expected to deliver a sizable 40% increase in free cash flow… while maintaining a very strong balance sheet that should meet 1x leverage by the second half of this year.” – CEO Herb Vogel .

  • What Went Wrong

    • GAAP earnings down YoY: Q4 net income was $188.3M ($1.64/share) vs $247.1M ($2.12/share) in Q4 2023, pressured by higher per‑unit expenses and higher taxes/interest despite stronger volumes and pricing .
    • Midstream and operating headwinds: ~3 MBoe/d Q4 impact from crude takeaway downtime and ethane rejection; Q4 transportation cost/boe nearly doubled YoY to $4.10 as new flows and mix raised logistics burden .
    • Uinta onboarding noise: Uinta Q4 metrics included refinery downtime and rail delays that deferred sales recognition; LOE in Utah appeared elevated in Q4 (workovers, transition), though cash margin per boe was “pretty darn close to Midland” .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total operating revenues and other income ($USD Millions)$608.726 $643.613 $852.221
Net income ($USD Millions)$247.111 $240.523 $188.278
Diluted EPS (GAAP)$2.12 $2.09 $1.64
Adjusted EPS (non‑GAAP)$1.56 $1.62 $1.91
Adjusted EBITDAX ($USD Millions)$445.127 $481.517 $610.755
Avg realized price per Boe (pre/post hedge)$42.99 / $43.45 $41.08 / $42.13 $43.68 / $44.85

Segment/KPI detail

  • Net Production by Operating Area – Q4 2024 | Metric | Midland Basin | South Texas | Uinta Basin | Total | |---|---|---|---|---| | Oil (MBbl / MBbl/d) | 4,957 / 53.9 | 2,011 / 21.9 | 2,870 / 31.2 | 9,838 / 106.9 | | Gas (MMcf / MMcf/d) | 16,028 / 174.2 | 20,352 / 221.2 | 2,703 / 29.4 | 39,084 / 424.8 | | NGLs (MBbl / MBbl/d) | 9 / — | 2,775 / 30.2 | — / — | 2,784 / 30.3 | | Total (MBoe / MBoe/d) | 7,637 / 83.0 | 8,178 / 88.9 | 3,321 / 36.1 | 19,136 / 208.0 |

  • Production & cost KPIs | KPI | Q4 2023 | Q3 2024 | Q4 2024 | |---|---|---|---| | Net production (MMBoe) | 14.1 | 15.6 | 19.1 | | Oil (MMBbl) | 6.1 | 7.1 | 9.8 | | Avg realized Eq price pre/post ($/Boe) | 42.99 / 43.45 | 41.08 / 42.13 | 43.68 / 44.85 | | LOE ($/Boe) | 5.31 | 4.73 | 5.35 | | Transportation ($/Boe) | 2.08 | 2.13 | 4.10 | | DD&A ($/Boe) | 13.39 | 12.98 | 13.61 |

Context and drivers:

  • Q4 volumes rose on Uinta addition (closed Oct 1), partially offset by ~3 MBoe/d downtime (Salt Lake refinery and rail) and ethane rejection; realized Eq price benefited from $1.17/boe derivative settlements .
  • Higher transportation cost/boe in Q4 reflects new flows and basin mix; LOE/boe moved modestly higher vs Q3 with oilier mix and integration expenses .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net productionFY 2025N/A200–215 MBoe/d; oil 51–52% (~102–112 MBbl/d) New
Capital expenditures (incl. accruals)FY 2025N/A≈$1.3B; DC&E ≈90% of budget; cap. interest ~$25M New
DC&E allocationFY 2025N/A35–40% Utah; 35–40% Midland; 25% South Texas New
Wells drilled / completed (net)FY 2025N/A~105 / ~150 New
LOEFY 2025N/A$5.30–$5.50/boe New
TransportationFY 2025N/A$4.10–$4.40/boe New
Prod. & ad valorem taxesFY 2025N/A$2.50–$2.70/boe New
G&A (incl. non‑cash)FY 2025N/A$160M ($25M non‑cash; ~$7M one‑time Uinta integration) New
Exploration/capitalized OHFY 2025N/A≈$75M New
DD&AFY 2025N/A≈$15/boe New
Cash taxesFY 2025N/A$75–$95M New
Capital expendituresQ1 2025N/A$425–$435M; ~40 net drilled / ~45 net completed; 1/3 of FY program New
Net productionQ1 2025N/A~191–198 MBoe/d; oil 52–53% New
LOEQ1 2025N/A$5.45–$5.55/boe New
G&AQ1 2025N/A~$40–$42M incl. $3–$4M one‑time Uinta integration New

Management reiterated priority to reach ~1x leverage in H2 2025, then resume buybacks as appropriate .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Uinta integration & takeawayDetailed takeaway context; rail options; Mountain West expansion and Kinder project to ease gas constraints; confident no structural oil takeaway limits Wider Q4 guidance due to new asset; TSA running through Q4; staffing and G&A cadence noted Refinery downtime and rail delays deferred sales in Q4; building flexibility in railcar/storage; Utah cash margin per boe near Midland Integration progressing; takeaway manageable with logistics flexibility
Production cadence & DUCsExpect optimization post‑close; inheriting DUCs; optimize into 2026 Larger pads in Uinta imply higher DUCs; do not manage to DUC count YE’24 DUCs were 104; plan ~45% drawdown in 2025; still not a target metric DUC drawdown supports 2025 TIL cadence
Capital allocation & leverage/repurchasePrioritize deleveraging to ~1x by mid‑2025; opportunistic buybacks meanwhile Similar stance; repurchases likely limited until ~1x CFO: clear path to ~1x in H2 2025; buybacks modeled similar to 2023 cadence after deleveraging Deleveraging first, then increased buybacks
Permian delineation (Klondike; Woodford‑Barnett)Woodford‑Barnett: 56–58% oil; early strong results; development planning ahead Klondike positive; facility constraints managed for capital efficiency; spacing/returns competitive Returns competitive across basins; examples of strong wells; more delineation in 2025 Continues to support diversified inventory
Price/hedging/differentials——2025 hedges: ~30% oil at ~$69–$75; ~30% gas at ~$3.43–$4.44; basis hedges in Permian oil/gas Risk management underpinning 2025 plan

Management Commentary

  • “2024 was an outstanding year... 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 designed our 2025 operational plan to optimize free cash flow… We are well poised for an excellent 2025.” – CEO Herb Vogel .
  • “SM’s 2025 plan is expected to deliver a sizable 40% increase in free cash flow… while maintaining a very strong balance sheet that should meet 1x leverage by the second half of this year.” – CEO Herb Vogel .
  • “Our cash margin [in Uinta]… is pretty darn close to the Midland margin per barrel, which is what we anticipated and hoped for.” – CFO Wade Pursell .
  • “It’s our plan 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.” – CEO Herb Vogel .

Q&A Highlights

  • Q1 2025 guide timing: Lower Q1 production tied to a South Texas frac crew gap and TIL timing; growth builds through Q2–Q3, then levels in Q4 (timing-driven) .
  • Uinta logistics and margins: Q4 deferrals from Salt Lake turnaround and rail delays; management is adding rail/storage flexibility; Utah Q4 LOE temporarily elevated from workovers/transition, but cash margins comparable to Midland .
  • DUCs and cadence: YE’24 DUCs 104; plan ~45% reduction in 2025; DUCs are an outcome of pad size/timing, not a managed target .
  • Capital returns path: Clear path to ~1x leverage in H2’25; repurchases expected to ramp thereafter, potentially similar to 2023 cadence, with opportunistic activity before reaching 1x .
  • 2026 framework: Expect flat to single‑digit growth at similar capital; stronger balance sheet positions company for increased return of capital .

Estimates Context

  • S&P Global (Capital IQ) consensus estimates for Q4 2024 EPS, revenue, and EBITDA were unavailable due to provider rate limits during retrieval; as a result, we cannot assess beats/misses versus Street for this quarter. Values retrieved from S&P Global were unavailable at this time.
  • Given the strong Adjusted EBITDAX ($610.8M) and adjusted EPS ($1.91), estimate revisions may trend higher for 2025 FCF and production, particularly with the initial 2025 guide implying ~22% Boe growth and ~33% oil growth at the midpoint .

Key Takeaways for Investors

  • Integration driving scale: Q4 volumes and 2025 guide reflect a sustainable step‑up in oil‑weighted scale with Utah; focus shifts to execution and logistics optimization to translate into margins/FCF .
  • FCF inflection and deleveraging: Management targets ~40% FCF uplift in 2025 and ~1x leverage by H2’25, positioning shares for higher capital returns beyond the base dividend .
  • Margin durability: Post‑hedge realized price/boe improved; Utah cash margins near Midland should underpin corporate margins as integration noise fades .
  • 2025 capex front‑half weighted: Q1 capex ~$425–$435M (~1/3 of FY), supporting TIL cadence into Q3; expect production to build through the year .
  • Cost framework transparent: LOE $5.30–$5.50/boe; transport $4.10–$4.40/boe; DD&A ~$15/boe; G&A $160M with one‑time integration costs ($7M) .
  • Risk management: ~30% of 2025 oil and gas volumes hedged with supportive collars/swaps; basis hedges reduce differential risk (Midland oil, MEH oil, WAHA/HSC gas) .
  • Watch list catalysts: Demonstrated Utah logistics flexibility, sustained Utah/Midland margin parity, and confirmation of the deleveraging glide path may drive sentiment; strong Q2–Q3 volume ramps vs. guide will be key .

Additional detail, disclosures, and full financials are available in the company’s press release and 8‑K filing dated February 19, 2025, and the Q4 2024 earnings call transcript dated February 20, 2025 .