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) |
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Net loss | $ | (347,210 | ) | $ | (53,058 | ) | |
Net cash provided by operating activities | $ | 118,276 | $ | 283,922 |
(d) | Exhibits. | The following exhibit is furnished as part of this report: |
Exhibit 99.1 | Press release of SM Energy Company dated May 3, 2016, entitled “SM Energy Reports First Quarter of 2016 Results - Initial Permian Wells Exceed Expectations” |
SM ENERGY COMPANY | |||
Date: | May 3, 2016 | By: | /s/ PATRICK A. LYTLE |
Patrick A. Lytle | |||
Director, Financial Planning & Reporting and Assistant Secretary |
• | 13.4 MMBoe production; production mix includes 31% oil |
• | $182.3 million adjusted EBITDAX |
• | $1.0 billion liquidity and flexibility following bank redetermination and new covenants |
• | 1,255 net acres added at Sweetie Peck in the Permian Basin, increasing net acreage position to 16,443 |
• | Initial Permian wells significantly exceeding type curve expectations for both Lower Spraberry and Wolfcamp B intervals |
SM ENERGY COMPANY | ||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||
March 31, 2016 | ||||||||||
For the Three Months Ended March 31, | ||||||||||
Production Data | 2016 | 2015 | Percent Change | |||||||
Average realized sales price, before the effects of | ||||||||||
derivative settlements: | ||||||||||
Oil (per Bbl) | $ | 25.67 | $ | 38.56 | (33 | )% | ||||
Gas (per Mcf) | 1.87 | 2.76 | (32 | )% | ||||||
NGL (per Bbl) | 11.76 | 16.67 | (29 | )% | ||||||
Equivalent (per BOE) | $ | 15.78 | $ | 23.44 | (33 | )% | ||||
Average realized sales price, including the effects of | ||||||||||
derivative settlements: | ||||||||||
Oil (per Bbl) | $ | 49.94 | $ | 58.89 | (15 | )% | ||||
Gas (per Mcf) | 3.02 | 3.51 | (14 | )% | ||||||
NGL (per Bbl) | 13.54 | 22.00 | (38 | )% | ||||||
Equivalent (per BOE) | $ | 26.74 | $ | 33.05 | (19 | )% | ||||
Production: | ||||||||||
Oil (MMBbl) | 4.1 | 5.2 | (21 | )% | ||||||
Gas (Bcf) | 35.7 | 45.9 | (22 | )% | ||||||
NGL (MMBbl) | 3.3 | 3.9 | (14 | )% | ||||||
MMBOE (6:1) | 13.4 | 16.8 | (20 | )% | ||||||
Average daily production: | ||||||||||
Oil (MBbl/d) | 45.3 | 58.1 | (22 | )% | ||||||
Gas (MMcf/d) | 392.2 | 510.3 | (23 | )% | ||||||
NGL (MBbl/d) | 36.8 | 43.3 | (15 | )% | ||||||
MBOE/d (6:1) | 147.5 | 186.4 | (21 | )% | ||||||
Per BOE Data: | ||||||||||
Realized price, before the effects of derivative settlements | $ | 15.78 | $ | 23.44 | (33 | )% | ||||
Lease operating expense | 3.79 | 3.96 | (4 | )% | ||||||
Transportation costs | 6.06 | 6.08 | — | % | ||||||
Production taxes | 0.66 | 1.12 | (41 | )% | ||||||
Ad valorem tax expense | 0.27 | 0.52 | (48 | )% | ||||||
General and administrative | 2.40 | 2.60 | (8 | )% | ||||||
Operating profit, before the effects of derivative settlements | $ | 2.60 | $ | 9.16 | (72 | )% | ||||
Derivative settlement gain | 10.96 | 9.61 | 14 | % | ||||||
Operating profit, including the effects of derivative settlements | $ | 13.56 | $ | 18.77 | (28 | )% | ||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | $ | 15.96 | $ | 12.96 | 23 | % |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||
March 31, 2016 | |||||||
Condensed Consolidated Statements of Operations | |||||||
(in thousands, except per share amounts) | For the Three Months Ended March 31, | ||||||
2016 | 2015 | ||||||
Operating revenues: | |||||||
Oil, gas, and NGL production revenue | $ | 211,823 | $ | 393,315 | |||
Net loss on divestiture activity | (69,021 | ) | (35,802 | ) | |||
Other operating revenues | 274 | 8,421 | |||||
Total operating revenues and other income | 143,076 | 365,934 | |||||
Operating expenses: | |||||||
Oil, gas, and NGL production expense | 144,543 | 196,151 | |||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 214,207 | 217,401 | |||||
Exploration | 15,273 | 37,407 | |||||
Impairment of proved properties | 269,785 | 55,526 | |||||
Abandonment and impairment of unproved properties | 2,311 | 11,627 | |||||
General and administrative | 32,238 | 43,639 | |||||
Change in Net Profits Plan liability | (1,260 | ) | (4,334 | ) | |||
Derivative gain | (14,228 | ) | (154,167 | ) | |||
Other operating expenses | 6,932 | 17,119 | |||||
Total operating expenses | 669,801 | 420,369 | |||||
Loss from operations | (526,725 | ) | (54,435 | ) | |||
Non-operating income (expense): | |||||||
Interest income | 6 | 571 | |||||
Interest expense | (31,088 | ) | (32,647 | ) | |||
Gain on extinguishment of debt | 15,722 | — | |||||
Loss before income taxes | (542,085 | ) | (86,511 | ) | |||
Income tax benefit | 194,875 | 33,453 | |||||
Net loss | $ | (347,210 | ) | $ | (53,058 | ) | |
Basic weighted-average common shares outstanding | 68,077 | 67,463 | |||||
Diluted weighted-average common shares outstanding | 68,077 | 67,463 | |||||
Basic net loss per common share | $ | (5.10 | ) | $ | (0.79 | ) | |
Diluted net loss per common share | $ | (5.10 | ) | $ | (0.79 | ) |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS (unaudited) | |||||||
March 31, 2016 | |||||||
Condensed Consolidated Balance Sheets | |||||||
(in thousands, except share amounts) | March 31, | December 31, | |||||
ASSETS | 2016 | 2015 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 51 | $ | 18 | |||
Accounts receivable | 111,141 | 134,124 | |||||
Derivative asset | 281,596 | 367,710 | |||||
Prepaid expenses and other | 12,850 | 17,137 | |||||
Total current assets | 405,638 | 518,989 | |||||
Property and equipment (successful efforts method): | |||||||
Proved oil and gas properties | 6,994,150 | 7,606,405 | |||||
Less - accumulated depletion, depreciation, and amortization | (3,385,234 | ) | (3,481,836 | ) | |||
Unproved oil and gas properties | 231,060 | 284,538 | |||||
Wells in progress | 466,403 | 387,432 | |||||
Oil and gas properties held for sale, net of accumulated depletion, depreciation, and amortization of $288,592 and $0, respectively | 152,725 | 641 | |||||
Other property and equipment, net of accumulated depreciation of $34,699 and $32,956, respectively | 144,675 | 153,100 | |||||
Total property and equipment, net | 4,603,779 | 4,950,280 | |||||
Noncurrent assets: | |||||||
Derivative asset | 160,732 | 120,701 | |||||
Other noncurrent assets | 36,907 | 31,673 | |||||
Total other noncurrent assets | 197,639 | 152,374 | |||||
Total Assets | $ | 5,207,056 | $ | 5,621,643 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 293,796 | $ | 302,517 | |||
Derivative liability | 8,211 | 8 | |||||
Other current liabilities | 1,150 | — | |||||
Total current liabilities | 303,157 | 302,525 | |||||
Noncurrent liabilities: | |||||||
Revolving credit facility | 293,000 | 202,000 | |||||
Senior Notes, net of unamortized deferred financing costs | 2,271,472 | 2,315,970 | |||||
Asset retirement obligation | 105,329 | 137,284 | |||||
Asset retirement obligation associated with oil and gas properties held for sale | 33,862 | 241 | |||||
Net Profits Plan liability | 6,351 | 7,611 | |||||
Deferred income taxes | 563,105 | 758,279 | |||||
Derivative liability | 78,514 | — | |||||
Other noncurrent liabilities | 43,850 | 45,332 | |||||
Total noncurrent liabilities | 3,395,483 | 3,466,717 | |||||
Stockholders’ equity: | |||||||
Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 68,077,546 and 68,075,700, respectively | 681 | 681 | |||||
Additional paid-in capital | 312,473 | 305,607 | |||||
Retained earnings | 1,208,900 | 1,559,515 | |||||
Accumulated other comprehensive loss | (13,638 | ) | (13,402 | ) | |||
Total stockholders’ equity | 1,508,416 | 1,852,401 | |||||
Total Liabilities and Stockholders’ Equity | $ | 5,207,056 | $ | 5,621,643 |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||
March 31, 2016 | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(in thousands) | For the Three Months Ended March 31, | ||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (347,210 | ) | $ | (53,058 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Net loss on divestiture activity | 69,021 | 35,802 | |||||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 214,207 | 217,401 | |||||
Exploratory dry hole expense | (19 | ) | 16,275 | ||||
Impairment of proved properties | 269,785 | 55,526 | |||||
Abandonment and impairment of unproved properties | 2,311 | 11,627 | |||||
Stock-based compensation expense | 6,868 | 6,024 | |||||
Change in Net Profits Plan liability | (1,260 | ) | (4,334 | ) | |||
Derivative gain | (14,228 | ) | (154,167 | ) | |||
Derivative settlement gain | 147,028 | 161,229 | |||||
Amortization of deferred financing costs | (920 | ) | 1,957 | ||||
Non-cash gain on extinguishment of debt, net | (15,722 | ) | — | ||||
Deferred income taxes | (195,039 | ) | (33,727 | ) | |||
Plugging and abandonment | (604 | ) | (2,425 | ) | |||
Other, net | 128 | 1,496 | |||||
Changes in current assets and liabilities: | |||||||
Accounts receivable | 26,922 | 69,527 | |||||
Refundable income taxes | 5,085 | (544 | ) | ||||
Prepaid expenses and other | (101 | ) | 1,825 | ||||
Accounts payable and accrued expenses | (52,294 | ) | (45,416 | ) | |||
Accrued derivative settlements | 4,318 | (1,096 | ) | ||||
Net cash provided by operating activities | 118,276 | 283,922 | |||||
Cash flows from investing activities: | |||||||
Net proceeds from the sale of oil and gas properties | 1,206 | 21,573 | |||||
Capital expenditures | (176,370 | ) | (544,965 | ) | |||
Acquisition of proved and unproved oil and gas properties | (15,044 | ) | (10,069 | ) | |||
Other, net | 885 | (997 | ) | ||||
Net cash used in investing activities | (189,323 | ) | (534,458 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from credit facility | 317,000 | 560,000 | |||||
Repayment of credit facility | (226,000 | ) | (309,500 | ) | |||
Cash paid to repurchase Senior Notes | (19,917 | ) | — | ||||
Other, net | (3 | ) | (62 | ) | |||
Net cash provided by financing activities | 71,080 | 250,438 | |||||
Net change in cash and cash equivalents | 33 | (98 | ) | ||||
Cash and cash equivalents at beginning of period | 18 | 120 | |||||
Cash and cash equivalents at end of period | $ | 51 | $ | 22 |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
March 31, 2016 | |||||||
Adjusted Net Income (Loss) | |||||||
(in thousands, except per share data) | |||||||
Reconciliation of net income (loss) (GAAP) | For the Three Months Ended | ||||||
to adjusted net income (loss) (Non-GAAP): | March 31, | ||||||
2016 | 2015 | ||||||
Actual net loss (GAAP) | $ | (347,210 | ) | $ | (53,058 | ) | |
Adjustments net of tax: (1) | |||||||
Change in Net Profits Plan liability | (800 | ) | (2,730 | ) | |||
Derivative gain | (9,035 | ) | (97,125 | ) | |||
Derivative settlement gain | 93,363 | 101,574 | |||||
Net loss on divestiture activity | 43,828 | 22,555 | |||||
Impairment of proved properties | 171,313 | 34,981 | |||||
Abandonment and impairment of unproved properties | 1,467 | 7,325 | |||||
Gain on extinguishment of debt | (9,983 | ) | — | ||||
Other, net (2) | 478 | 914 | |||||
Adjusted net income (loss) (Non-GAAP) (3) | $ | (56,579 | ) | $ | 14,436 | ||
Adjusted net income (loss) per diluted common share: | $ | (0.83 | ) | $ | 0.21 | ||
Diluted weighted-average shares outstanding | 68,077 | 67,915 | |||||
(1) Adjustments are shown net of tax and are calculated using a tax rate of 36.5% and 37.0% for the three months ended March 31, 2016 and 2015, respectively, which approximates the Company's statutory tax rate for the respective periods, as adjusted for ordinary permanent differences. | |||||||
(2) For the three-month period ended March 31, 2016, the adjustments are related to impairment of materials inventory and an adjustment relating to claims on royalties on certain Federal and Indian leases. For the three-month period ended March 31, 2015 the adjustment is related to impairment of materials inventory. These items are included in other operating expenses on the Company's condensed consolidated statements of operations. | |||||||
(3) Adjusted net income (loss) 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 and other adjustments, such as the change in the Net Profits Plan liability, derivative gain, net of derivative settlement gains, impairments, and net loss on divestiture activity. The non-GAAP measure of adjusted net income (loss) 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 (loss) 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 (loss) should not be considered in isolation or as a substitute for net income (loss), income (loss) from operations, cash provided by operating activities, or other income, profitability, cash flow, or liquidity measures prepared under GAAP. Since adjusted net income (loss) excludes some, but not all, items that affect net income (loss) and may vary among companies, the adjusted net income (loss) amounts presented may not be comparable to similarly titled measures of other companies. |
SM ENERGY COMPANY | |||||||
FINANCIAL HIGHLIGHTS | |||||||
March 31, 2016 | |||||||
Adjusted EBITDAX (1) | |||||||
(in thousands) | |||||||
Reconciliation of net income (loss) (GAAP) to adjusted EBITDAX (Non-GAAP) to net cash provided by operating activities (GAAP) | For the Three Months Ended | ||||||
March 31, | |||||||
2016 | 2015 | ||||||
Net loss (GAAP) | $ | (347,210 | ) | $ | (53,058 | ) | |
Interest expense | 31,088 | 32,647 | |||||
Interest income | (6 | ) | (571 | ) | |||
Income tax benefit | (194,875 | ) | (33,453 | ) | |||
Depletion, depreciation, amortization, and asset retirement obligation liability accretion | 214,207 | 217,401 | |||||
Exploration (2) | 13,611 | 35,732 | |||||
Impairment of proved properties | 269,785 | 55,526 | |||||
Abandonment and impairment of unproved properties | 2,311 | 11,627 | |||||
Stock-based compensation expense | 6,868 | 6,024 | |||||
Derivative gain | (14,228 | ) | (154,167 | ) | |||
Derivative settlement gain (3) | 147,028 | 161,229 | |||||
Change in Net Profits Plan liability | (1,260 | ) | (4,334 | ) | |||
Net loss on divestiture activity | 69,021 | 35,802 | |||||
Gain on extinguishment of debt | (15,722 | ) | — | ||||
Other, net | 1,692 | 1,450 | |||||
Adjusted EBITDAX (Non-GAAP) | $ | 182,310 | $ | 311,855 | |||
Interest expense | (31,088 | ) | (32,647 | ) | |||
Interest income | 6 | 571 | |||||
Income tax benefit | 194,875 | 33,453 | |||||
Exploration (2) | (13,611 | ) | (35,732 | ) | |||
Exploratory dry hole expense | (19 | ) | 16,275 | ||||
Amortization of deferred financing costs | (920 | ) | 1,957 | ||||
Deferred income taxes | (195,039 | ) | (33,727 | ) | |||
Plugging and abandonment | (604 | ) | (2,425 | ) | |||
Other, net | (1,564 | ) | 46 | ||||
Changes in current assets and liabilities | (16,070 | ) | 24,296 | ||||
Net cash provided by operating activities (GAAP) | $ | 118,276 | $ | 283,922 | |||
(1) Adjusted EBITDAX represents net income (loss) before interest expense, other non-operating income or expense, income taxes, depletion, depreciation, amortization, and accretion expense, exploration expense, impairments, non-cash stock-based compensation expense, derivative gains and losses net of settlements, change in the Net Profits Plan liability, and gains and losses on divestitures. Adjusted EBITDAX excludes certain items that the Company believes affect the comparability of operating results and can exclude items that are generally one-time in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that is presented because the Company believes it provides useful additional information to investors and analysts, as a performance measure, for analysis of the Company's ability to internally generate funds for exploration, development, acquisitions, and to service debt. We are also subject to financial covenants under our Amended Credit Agreement based on adjusted EBITDAX ratios. In addition, adjusted EBITDAX 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 EBITDAX should not be considered in isolation or as a substitute for net income (loss), income (loss) from operations, net cash provided by operating activities, or profitability or liquidity measures prepared under GAAP. Because adjusted EBITDAX excludes some, but not all items that affect net income (loss) and may vary among companies, the adjusted EBITDAX amounts presented may not be comparable to similar metrics of other companies. | |||||||
(2) Stock-based compensation expense is a component of exploration expense and general and administrative expense on the accompanying statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the accompanying statements of operations for the component of stock-based compensation expense recorded to exploration expense. | |||||||
(3) Derivative settlement gain is reported net of the change in accrued settlements between periods in the derivative cash settlements line item on the condensed consolidated statements of cash flows within net cash provided by operating activities. |