Delaware | 001-31539 | 41-0518430 |
(State or other jurisdiction | (Commission | (I.R.S. Employer |
of incorporation) | File Number) | Identification No.) |
1775 Sherman Street, Suite 1200, Denver, Colorado (Address of principal executive offices) | 80203 (Zip Code) |
(d) | Exhibits. | The following exhibit is furnished as part of this report: |
Exhibit 99.1 | Press release of SM Energy Company dated February 22, 2012 entitled SM Energy Reports Results for Fourth Quarter of 2011 and 2011 Proved Reserves; Provides Operational Update |
SM ENERGY COMPANY | |||
Date: | February 22, 2012 | By: | /s/ KELLY E. COLLINS |
Kelly E. Collins | |||
Director of Financial Reporting & Assistant Corporate Secretary |
• | Record quarterly average daily production of 557.9 MMCFE/d (93.0 MBOE/d); exceeds guidance of 479 - 509 MMCFE/d |
• | GAAP net loss of $(120.7) million, or $(1.89) per diluted share; adjusted net income of $40.9 million, or $0.60 per diluted share |
• | Record proved reserves of 1,259 BCFE (210 MMBOE) at year-end 2011, up 28% from 2010; proved liquids reserves grow 73% year over year; 310% drilling reserve replacement, excluding revisions for the year. |
Reconciliation of Net Income (GAAP) To Adjusted Net Income (Non-GAAP): | ||||
(in thousands, except per share data) | ||||
For the Three Months Ended December 31, | ||||
2011 | ||||
Actual Net Loss (GAAP) | $ | (120,711 | ) | |
Adjustments, net of tax:(1) | ||||
Change in Net Profits Plan liability | (475 | ) | ||
Unrealized portion of derivative loss | 28,380 | |||
Loss on divestiture activity | 15,666 | |||
Impairment of proved properties | 106,911 | |||
Abandonment and impairment of unproved properties | 1,913 | |||
DD&A adjustment for Marcellus shale | 9,245 | |||
Adjusted Net Income (Non-GAAP) | $ | 40,929 | ||
Diluted net income (loss) per common share | ||||
Actual (GAAP) | $ | (1.89 | ) | |
Adjusted (Non-GAAP) (2) | $ | 0.60 | ||
Diluted weighted-average common shares outstanding | ||||
Actual (GAAP) | 64,024 | |||
Adjusted (Non-GAAP) (2) | 67,653 | |||
(1) For the three-month period ended December 31, 2011, adjustments are shown net of tax and are calculated using an effective tax rate of 37.3% which approximates the Company's statutory tax rate adjusted for ordinary permanent differences. | ||||
(2) Adjusted net income per adjusted diluted share is calculated by assuming the Company had net income in the period and therefore includes potentially dilutive securities related to unvested restricted stock units, in-the-money outstanding options to purchase the Company’s common stock, contingent Performance Share Units, and shares into which the 3.50% Senior Convertible Notes may be converted, as calculated for accounting purposes using the treasury stock method as applied to the Company's net share settlement option for the notes. On a GAAP basis, these items were not treated as dilutive securities in the fourth quarter of 2011 because the Company had a GAAP net loss for the quarter. |
Average Realized Commodity Prices for Quarter Ended December 31, 2011 | |||||||||
Before the impact of derivative cash settlements | After the impact of derivative cash settlements | ||||||||
Oil ($/Bbl) | $ | 87.52 | $ | 80.63 | |||||
Gas ($/Mcf) | $ | 3.86 | $ | 4.36 | |||||
Natural gas liquids ($/Bbl) | $ | 54.36 | $ | 50.37 | |||||
Equivalent ($/MCFE) | $ | 7.73 | $ | 7.58 |
Production | Actual | 4Q11 Guidance | |||||||
Average daily production (MMCFE/d) | 557.9 | 479 | - | 509 | |||||
Total production (BCFE) | 51.3 | 44.0 | - | 47.0 | |||||
Oil production (as % of total) | 29 | % | ~30% | ||||||
Natural gas production (as % of total) | 56 | % | ~58% | ||||||
NGL production (as % of total) | 15 | % | ~12% | ||||||
Costs | |||||||||
LOE ($/MCFE) | $0.85 | $0.90 | - | $0.96 | |||||
Transportation ($/MCFE) | $0.60 | $0.64 | - | $0.67 | |||||
Production taxes (% of pre-derivative oil, gas, and NGL revenue) | 4.8 | % | 5% | ||||||
G&A - other cash (per MCFE) | $0.50 | $0.48 | - | $0.51 | |||||
G&A - cash related to NPP (per MCFE) | $0.09 | $0.11 | - | $0.13 | |||||
G&A - non-cash (per MCFE) | $0.10 | $0.12 | - | $0.14 | |||||
Total G&A ($/MCFE) | $0.69 | $0.71 | - | $0.78 | |||||
DD&A ($/MCFE) | $3.26 | $2.90 | - | $3.10 | |||||
Non-cash interest expense ($MM) | $3.6 | $3.4 |
(BCFE) | ||
Beginning of year | 984.5 | |
Price revisions | (25.3 | ) |
Performance revisions (engineering and three-stream conversion) | 36.8 | |
Discoveries and extensions | 491.3 | |
Infill reserves in an existing proved field | 34.7 | |
Purchases of minerals in place | — | |
Sales of reserves | (93.1 | ) |
Production | (169.7 | ) |
End of year | 1,259.2 | |
Percentage natural gas | 53 | % |
Percentage proved undeveloped | 33 | % |
Costs incurred in oil and gas producing activities: | |||
For the Year Ended | |||
(in thousands) | December 31, 2011 | ||
Development costs | $ | 1,208,255 | |
Facility costs | 112,372 | ||
Exploration costs | 177,465 | ||
Acquisitions: | |||
Unproved properties - other | 55,237 | ||
Total, including asset retirement obligation | $ | 1,553,329 |
2012 Capital Forecast | |
(in millions) | |
Allocated Capital | |
Operated Eagle Ford | $650 - $700 |
Operated Bakken/Three Forks | $160 - $185 |
Operated Granite Wash | $60 - $70 |
Operated Haynesville | $35 - $40 |
Other Operated | $130 - $150 |
Outside Operated | $125 - $150 |
Total Drilling Capital | $1,200 - $1,300 |
Non Drilling Capital | $200 - $300 |
Total Capital | $1,400 - $1,500 |
Note: The Company intends to manage capital expenditures to a range of $1.4 billion to $1.5 billion. Totals above are not intended to sum. |
1Q12 | FY 2012 | ||
Production (BCFE) | 48.5 - 52.0 | 220 - 227 | |
Average daily production (MMCFE/d) | 533 - 571 | 601 - 620 | |
LOE ($/MCFE) | $0.90 - $0.96 | $0.90 - $0.96 | |
Transportation ($/MCFE) | $0.65 - $0.70 | $0.73 - $0.77 | |
Production Taxes (% of pre-hedge O&G revenue) | 5.5% | 5.5% | |
G&A - cash NPP ($/MCFE) | $0.08 - $0.10 | $0.08 - $0.10 | |
G&A - other cash ($/MCFE) | $0.45 - $0.48 | $0.41 - $0.45 | |
G&A - non-cash ($/MCFE) | $0.09 - $0.11 | $0.09 - $0.11 | |
G&A TOTAL ($/MCFE) | $0.62 - $0.69 | $0.58 - $0.66 | |
DD&A ($/MCFE) | $3.35 - $3.55 | $3.10 - $3.30 | |
Non-cash interest expense ($MM) | $3.7 | $6.6 | |
Effective income tax rate range | 37.2% - 37.7% | ||
% of income tax that is current | —% |
As of December 31, | |||
2011 | |||
(in millions) | |||
Standardized measure of discounted future net cash flows (GAAP) | $ | 2,580.0 | |
Add: 10 percent annual discount, net of income taxes | 1,727.6 | ||
Add: future income taxes | 1,740.4 | ||
Undiscounted future net cash flows | $ | 6,048.0 | |
Less: 10 percent annual discount without tax effect | (2,586.8 | ) | |
PV-10 value (Non-GAAP) | $ | 3,461.2 |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 2011 | |||||||
Guidance Comparison | For the Three Months | ||||||
Ended December 31, 2011 | |||||||
Actual | Guidance | ||||||
Average daily production (MMCFE per day) | 557.9 | 479 | - | 509 | |||
Total production (BCFE) | 51.3 | 44.0 | - | 47.0 | |||
Oil production (as % of total) | 29 | % | ~30% | ||||
Natural gas production (as % of total) | 56 | % | ~58% | ||||
NGL production (as % of total) | 15 | % | ~12% | ||||
Lease operating expense (per MCFE) | $0.85 | $0.90 | - | $0.96 | |||
Transportation expense (per MCFE) | $0.60 | $0.64 | - | $0.67 | |||
Production taxes, as a percentage of pre-derivative oil, gas, and NGL revenue | 4.8 | % | 5% | ||||
General and administrative - other cash (per MCFE) | $0.50 | $0.48 | - | $0.51 | |||
General and administrative - cash related to Net Profits Plan (per MCFE) | $0.09 | $0.11 | - | $0.13 | |||
General and administrative - non-cash (per MCFE) | $0.10 | $0.12 | - | $0.14 | |||
General and administrative - TOTAL (per MCFE) | $0.69 | $0.71 | - | $0.78 | |||
Depreciation, depletion, and amortization (per MCFE) | $3.26 | $2.90 | - | $3.10 | |||
Non-cash interest expense ($MM) | $3.6 | $3.4 | |||||
For the Twelve Months | |||||||
Ended December 31, 2011 | |||||||
Actual | Guidance | ||||||
Effective income tax rate | 36.5 | % | 36.6 | % | - | 37.1% | |
% of income tax that is current | — | % | 15 | % | - | 18% |
SM ENERGY COMPANY | |||||||||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||||||||
December 31, 2011 | |||||||||||||||||||||
Production Data | For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | |||||||||||||||||||
2011 | 2010 | Percent Change | 2011 | 2010 | Percent Change | ||||||||||||||||
Average realized sales price, before the effects | |||||||||||||||||||||
of derivative cash settlements: (1) | |||||||||||||||||||||
Oil (per Bbl) | $ | 87.52 | $ | 77.46 | 13 | % | $ | 88.23 | $ | 72.65 | 21 | % | |||||||||
Gas (per Mcf) | 3.86 | 5.23 | (26 | )% | 4.32 | 5.21 | (17 | )% | |||||||||||||
NGL (per Bbl) | 54.36 | — | NM | 53.32 | — | NM | |||||||||||||||
Equivalent (MCFE) | $ | 7.73 | $ | 7.90 | (2 | )% | $ | 7.85 | $ | 7.60 | 3 | % | |||||||||
Average realized sales price, including the | |||||||||||||||||||||
effects of derivative cash settlements: (1) | |||||||||||||||||||||
Oil (per Bbl) | $ | 80.63 | $ | 70.30 | 15 | % | $ | 78.89 | $ | 66.85 | 18 | % | |||||||||
Gas (per Mcf) | 4.36 | 6.00 | (27 | )% | 4.80 | 6.05 | (21 | )% | |||||||||||||
NGL (per Bbl) | 50.37 | — | NM | 47.90 | — | NM | |||||||||||||||
Equivalent (MCFE) | $ | 7.58 | $ | 7.98 | (5 | )% | $ | 7.58 | $ | 7.82 | (3 | )% | |||||||||
Production: (1) | |||||||||||||||||||||
Oil (MMBbls) | 2,461 | 1,832 | 34 | % | 8,080 | 6,359 | 27 | % | |||||||||||||
Gas (Bcf) | 28,794 | 20,690 | 39 | % | 100,309 | 71,855 | 40 | % | |||||||||||||
NGL (MMBbls) | 1,295 | — | NM | 3,491 | — | NM | |||||||||||||||
BCFE (6:1) | 51,329 | 31,682 | 62 | % | 169,734 | 110,007 | 54 | % | |||||||||||||
Average daily production: (1) | |||||||||||||||||||||
Oil (MBbls per day) | 26.7 | 19.9 | 34 | % | 22.1 | 17.4 | 27 | % | |||||||||||||
Gas (MMcf per day) | 313.0 | 224.9 | 39 | % | 274.8 | 196.9 | 40 | % | |||||||||||||
NGL (MBbls per day) | 14.1 | — | NM | 9.6 | — | NM | |||||||||||||||
MMCFE per day (6:1) | 557.9 | 344.4 | 62 | % | 465.0 | 301.4 | 54 | % | |||||||||||||
Per MCFE Data: | |||||||||||||||||||||
Realized price before the effects of derivative cash settlements | $ | 7.73 | $ | 7.90 | (2 | )% | $ | 7.85 | $ | 7.60 | 3 | % | |||||||||
Lease operating expense | (0.85 | ) | (1.06 | ) | (20 | )% | (0.88 | ) | (1.10 | ) | (20 | )% | |||||||||
Transportation costs | (0.60 | ) | (0.22 | ) | 173 | % | (0.51 | ) | (0.19 | ) | 168 | % | |||||||||
Production taxes | (0.37 | ) | (0.52 | ) | (29 | )% | (0.32 | ) | (0.48 | ) | (33 | )% | |||||||||
General and administrative | (0.69 | ) | (1.00 | ) | (31 | )% | (0.70 | ) | (0.97 | ) | (28 | )% | |||||||||
Operating profit, before the effects of derivative cash settlements | $ | 5.22 | $ | 5.10 | 2 | % | $ | 5.44 | $ | 4.86 | 12 | % | |||||||||
Derivative cash settlements | (0.15 | ) | 0.08 | (288 | )% | (0.27 | ) | 0.22 | (223 | )% | |||||||||||
Operating profit, including the effects of derivative cash settlements | $ | 5.07 | $ | 5.18 | (2 | )% | $ | 5.17 | $ | 5.08 | 2 | % | |||||||||
Depletion, depreciation, amortization, and | |||||||||||||||||||||
asset retirement obligation liability accretion | $ | (3.26 | ) | $ | (2.99 | ) | 9 | % | $ | (3.01 | ) | $ | (3.06 | ) | (2 | )% | |||||
(1) NGL production volumes, revenues, and prices for 2010 have not been reclassified to conform to the current presentation given the immateriality of the volumes in that period. Please refer to additional discussion in the Company's Form 10-Q for the quarter ended March 31, 2011. |
SM ENERGY COMPANY | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
December 31, 2011 | |||||||||||||||
Consolidated Statements of Operations | |||||||||||||||
(In thousands, except per share amounts) | For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Operating revenues and other income: | |||||||||||||||
Oil, gas, and NGL production revenue | $ | 396,914 | $ | 250,160 | $ | 1,332,392 | $ | 836,288 | |||||||
Realized hedge (loss) gain | (6,159 | ) | 2,694 | (20,707 | ) | 23,465 | |||||||||
Gain (loss) on divestiture activity | (24,986 | ) | 23,094 | 220,676 | 155,277 | ||||||||||
Marketed gas system revenue | 13,630 | 16,083 | 69,898 | 70,110 | |||||||||||
Other operating revenue | 143 | 2,087 | 1,059 | 7,694 | |||||||||||
Total operating revenues and other income | 379,542 | 294,118 | 1,603,318 | 1,092,834 | |||||||||||
Operating expenses: | |||||||||||||||
Oil, gas, and NGL production expense | 93,204 | 56,961 | 290,111 | 195,075 | |||||||||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 167,298 | 94,806 | 511,103 | 336,141 | |||||||||||
Exploration | 19,950 | 21,027 | 53,537 | 63,860 | |||||||||||
Impairment of proved properties | 170,512 | 6,127 | 219,037 | 6,127 | |||||||||||
Abandonment and impairment of unproved properties | 3,051 | (3,012 | ) | 7,367 | 1,986 | ||||||||||
General and administrative | 35,568 | 31,560 | 118,526 | 106,663 | |||||||||||
Change in Net Profits Plan liability | (758 | ) | (4,656 | ) | (25,477 | ) | (34,441 | ) | |||||||
Unrealized and realized derivative (gain) loss (note 10) | 46,786 | 12,994 | (37,086 | ) | 8,899 | ||||||||||
Marketed gas system expense | 12,653 | 14,176 | 64,249 | 66,726 | |||||||||||
Other operating expense | 11,417 | 956 | 17,567 | 3,027 | |||||||||||
Total operating expenses | 559,681 | 230,939 | 1,218,934 | 754,063 | |||||||||||
Income (loss) from operations | (180,139 | ) | 63,179 | 384,384 | 338,771 | ||||||||||
Nonoperating income (expense): | |||||||||||||||
Interest income | 84 | 53 | 466 | 321 | |||||||||||
Interest expense | (12,213 | ) | (4,727 | ) | (45,849 | ) | (24,196 | ) | |||||||
Income (loss) before income taxes | (192,268 | ) | 58,505 | 339,001 | 314,896 | ||||||||||
Income tax (expense) benefit | 71,557 | (21,366 | ) | (123,585 | ) | (118,059 | ) | ||||||||
Net income (loss) | $ | (120,711 | ) | $ | 37,139 | $ | 215,416 | $ | 196,837 | ||||||
Basic weighted-average common shares outstanding | 64,024 | 63,131 | 63,755 | 62,969 | |||||||||||
Diluted weighted-average common shares outstanding | 64,024 | 64,919 | 67,564 | 64,689 | |||||||||||
Basic net income (loss) per common share | $ | (1.89 | ) | $ | 0.59 | $ | 3.38 | $ | 3.13 | ||||||
Diluted net income (loss) per common share | $ | (1.89 | ) | $ | 0.57 | $ | 3.19 | $ | 3.04 | ||||||
* As of January 1, 2011, the Company elected to de-designate all commodity derivative contracts that had previously been designated as cash flow hedges as of December 31, 2010, and to discontinue hedge accounting prospectively. Accordingly, beginning January 1, 2011, gains and losses from commodity price management activities, both realized and unrealized, will be included in the income statement on the line titled “Unrealized and realized derivative (gain) loss”. Hedging balances accounted for in the balance sheet line titled “Accumulated other comprehensive loss” as of December 31, 2010, will now be recognized in the income statement line titled “Realized hedge (loss) gain” as they are realized. For the three-month period ended December 31, 2011, SM Energy's adjusted oil price was negatively impacted by $16.9 million of realized oil derivative cash settlements, the Company's adjusted natural gas price was positively impacted by $14.4 million of realized natural gas derivative cash settlements, and SM Energy's adjusted NGL price was negatively impacted by $5.2 million of realized NGL derivative cash settlements. For the twelve-month period ended December 31, 2011, the Company's adjusted oil price was negatively impacted by $75.4 million of realized oil derivative cash settlements, SM Energy's adjusted natural gas price was positively impacted by $48.0 million of realized natural gas derivative cash settlements, and the Company's adjusted NGL price was negatively impacted by $18.9 million of realized NGL derivative cash settlements. |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 2011 | |||||||
Consolidated Balance Sheets | |||||||
(In thousands, except per share amounts) | December 31, | December 31, | |||||
ASSETS | 2011 | 2010 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 119,194 | $ | 5,077 | |||
Accounts receivable | 210,368 | 163,190 | |||||
Refundable income taxes | 5,581 | 8,482 | |||||
Prepaid expenses and other | 68,026 | 45,522 | |||||
Derivative asset | 55,813 | 43,491 | |||||
Deferred income taxes | 4,222 | 8,883 | |||||
Total current assets | 463,204 | 274,645 | |||||
Property and equipment (successful efforts method), at cost: | |||||||
Land | 1,548 | 1,491 | |||||
Proved oil and gas properties | 4,378,987 | 3,389,158 | |||||
Less - accumulated depletion, depreciation, and amortization | (1,766,445 | ) | (1,326,932 | ) | |||
Unproved oil and gas properties | 120,966 | 94,290 | |||||
Wells in progress | 273,428 | 145,327 | |||||
Materials inventory, at lower of cost or market | 16,537 | 22,542 | |||||
Oil and gas properties held for sale | 246 | 86,811 | |||||
Other property and equipment, net of accumulated depreciation of $23,985 in 2011 and $15,480 in 2010 | 71,369 | 21,365 | |||||
Total property and equipment, net | 3,096,636 | 2,434,052 | |||||
Other noncurrent assets: | |||||||
Derivative asset | 31,062 | 18,841 | |||||
Restricted cash | 124,703 | — | |||||
Other noncurrent assets | 83,375 | 16,783 | |||||
Total other noncurrent assets | 239,140 | 35,624 | |||||
Total Assets | $ | 3,798,980 | $ | 2,744,321 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 456,999 | $ | 417,654 | |||
Derivative liability | 42,806 | 82,044 | |||||
Other current liabilities | 6,000 | 2,355 | |||||
Total current liabilities | 505,805 | 502,053 | |||||
Noncurrent liabilities: | |||||||
Long-term credit facility | — | 48,000 | |||||
3.50% Senior Convertible Notes, net of unamortized discount of $2,431 in 2011 and $11,827 in 2010 | 285,069 | 275,673 | |||||
6.625% Senior Notes | 350,000 | — | |||||
6.50% Senior Notes | 350,000 | — | |||||
Asset retirement obligation | 87,167 | 69,052 | |||||
Asset retirement obligation associated with oil and gas properties held for sale | 1,277 | 2,119 | |||||
Net Profits Plan liability | 107,731 | 135,850 | |||||
Deferred income taxes | 568,263 | 443,135 | |||||
Derivative liability | 12,875 | 32,557 | |||||
Other noncurrent liabilities | 67,853 | 17,356 | |||||
Total noncurrent liabilities | 1,830,235 | 1,023,742 | |||||
Stockholders' equity: | |||||||
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued: 64,145,482 shares in 2011 and 63,412,800 shares in 2010; outstanding, net of treasury shares: 64,064,415 shares in 2011 and 63,310,165 shares in 2010 | 641 | 634 | |||||
Additional paid-in capital | 216,966 | 191,674 | |||||
Treasury stock, at cost: 81,067 shares in 2011 and 102,635 shares in 2010 | (1,544 | ) | (423 | ) | |||
Retained earnings | 1,251,157 | 1,042,123 | |||||
Accumulated other comprehensive loss | (4,280 | ) | (15,482 | ) | |||
Total stockholders' equity | 1,462,940 | 1,218,526 | |||||
Total Liabilities and Stockholders' Equity | $ | 3,798,980 | $ | 2,744,321 |
SM ENERGY COMPANY | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
December 31, 2011 | |||||||||||||||
Consolidated Statements of Cash Flows | |||||||||||||||
(In thousands) | For the Three Months | For the Twelve Months | |||||||||||||
Ended December 31, | Ended December 31, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income (loss) | $ | (120,711 | ) | $ | 37,139 | $ | 215,416 | $ | 196,837 | ||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||
Loss (gain) on divestiture activity | 24,986 | (23,094 | ) | (220,676 | ) | (155,277 | ) | ||||||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 167,298 | 94,806 | 511,103 | 336,141 | |||||||||||
Exploratory dry hole expense | 228 | — | 277 | 289 | |||||||||||
Impairment of proved properties | 170,512 | 6,127 | 219,037 | 6,127 | |||||||||||
Abandonment and impairment of unproved properties | 3,051 | (3,012 | ) | 7,367 | 1,986 | ||||||||||
Stock-based compensation expense * | 7,274 | 6,890 | 26,824 | 26,743 | |||||||||||
Change in Net Profits Plan liability | (758 | ) | (4,656 | ) | (25,477 | ) | (34,441 | ) | |||||||
Unrealized derivative (gain) loss | 45,263 | 12,994 | (62,757 | ) | 8,899 | ||||||||||
Amortization of debt discount and deferred financing costs | 3,601 | 3,442 | 18,299 | 13,464 | |||||||||||
Deferred income taxes | (40,462 | ) | 28,822 | 123,789 | 114,517 | ||||||||||
Plugging and abandonment | (2,914 | ) | (1,208 | ) | (5,849 | ) | (8,314 | ) | |||||||
Other | (75 | ) | (908 | ) | (6,027 | ) | (3,993 | ) | |||||||
Changes in current assets and liabilities: | |||||||||||||||
Accounts receivable | (21,211 | ) | (42,216 | ) | (41,998 | ) | (47,153 | ) | |||||||
Refundable income taxes | (5,581 | ) | (7,111 | ) | 2,901 | 24,291 | |||||||||
Prepaid expenses and other | 1,644 | (35,875 | ) | 16,376 | (35,363 | ) | |||||||||
Accounts payable and accrued expenses | 23,485 | 6,075 | (18,073 | ) | 53,198 | ||||||||||
Excess income tax benefit from the exercise of stock awards | 15,155 | 522 | — | (854 | ) | ||||||||||
Net cash provided by operating activities | 270,785 | 78,737 | 760,532 | 497,097 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Net proceeds from sale of oil and gas properties | 39,469 | 52,003 | 364,522 | 311,504 | |||||||||||
Capital expenditures | (551,476 | ) | (179,604 | ) | (1,633,093 | ) | (668,288 | ) | |||||||
Acquisition of oil and gas properties | — | 21 | — | (664 | ) | ||||||||||
Other | 4,001 | 2,367 | 3,661 | (4,125 | ) | ||||||||||
Net cash used in investing activities | (508,006 | ) | (125,213 | ) | (1,264,910 | ) | (361,573 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Proceeds from credit facility | 206,500 | 256,500 | 322,000 | 571,559 | |||||||||||
Repayment of credit facility | (206,500 | ) | (210,500 | ) | (370,000 | ) | (711,559 | ) | |||||||
Debt issuance costs related to credit facility | — | — | (8,719 | ) | — | ||||||||||
Net proceeds from 6.625% Senior Notes | — | — | 341,122 | — | |||||||||||
Net proceeds from 6.50% Senior Notes | 343,120 | — | 343,120 | — | |||||||||||
Proceeds from sale of common stock | 1,734 | 3,324 | 7,327 | 6,440 | |||||||||||
Dividends paid | (3,201 | ) | (3,153 | ) | (6,382 | ) | (6,297 | ) | |||||||
Excess income tax benefit from the exercise of stock awards | (15,155 | ) | (522 | ) | — | 854 | |||||||||
Other | (6 | ) | (1,185 | ) | (9,973 | ) | (2,093 | ) | |||||||
Net cash provided by (used in) financing activities | 326,492 | 44,464 | 618,495 | (141,096 | ) | ||||||||||
Net change in cash and cash equivalents | 89,271 | (2,012 | ) | 114,117 | (5,572 | ) | |||||||||
Cash and cash equivalents at beginning of period | 29,923 | 7,089 | 5,077 | 10,649 | |||||||||||
Cash and cash equivalents at end of period | $ | 119,194 | $ | 5,077 | $ | 119,194 | $ | 5,077 | |||||||
* Stock-based compensation expense is a component of exploration expense and general and administrative expense on the consolidated statements of operations. For the three-month periods ended December 31, 2011 and 2010, approximately $1.9 million and $2.0 million, respectively, of stock-based compensation expense was included in exploration expense. For the three-month periods ended December 31, 2011 and 2010, approximately $5.4 million and $4.9 million, respectively, of stock-based compensation expense was included in general and administrative expense. For the twelve-month periods ended December 31, 2011 and 2010, approximately $6.8 million and $7.7 million, respectively, of stock-based compensation expense was included in exploration expense. For the twelve-month periods ended December 31, 2011 and 2010, approximately $20.0 million and $19.0 million, respectively, of stock-based compensation expense was included in general and administrative expense. |
SM ENERGY COMPANY | ||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||
December 31, 2011 | ||||||||||||||||
Adjusted Net Income | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Reconciliation of net income (GAAP) | For the Three Months | For the Twelve Months | ||||||||||||||
to Adjusted net income (Non-GAAP): | Ended December 31, | Ended December 31, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Actual net income (loss) (GAAP) | $ | (120,711 | ) | $ | 37,139 | $ | 215,416 | $ | 196,837 | |||||||
Adjustments net of tax: (2) | ||||||||||||||||
Change in Net Profits Plan liability | (475 | ) | (2,956 | ) | (15,974 | ) | (21,529 | ) | ||||||||
Unrealized derivative (gain) loss | 28,380 | 8,249 | (39,349 | ) | 5,563 | |||||||||||
(Gain) loss on divestiture activity | 15,666 | (14,660 | ) | (138,364 | ) | (97,061 | ) | |||||||||
Impairment of proved properties | 106,911 | 3,889 | 137,336 | 3,830 | ||||||||||||
Abandonment and impairment of unproved properties | 1,913 | (1,912 | ) | 4,619 | 1,241 | |||||||||||
DD&A adjustment for Marcellus shale | 9,245 | — | 9,245 | — | — | |||||||||||
Adjusted net income (Non-GAAP) (3) | $ | 40,929 | $ | 29,749 | $ | 172,929 | $ | 88,881 | ||||||||
Diluted net income per common share | ||||||||||||||||
Actual (GAAP) | $ | (1.89 | ) | $ | 0.57 | $ | 3.19 | $ | 3.04 | |||||||
Adjusted (Non-GAAP) (4) | $ | 0.60 | $ | 0.46 | $ | 2.56 | $ | 1.37 | ||||||||
Diluted weighted-average common shares outstanding | ||||||||||||||||
Actual (GAAP) | 64,024 | 64,919 | 67,564 | 64,689 | ||||||||||||
Adjusted (Non-GAAP) (4) | 67,653 | 64,919 | 67,564 | 64,689 | ||||||||||||
(2) For the three and twelve-month periods ended December 31, 2011, adjustments are shown net of tax and are calculated using an effective tax rate of 37.3%, which approximates the Company's statutory tax rate adjusted for ordinary permanent differences. For the three and twelve-month periods ended December 31, 2010, adjustments are shown net of tax using the effective income tax rate as calculated by dividing the income tax expense by income before income taxes as shown on the consolidated statement of operations for the respective period. | ||||||||||||||||
(3) Adjusted net income excludes certain items that the Company believes affect the comparability of operating results. Items excluded generally are non-recurring items or are items whose timing and/or amount cannot be reasonably estimated. These items include non-cash adjustments and impairments such as the change in the Net Profits Plan liability, unrealized derivative (gain) loss, impairment of proved properties, abandonment and impairment of unproved properties, (gain) loss on divestiture activity, and DD&A adjustment for Marcellus shale. The non-GAAP measure of adjusted net income is presented because management believes it provides useful additional information to investors for analysis of SM Energy's fundamental business on a recurring basis. In addition, management believes that adjusted net income is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Adjusted net income should not be considered in isolation or as a substitute for net income, income from operations, cash provided by operating activities or other income, profitability, cash flow, or liquidity measures prepared under GAAP. Since adjusted net income excludes some, but not all, items that affect net income and may vary among companies, the adjusted net income amounts presented may not be comparable to similarly titled measures of other companies. | ||||||||||||||||
(4) Adjusted net income per adjusted diluted share is calculated by assuming the Company had income in the period by using potentially dilutive securities related to unvested restricted stock units, in-the-money outstanding options to purchase the Company’s common stock, contingent Performance Share Awards, and shares into which the 3.50% Senior Convertible Notes may be converted, as calculated for accounting purposes using the treasury stock method as applied to the Company's net share settlement option for the notes. On a GAAP basis, these items were not treated as dilutive securities in the fourth quarter of 2011 as the Company had a GAAP loss for the quarter. |
SM ENERGY COMPANY | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
December 31, 2011 | |||||||||||||||
Operating Cash Flow | |||||||||||||||
(In thousands) | |||||||||||||||
Reconciliation of net cash provided by operating activities | For the Three Months | For the Twelve Months | |||||||||||||
(GAAP) to Operating cash flow (Non-GAAP): | Ended December 31, | Ended December 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Net cash provided by operating activities (GAAP) | $ | 270,785 | $ | 78,737 | $ | 760,532 | $ | 497,097 | |||||||
Changes in current assets and liabilities | (13,492 | ) | 78,605 | 40,794 | 5,881 | ||||||||||
Exploration | 19,950 | 21,027 | 53,537 | 63,860 | |||||||||||
Less: Exploratory dry hole expense | (228 | ) | — | (277 | ) | (289 | ) | ||||||||
Less: Stock-based compensation expense included in exploration | (1,869 | ) | (1,952 | ) | 6,761 | (7,676 | ) | ||||||||
Operating cash flow (Non-GAAP) (5) | $ | 275,146 | $ | 176,417 | $ | 861,347 | $ | 558,873 | |||||||
(5) Operating cash flow is computed as net cash provided by operating activities adjusted for changes in current assets and liabilities and exploration, less exploratory dry hole expense, and stock-based compensation expense included in exploration. The non-GAAP measure of operating cash flow is presented because management believes that it provides useful additional information to investors for analysis of SM Energy's ability to internally generate funds for exploration, development, acquisitions, and to service debt. In addition, operating cash flow is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Operating cash flow should not be considered in isolation or as a substitute for net income, income from operations, net cash provided by operating activities or other income, profitability, cash flow, or liquidity measures prepared under GAAP. Since operating cash flow excludes some, but not all items that affect net income and net cash provided by operating activities and may vary among companies, the operating cash flow amounts presented may not be comparable to similarly titled measures of other companies. See the consolidated statements of cash flows herein for more detailed cash flow information. |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
December 31, 2011 | |||||||
Information on Proved Reserves and Costs Incurred | |||||||
Costs incurred in oil and gas producing activities: | |||||||
For the Year Ended | |||||||
December 31, | |||||||
2011 | |||||||
Development costs | $ | 1,208,255 | |||||
Facility costs | 112,372 | ||||||
Exploration costs | 177,465 | ||||||
Acquisitions: | |||||||
Proved properties | — | ||||||
Unproved properties - other | 55,237 | ||||||
Total, including asset retirement obligation (6) (7) | $ | 1,553,329 | |||||
(6) Includes capitalized interest of $10.8 million for the year ended December 31, 2011. | |||||||
(7) Includes amounts relating to estimated asset retirement obligations of $19.3 million for the year ended December 31, 2011. |
Proved oil and gas reserve quantities: | ||||||||||||||||||||
For the Year Ended | ||||||||||||||||||||
December 31, 2011 | ||||||||||||||||||||
Oil or Condensate | Gas | NGL | Equivalents | Proved Developed | Proved Undeveloped | |||||||||||||||
(MMBbl) | (Bcf) | (MMBbl) | (BCFE) | (BCFE) | (BCFE) | |||||||||||||||
Total proved reserves | ||||||||||||||||||||
Beginning of year | 57.4 | 640.0 | — | 984.5 | 687.3 | 297.2 | ||||||||||||||
Revisions of previous estimate | (0.9 | ) | (76.7 | ) | 15.6 | 11.5 | 36.5 | (25.0 | ) | |||||||||||
Discoveries and extensions | 26.9 | 223.5 | 17.8 | 491.3 | 303.8 | 187.5 | ||||||||||||||
Infill reserves in an existing proved field | 2.8 | 14.8 | 0.5 | 34.7 | 20.1 | 14.6 | ||||||||||||||
Purchases of minerals in place | — | — | — | — | — | — | ||||||||||||||
Sales of reserves | (6.4 | ) | (37.3 | ) | (2.9 | ) | (93.1 | ) | (68.6 | ) | (24.5 | ) | ||||||||
Production | (8.1 | ) | (100.3 | ) | (3.5 | ) | (169.7 | ) | (169.7 | ) | — | |||||||||
Conversions | — | 34.6 | (34.6 | ) | ||||||||||||||||
End of year | 71.7 | 664.0 | 27.5 | 1,259.2 | 844.0 | 415.2 | ||||||||||||||
PV-10 value (in millions) | $ | 3,461.2 | $ | 2,836.3 | $ | 624.9 | ||||||||||||||
Proved developed reserves | ||||||||||||||||||||
Beginning of year | 46.0 | 411.0 | — | 687.3 | ||||||||||||||||
End of year | 50.3 | 451.2 | 15.2 | 844.0 |
SM ENERGY COMPANY | |||
FINANCIAL HIGHLIGHTS | |||
December 31, 2011 | |||
Finding Cost and Reserve Replacement Ratios: (8) | |||
Finding Costs in $ per MCFE | |||
Drilling, excluding revisions | $2.85 | ||
Drilling, including revisions | $2.79 | ||
All-in | $2.89 | ||
Reserve Replacement Ratios | |||
Drilling, excluding revisions | 310 | % | |
Drilling, including revisions | 317 | % | |
All-in | 317 | % | |
(8) Finding costs and reserve replacement ratios are common metrics used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry. The metrics are easily calculated from information provided in the sections "Costs incurred in oil and gas producing activities" and "Proved oil and gas reserve quantities" above. Finding cost provides some information as to the cost of adding proved reserves from various activities. Reserve replacement provides information related to how successful a company is at growing its proved reserve base. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in "Costs incurred in oil and gas producing activities." The Company uses the reserve replacement ratio as an indicator of the Company’s ability to replenish annual production volumes and grow its reserves. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. The ratio is limited because it typically varies widely based on the extent and timing of new discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not embed the cost or timing of future production of new reserves, it cannot be used as a measure of value creation. | |||
Finding Costs Definitions: | |||
> Drilling, excluding revisions - numerator defined as the sum of development costs and exploration costs and facility costs divided by a denominator defined as the sum of discoveries and extensions and infill reserves in an existing proved field. To consider the impact of divestitures on this metric, further include sales of reserves in denominator. | |||
> Drilling, including revisions - numerator defined as the sum of development costs and exploration costs and facility costs divided by a denominator defined as the sum of discoveries and extensions, infill reserves in an existing proved field, and revisions. To consider the impact of divestitures on this metric, further include sales of reserves in denominator. | |||
> All-in - numerator defined as total costs incurred, including asset retirement obligation divided by a denominator defined as the sum of discoveries and extensions, infill reserves in an existing proved field, purchases of minerals in place, and revisions. To consider the impact of divestitures on this metric, further include sales of reserves in denominator. | |||
Reserve Replacement Ratio Definitions: | |||
> Drilling, excluding revisions - numerator defined as the sum of discoveries and extensions and infill reserves in an existing proved field divided by production. To consider the impact of divestitures on this metric, further include sales of reserves in denominator. | |||
> Drilling, including revisions - numerator defined as the sum of discoveries and extensions, infill reserves in an existing proved field, and revisions divided by production. To consider the impact of divestitures on this metric, further include sales of reserves in denominator. | |||
> All-in - numerator defined as the sum of discoveries and extensions, infill reserves in an existing proved field, purchases of minerals in place, and revisions divided by production. To consider the impact of divestitures on this metric, further include sales of reserves in denominator. |