SM Energy Co Q3 2024 Earnings Call (Q&A Session) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gabriel Daoud - TD Cowen - Analyst : I was hoping we can maybe start in Utah. Maybe you can help us quantify a couple of things. First is just the delay in volumes you alluded to, given less [TILs] by the seller. Could you maybe quantify the impact of 4Q? And then maybe give us a leading edge number as far as what current Utah production might be at this point?

Question: Gabriel Daoud - TD Cowen - Analyst : No. That's helpful. Appreciate the color there. And then I guess just as a follow-up, you noted quarterly cadence shouldn't really be looked at all that much as you're still kind of finalizing plans for '25. But if I look at 4Q CapEx of $330 million, that would imply about $1.3 billion annualized. And that's still on a higher rig count than what you guys hope to get to. So for '25 CapEx, is it fair to say directionally, you could be $1.3 billion or lower, just given the plans to go from nine to six rigs? And I'll keep it there.

Question: Leo Mariani - ROTH MKM Partners - Analyst : I just wanted to ask on the fourth quarter production guidance here. So I mean it looks to me like it's much wider than you guys normally have presented historically. I mean you guys present a quarter. So can you kind of provide some color in terms of why the wide range of production in 4Q, because the capital range is quite a bit (inaudible).

Question: Leo Mariani - ROTH MKM Partners - Analyst : Okay. No, that makes sense. And then just with respect to the share buybacks. Obviously, you guys did not do any in the third quarter. You just had some kind of language there, I guess, in the release and the prepared comments, which maybe suggested like maybe these aren't all that likely kind of going forward to get to kind of 1 times net leverage, if I was sort of reading that right. So could you just kind of provide a little bit more color? Is that generally right? Should we not expect many and maybe just in times of like material weakness, maybe you'll step in as really the free cash flow goes to debt [paydown]?

Question: Scott Hanold - RBC Capital Markets - Analyst : If we could maybe touch on 2025, right now again. And I appreciate you're still in the planning phase, but could you give us some framework and context on how you think about this given some of the weakness we've seen in oil prices? How do you think about like when you look at your asset base, you obviously have three distinct basins. Which ones do you find most competitive as oil prices come down, so there's more incentives to invest there?

Question: Scott Hanold - RBC Capital Markets - Analyst : Understood. And then my next question is on the Klondike wells. Obviously, we've got some initial rates on those right now. And can you give us some color? You did comment in your prepared remarks that the productivity in the first 30 days seem to exceed your initial acquisition economic parameters. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 2:00PM, SM.N - Q3 2024 SM Energy Co Earnings Call (Q&A Session) Can you give us a little context? Like how do they look compared to some of your legacy Midland activity? Is it more in line with that overall, but -- just some color there.

Question: Neal Dingmann - Truist Securities, Inc. - Analyst : My question, maybe just follow on a little bit on the other. I'm curious for your sort of future Midland plans, you've had a lot of success, Klondike and other areas, obviously, that Sweetie Peck continues to do super well. I'm just wondering, kind of looking regionally and formationally next year, could we assume -- and I know, obviously, you don't have detailed '25 guide out yet. But I'm just wondering, would you assume the Midland plan would be relatively similar to this year, just when you think about areas and formations you might tackle?

Question: Neal Dingmann - Truist Securities, Inc. - Analyst : Great details. And then just second around the Uinta, and maybe specifically around the marketing there. Just wonder if you move forward, you already like the cube and you seem to be doing a lot of things to likely boost and improve production there. I'm just wondering, what type of options do you all have when it comes to takeaway in order to maximize pricing going forward?

Question: Michael Scialla - Stephens Inc - Analyst : I want to go back to Klondike. You mentioned that some of the wells that are going to be coming on will be constrained due to the water infrastructure there. I guess what are the plans to expand that? And what might be the time frame there?

Question: Michael Scialla - Stephens Inc - Analyst : Okay. So there really won't be any -- the infrastructure that you need is pretty much in place. We just should look for a little flatter declines, lower peak rates out of these newer wells as you go forward? Is that the bottom line?

Question: Michael Scialla - Stephens Inc - Analyst : Okay. And on the Utah properties, you mentioned you're paying a transition service agreement in the fourth quarter. I guess, how do you expect that to change going forward? And is the fourth quarter run rate for your G&A, is that a good run rate to look forward to for 2025, at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 2:00PM, SM.N - Q3 2024 SM Energy Co Earnings Call (Q&A Session)

Question: Timothy Rezvan - KeyBanc Capital Markets Inc - Analyst : Lots of potential questions here, but I'll start in the Uinta. I thought it was interesting, your first well results were from the Douglas Creek, which is not one of the three sort of standard derisked zones. So obviously, maybe it's not [17], but it looks like it's greater than three of the number of productive intervals. So as you go forward in 2025, how do you think about the allocation between sort of development drilling in defined areas and then sort of step outs to other areas?

Question: Timothy Rezvan - KeyBanc Capital Markets Inc - Analyst : Okay. That's great. And then if I could follow up with Wade on the repurchase topic. You mentioned waiting on leverage back to kind of 1 times. But it's pretty easy to see that in the relatively near future, counting the legacy EBITDA you acquired. So based on -- I know you haven't given 2025 guidance, but do you see that coming possibly by mid-2025 or sooner if oil holds at $70, your ability to hit the parameters to start repurchases again?

Question: Oliver Huang - Tudor, Pickering, Holt & Co. Securities - Analyst : Herb, Wade, wanted to kind of try and get a better understanding around the moving pieces on the Q4 pro forma guide for LOE. Are there any one-offs that we should be aware of that's expected to kind of drive the legacy Texas side of things higher quarter-over-quarter for LOE? And then when we're kind of thinking about the Uinta, how are you all thinking about this line item trending for Q4? And just given how there's lower volumes from fewer completions and the offset frac shut-ins occurring, I do want to be careful about just extrapolating this forward given potential efficiencies as the operator and a rebound in volumes that might impact certain costs that are more fixed in nature. So just trying to think if there's a good proxy in terms of how to think about it for 2025?

Question: Oliver Huang - Tudor, Pickering, Holt & Co. Securities - Analyst : Yeah. That's helpful color for sure. And maybe for a second follow-up question, just on the Uinta. With keys now in hand, any sort of color you're able to speak to in terms of what your current DUC backlog might look like out of the basin exiting the year, and just kind of how that might compare to a normalized run rate in terms of how you all are thinking about it? Just trying to take it through the possible efficiencies that you all might be able to capture on this front moving to the 2025, program.