Q4 2022 SM Energy Co Earnings Call

Good morning, My name is Rob and I'll be your conference operator today at this time I'd like to welcome everyone to the SM energy fourth quarter 2022 results and 2023 plan Q&A discussion all lines have been placed on mute to prevent any background noise.

After the Speakers' brief remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

You'd like to withdraw your question again press the star one. Thank you Jennifer Samuels, Vice President Investor Relations and ESG stewardship, you may begin your conference.

Thanks, Rob and good morning, everyone. We come to you. This morning from our Chile, Denver, just warmed up to minus two degrees. Thank you for joining us today to answer your questions. We have our president and CEO Herb Vogel and CFO Wade herself as usual before we get started I will remind you that our discussion today may include forward.

Looking statements and discussion of non-GAAP measures I direct you to slide two of the accompanying slide deck page eight of the accompanying earnings release.

Risk factors section of our most recently filed 10-K, which describe risks associated with forward looking statements that could cause actual results to differ we may also refer to non-GAAP measures. Please see the slide deck appendix and earnings release for definitions and reconciliations of non-GAAP measures to the most directly comparable GAAP measures.

And discussion of forward looking non-GAAP measures as a reminder, we have posted to our website, an investor presentation and the transcript to our prerecorded call that we may reference today.

And also look for our 2022 annual report filed on Form 10-K. This morning with that I will turn it back to Rob to open it up for questions Rob.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. We ask that you. Please limit yourself to one question and one follow up well pause for just a moment to compile the Q&A roster.

Again, if you'd like to ask a question press star one on your telephone keypad.

And we have our first question from the line of Zach par him from J P. Morgan Your line is open.

Hey, guys. Thanks for taking my question I guess first off.

Started buying back stock a couple of quarters ago.

And if you've met your balance sheet goals and exited the year with almost $450 million in cash on the balance sheet can you just talk a little bit about your plans for cash return going forward and what your plans are for allocating that cash balance.

Yes. Good morning. This is wade.

Yeah. Good question.

I think we mentioned in our remarks.

We're very pleased to continue with the return of capital program, which we which we were happy to announced last year as we met our leverage targets and we feel that's a very sustainable program and we've been reminded everyone that we ran at 60 and three.

The dividend, obviously that will continue to be paid in the $500 million that we committed to on the stock buyback and I believe we said through 2024, we'll continue that program and it'll be methodical people like to ask how do you how are we going to run that well what we're saying the same thing we said before that that it'll just be a methodical.

Buybacks will support the stock.

Looking at it on a daily basis.

As far as anything beyond that that will obviously that'll have a lot to do with commodity price and the level of free cash flow that we generate and there's clearly some upside to that given the fact that we stated that we ran it at 60 and three and beyond that we'll just we'll just monitor conditions going forward. So we did mentioned at one time and we still.

Believe it that.

Running the balance sheet and I've kind of been a one in one area is as it is a prudent place to be so.

One of the reasons that cash is so high is because that's a net debt.

Number so at some point, we could reduce absolute debt, we could do that any time a lot of flexibility with those bonds, but for now there's a lot of uncertainty as we enter our 23, so it just feels prudent.

Perhaps have some cash on the balance sheet, and just kind of monitor things how they develop.

Got it and then for about follow up just wanted to ask on an LOE.

The guidance for the year was up pretty significantly a little higher than we were modeling I know you mentioned workovers in there, but can you just talk about the drivers of low moving higher year over year.

Yeah, Zach this is herb.

Yes.

You know the capital inflation last year was much stronger than the operating cost inflation, but there are certain.

Cost areas that went up but workovers.

Increase is probably the single biggest.

Then we've got the.

Water and just general inflation, so that that's really the contributors there labor is also up.

And we've got that.

Integrated in that estimate also.

Those are those are the really the major components. The good news is diesel is way down.

That'll play into capital and operating expense.

Downward trajectory trajectory right now.

Thanks, I appreciate the color.

And your next question comes from the line of Alicia Dong from Bloomberg. Your line is Oh, I'm, sorry, Yeah, just disconnected.

Oh, I'm, sorry, and again, if you would like to ask a question. Please press star one to reenter the queue.

And we have no further questions at this time I'm going to turn it back to her Vogel Oh, I'm, sorry, yes to Herb Vogel for some final closing comments.

Okay, well, thank you for joining the call and your interest in SM energy and we're looking forward to our outstanding 2023.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Please wait the conference will begin shortly.

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