SM Energy Company (SM) announced certain fourth quarter and full year 2022 operating and financial results, year-end 2022 estimated proved reserves and its 2023 operating plan.
- Substantial growth in profitability. Net income for the full year 2022 and fourth quarter 2022 was $1.11 billion and $258.5 million, or $8.96 and $2.09 per diluted common share, respectively. Adjusted net income(1) for the full year 2022 and fourth quarter 2022 was $7.29 and $1.29 per diluted common share, respectively.
- Increased return of capital to stockholders through share buybacks and fixed dividend. The Company repurchased 1,365,255 shares from announcement of its return of capital program on September 7, 2022 through year-end and initiated payment of the $0.15 quarterly dividend on November 7, 2022.
- Proved reserves growth. Estimated proved reserves at year-end 2022 totaled 537 MMBoe, a 9% increase from year-end 2021, replacing 2022 production by 205%. The ratio of estimated proved reserves at year-end 2022 to 2022 production is 10.1 years. The standardized measure of discounted future net cash flows from estimated proved reserves was $9.96 billion, up 43% from year-end 2021.
- Significant cash flow generation. For the full year 2022, net cash provided by operating activities of $1.69 billion before net change in working capital of $72.1 million totaled $1.76 billion. Fourth quarter net cash provided by operating activities of $288.4 million before net change in working capital of $58.8 million was $347.2 million.(1) For the full year 2022, the Company generated Adjusted free cash flow(1) of $848.7 million, more than double the Adjusted free cash flow generated in 2021.
- Production at high end of guidance. Production for the full year 2022 was 53.0 MMBoe or 145.1 MBoe/d, up 3% from 2021. Fourth quarter production was 13.1 MMBoe or 142.9 MBoe/d.
- Strengthened balance sheet. Cash and cash equivalents at year-end 2022 were $445.0 million. Utilizing cash generated in 2022, and in support of the Company's objective to reduce absolute debt, the Company redeemed $551.4 million of long-term debt and ended 2022 with a net debt-to-Adjusted EBITDAX(1) ratio of 0.59 times.
- Stewardship targets on track. The Company made substantial progress in 2022 and is committed to achieving its short-to-medium-term targets for flaring, Scope 1 and 2 greenhouse gas emissions reductions, and methane intensity. For full year 2022, the Company had de minimis routine flaring and non-routine flaring was less than 1% at all SM Energy operations. Scope 1 and 2 greenhouse gas emissions intensity was down an estimated 40% from base year 2019 and methane intensity was estimated at less than 0.04 mT CH4/MBoe.
2023 Strategic Objectives:
- Deliver increased return of capital to stockholders. Continue the Company's sustainable capital return program through the increased fixed annual dividend of $0.60 per share, to be paid in quarterly increments, and share repurchases of up to $500.0 million in total through 2024, while maintaining a strong balance sheet.
- Focus on operational execution. Optimize capital efficiency, demonstrate innovation and maintain focus on ESG stewardship.
- Continue to replace/build top-tier inventory. Repeat the Company's track record of inventory replacement and growth, applying the Company's differential strength in geosciences and development optimization.
Chief Executive Officer Herb Vogel comments: "We are very pleased to report our results and achievements for 2022, which exceeded our strategic objectives. We generated Adjusted free cash flow(1) of $848.7 million, a 20% yield to market capitalization(1) at year-end. We outperformed our leverage objective and initiated a capital return program via an increased dividend and share repurchases. Proved reserves increased to 537 million Boe, which resulted in a Pre-tax PV-10(1) value of $12.15 billion and demonstrated our high-quality asset base. Our strategy is to be a premier operator of top tier assets and our 2023 objectives are intended to drive value creation, differential performance and increased stockholder returns."