3Q19 EARNINGS · (1) Previously Reported Well Average includes all (182) previously reported SM...

TOP-TIER OPERATIONAL EXECUTION CONTINUES

3Q19 EARNINGS

O C T O B E R 3 1 , 2 0 1 9

NYSE: SM

PLEASE READTHIS PRESENTATION MAKES REFERENCE TO:

2

FORWARD LOOKING STATEMENTS

This presentation contains forward-looking statements within the meaning of securities laws. The words “assumes,” "anticipate," "estimate," "expect,"

"forecast," "guidance," “implied,” "plan," "project," "objectives," "target," "will" and similar expressions are intended to identify forward-looking statements.

These statements involve known and unknown risks, which may cause SM Energy's actual results to differ materially from results expressed or implied

by the forward-looking statements. Forward-looking statements in this release include: projections for production, certain operating costs, general and

administrative expenses and expected savings, and total capital spend; the expectation that the Company will spend within discretionary cash flow in the

fourth quarter of 2019 and beyond; the potential to reduce absolute debt and leverage in 2020; and, the Company’s expectations regarding capital

allocation. General risk factors include the availability, proximity and capacity of gathering, processing and transportation facilities; the volatility and level

of oil, natural gas, and natural gas liquids prices and related differentials, including any impact on the Company’s asset carrying values or reserves

arising from price declines; uncertainties inherent in projecting future timing and rates of production or other results from drilling and completion

activities; the imprecise nature of estimating oil and natural gas reserves; uncertainties inherent in projecting future drilling and completion activities,

costs or results; the availability of additional economically attractive exploration, development, and acquisition opportunities for future growth and any

necessary financings; unexpected drilling conditions and results; unsuccessful exploration and development drilling results; the availability of drilling,

completion, and operating equipment and services; the risks associated with the Company's commodity price risk management strategy; and other such

matters discussed in the Risk Factors section of SM Energy's most recent Annual Report on Form 10-K, as such risk factors may be updated from time

to time in the Company's other periodic reports filed with the Securities and Exchange Commission. The forward-looking statements contained herein

speak as of the date of this presentation. Although SM Energy may from time to time voluntarily update its prior forward-looking statements, it disclaims

any commitment to do so, except as required by securities laws.

non-GAAP financial measures and forward-looking metrics:

See Appendix for reconciliations and definitions

NYSE: SM 3

CAPITAL COSTS DOWN

LOWER OPERATING

COSTS

COMMITMENT TO GENERATING FREE CASH FLOW

G R E AT W E L L

P E R F O R M AN C E

NYSE: SM 4

3Q19 FINANCIAL & OPERATING RESULTS

UPDATE

NYSE: SM

MIDLAND BASINTOP-TIER EXECUTION, WELL PERFORMANCE AND CAPITAL EFFICIENCY

5

MARTIN

RockStarHOWARD

UPTON

Sweetie Peck

E x e c u t i n g O n O u r P l a n

COMPLETIONS EXECUTION

• ~100+ net completions planned for 2019

• 19 net completions in 3Q19; 78 net completions YTD

GREAT NEW WELLS

• 11 new RockStar wells reached their 30-day peak rates

that averaged approximately 1,180 Boe/d (90% oil)

TOP TIER CAPITAL EFFICIENCY

• Drilling/completing faster, longer laterals, lower sand costs

YE 2018 INVENTORY: 12 – 16 YEARS

O p e r a t i n g D e t a i l s ( 1 )

~81,500

Rigs Running:

Completion Crews:

N E T A C R E S

MIDLAND

(1) As of October, 2019.

NYSE: SM

0

50,000

100,000

150,000

200,000

250,000

0 30 60 90 120 150 180 210 240 270 300 330 360

Cu

mu

lati

ve

Pro

du

cti

on

(B

oe)

Days on Production

Previously Reported Well Avg New Well Avg*

MIDLAND BASIN: GREAT NEW ROCKSTAR RESULTSNEW WELL PERFORMANCE CONSISTENT WITH PRIOR WELLS

6

(1)

(1) Previously Reported Well Average includes all (182) previously reported SM operated wells at RockStar on production since 11/3/2016.

(2) New Well Average includes 11 new wells at RockStar that have not been previously reported.

(2)

• 11 new wells at RockStar tracking in-line with Previously

Reported Well Avg.

• New Well Avg. includes 4 Lower Spraberry wells;

approximately half of the new wells are located along the

eastern edge of our position (Lower Spraberry and wells

in the eastern area typically have lower IPs with flatter

declines than wells farther west)

. .

NYSE: SM 7

+21%Increase in

Lateral Feet

Drilled / Day(YTD19 / 2017)

+101%

+13%

-74%

Increase in

Lateral Feet

Completed / Day(YTD19 / 2017)

Increase in Avg.

Lateral Length

Completed(2019 Plan / 2017)

Decrease in

Sand Costs(Sep. 19 / Jan. 18)

(1) Total lateral feet delivered per day, spud to rig release.

(2) Lateral feet completed per fleet per day.(3) 2019 includes drilled and planned wells.

(4) Excludes last mile logistics as there is variability in these charges.

510

562

618

2017 2018 YTD19

Drilling FasterLateral Ft Drilled per Day(1)

9,300

10,10010,500

2017 2018 2019

Longer LateralsAvg Lateral Length Completed(3)

-

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

Jan Apr Jul Oct Jan Apr Jul

Lower Sand CostsIndexed to January 2018(4)

765

1,025

1,536

2017 2018 YTD19

Completing FasterLateral Ft Completed per Day(2)

MIDLAND BASIN: TOP-TIER CAPITAL EFFICIENCYINCREASE IN CAPITAL EFFICIENCY RECENT DC&E WELL COSTS AT

~$700 PER LATERAL FOOT

NYSE: SM

SOUTH TEXASFOCUSED ON EXECUTION AND RETURNS ENHANCEMENT

8

DIMMIT COUNTY

WEBB COUNTY

North

Area

South

Area

East

Area

COMPLETIONS EXECUTION

• 6 net completions in 3Q19; South Texas 2019 program

concluded with 19 net completions for the year

• Completed 12 gross wells during the third quarter in the

JV-funded area

AUSTIN CHALK SUCCESS

• Two Austin Chalk wells completed during the third quarter

reached an average 30-day peak rate of ~2,655 Boe/d

(>55% liquids, 3-stream)

VALUE ENHANCEMENT THROUGH HIGHER RETURN

WELLS

• 12 JV-funded wells reached an average 30-day peak rate

of ~2,530 Boe/d (~50% liquids, 3-stream)

YE 2018 INVENTORY: 12 – 14 YEARS

E n h a n c i n g I n v e n t o r y Va l u e

O p e r a t i n g D e t a i l s ( 1 )

Rigs Running:

~163,000N E T A C R E S

(1) As of October, 2019.

NYSE: SM

SOUTH TEXAS: AUSTIN CHALK SUCCESSTWO NEW TESTS: ~1,100 BOPD PEAK 24 HR RATES EACH

9

HIGHER OIL CONTENT = HIGHER RETURNS

Watson (SA2) State 167H Galvan Ranch C 917H

Briscoe C (SA1) State 108H

IP30: 1,710 Boe/d (preliminary)

IP30 oil: 787 Bbl/d

Lateral Length: 11,269’

% liquids: 74%

API Gravity: 50.0

Watson (SA2) State 167H

IP30: 3,179 Boe/d

IP30 oil: 651 Bbl/d


% liquids: 58%

API Gravity: 56.7

Galvan Ranch C917H

IP30: 2,133 Boe/d

IP30 oil: 310 Bbl/d


% liquids: 52%

API Gravity: 61.9

Galvan Ranch B904H

IP30: 3,599 Boe/d

IP30 oil: 896 Bbl/d


% liquids: 61%

API Gravity: 53.5

Galvan Ranch B904H Briscoe C (SA1) State 108H

DEMONSTRATING GEOGRAPHIC EXPANSE

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0 50 100 150 200 250 300 350 400 450 500

Bo

e/D

ay (

3-s

trea

m)

Days Online

Surface equipment repairs

Well shut-in for tubing installation

Note: Boe rates provided are 3-stream.

NYSE: SM

SOUTH TEXAS: VALUE ENHANCEMENTPOSITIVE RESULTS FROM NEW WELL DESIGN

10

• Wider spacing and new completion design

• Increasing lateral length with less capex per

lateral foot

• Increasing production volumes at lower cost

with more liquids higher expected

returns

A C T U A L P R O D U C T I O N P E R L A T E R A L F T T O T A L W E L L P R O D U C T I O N

-

10

20

30

0 50 100 150 200 250 300 350

Cu

mu

lati

ve

Pro

du

cti

on

(Mb

oe/1

,00

0’)

Producing Days

-

50

100

150

200

0 100 200 300

Cu

mu

lati

ve P

rod

ucti

on

Pe

r W

ell

(Mb

oe)

Producing Days

2019 JV Wells

2016 Wells

2019 JV Wells

2016 Wells

NYSE: SM

SOUTH TEXAS: EXCELLENT CAPITAL EFFICIENCYRECENT EAGLE FORD D&C WELL COSTS LESS THAN $650 PER LATERAL FOOT

11

666721

824

2017 2018 YTD19

Drilling FasterLateral Ft Drilled per Day(1)

8,392

10,483

12,531

2017 2018 2019

Drilling LongerAvg. Lateral Length Completed(3)

851

737

632

2017 2018 YTD19

Lower CostsD&C Cost / Lateral Foot(4)

1,210 1,256

1,663

2017 2018 YTD19

Completing FasterLateral Feet Completed per Day(2)

+24%

+49%

+37%

-26%Decrease in

Well Costs(YTD19 / 2017)

Increase in

Lateral Feet

Completed / Day(YTD19 / 2017)

Increase in

Lateral Feet

Drilled / Day(YTD19 / 2017)

Increase in Avg.

Lateral Length

Completed(2019 Plan / 2017)

(1) Total lateral feet delivered per day, spud to rig release.

(2) Lateral feet completed per fleet per day.(3) 2019 includes drilled and planned wells.

(4) Includes drilling, toe-prep, stim, drill-out & flowback.

Note: Excludes Austin Chalk wells.

NYSE: SM

BALANCE SHEET FOCUSIMPROVING DEBT METRICS EXPECTED

12

• Borrowing base re-affirmed in October

• Liquidity of $1.1B(1); no near-term maturities

$500$500$500$500$476.8

$172.5 $0

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

202720262025202420232022202120202019

Debt Maturities as of September 30, 2019(in millions)

Borrowing Base: $1.6B

Commitments: $1.2B

$129

Coupon 1.500% 6.125% 5.000% 5.625% 6.750% 6.625%

Yield to worst(2) - 7.81% 8.40% 8.91% 9.63% 9.55%

Initial call date - 11/2018 7/2018 6/2020 9/2021 1/2022

Initial call price - 103.06% 102.50% 102.81% 103.38% 104.97%

(1) Liquidity as of September 30, 2019.

(2) YTW as of October 30, 2019.

NYSE: SM

SM VALUEACTIVELY MANAGING TO LONG-TERM VALUE CREATION

13

BEST WELLS IN THE MIDLAND BASIN“The Company’s high-quality Howard County assets have yielded some of the best results in the area to date in the highest oil cut county.” – Raymond James, July 2019

“SM’s prolific, oil-weighted assets in Howard County differentiate itself versus other SMID peers in a potentially lower for longer oil price.” – JP Morgan, July 2019

“Our analysis of the Permian, which includes every horizontal well drilled in the Midland Basin since 2013, indicates that the SM wells are among the most productive on a lateral foot basis in terms of cumulative production.” – JP Morgan, July 2019

Baird has repeatedly ranked SM as #1 and at least among the top 5 in their periodic ranking of highest revenue per well in the Midland Basin.

TOP-TIER CAPITAL EFFICIENCYWe are very capital efficient among Midland operators, comparable to larger scale operators.

Cost per lateral foot: ~$700 in Permian, <$650 in South Texas

INVENTORY: 12+ YEARS AND SUBSTANTIAL UPSIDE POTENTIAL

Recent and exciting successes in four new horizons, providing upside of growing inventory organically.

NYSE: SM 14

Appendix

NYSE: SM

2019 GUIDANCE(1)

15(1) As of October 31, 2019.

(2) Total capital spend is a non-GAAP financial measure. See “Definitions of non-GAAP Measures as Calculated by the Company” in the Appendix.

Capital & Production FY 2019

Total capital spend ($MM)(2) (before acquisitions) ~$1,025

Total production (MMBoe) 47.5 – 47.9

Total production (MBoe/d) 130 – 131

Oil percentage ~44%

Costs

LOE ($/Boe) ~$4.70 - $4.80

Transportation ($/Boe) ~$4.05 - $4.15

Production and Ad Valorem taxes ($/Boe)– 4% of pre-hedge revenue + ~$0.70

~$2.00

G&A ($MM) – includes ~$20MM non-cash compensation

~$125 - $130

Exploration expense, including capitalized overhead ($MM)– before dry hole expense, all of which is included in capital

expenditure guidance

~$50

DD&A ($/Boe) ~$17.00

• 4Q19 production is expected to range between 12.0 and 12.4 MMBoe (130.4-134.8) MBoe/d), 44% oil,

and reflects expected shut-ins related to offset activity and maintenance.

• G&A revised to $125 - $130 million (including non-cash compensation). Includes estimated 4Q19 costs

associated with reorganization to eliminate duplicate regional functions and reduce overhead costs.

PRODUCTION UP, COSTS DOWN

NYSE: SM

WELL HEDGEDPERCENTAGE OF PRODUCTION HEDGED

16

Benchmark Hedges(1)

4Q19

~80%

BENCHMARK

• ~90% of expected 4Q19 oil production hedged;

swaps at ~$61.35/Bbl, collar floors at ~$50.50/Bbl

• ~70% of expected 4Q19 gas production hedged;

swaps at ~$2.85/MMBtu, collar floors at

$2.50/MMBtu

• Hedged by product

REGIONAL

• ~40%(2) of expected 4Q19 Permian gas

production hedged at WAHA ($1.75/MMBtu)

• ~60-65%(3) of expected 4Q19 Permian oil

production covered by Midland to Cushing basis

hedges at ~$2.85/Bbl

(1) Total Company percentage includes oil swaps and collars at NYMEX WTI, natural gas swaps and collars at HSC, and NGL swaps (excludes WAHA swaps and basis hedges).

(2) Permian gas hedges at WAHA based on Permian residue/tailgate volumes; assumes ethane rejection.

(3) Permian Midland to Cushing basis hedges based on expected Permian oil volumes.

Note: Hedging data as of October 31, 2019

O i l

G a s

N G L s

W A H A

M i d l a n d - C u s h i n g O i l

NYSE: SM

THIRD QUARTER 2019 PERFORMANCE

17

Production & Pricing 3Q19 2019 YTD

Total Production (MMBoe / MBoe/d) 12.4/134.9 35.5/130.1

Oil Percentage 44% 44%

Pre-Hedge Realized Price ($/Boe) $31.39 $32.00

Post-Hedge Realized Price ($/Boe) $33.38 $32.68

Costs ($/Boe) 3Q19 2019 YTD

LOE $4.73 $4.67

Ad Valorem $0.39 $0.52

Transportation $4.00 $4.02

Production Taxes $1.29 $1.30

Production Expenses $10.41 $10.51

Cash Production Margin (pre-hedge) $20.98 $21.49

G&A – Cash $2.19 $2.27

G&A – Non Cash $0.44 $0.42

Operating Margin (pre-hedge) $18.35 $18.80

DD&A $17.02 $16.76

Earnings 3Q19 2019 YTD

EPS (Diluted) $0.37 $(0.76)

Adjusted EPS(1) $(0.11) $(0.43)

Adjusted EBITDAX(1) ($MM) $257.8 $707.2

(1) Adjusted EPS and Adjusted EBITDAX are non-GAAP financial measures. See “Definitions of non-GAAP Measures as Calculated by the

Company” and reconciliations to the most directly comparable GAAP metric in the Appendix.

NYSE: SM

3Q19 REALIZATIONS BY REGION

18

Benchmark Pricing

NYMEX WTI Oil ($/Bbl) $56.45

NYMEX LLS Oil ($/Bbl) $57.72

NYMEX Henry Hub Gas ($/MMBtu) $2.23

Hart Composite NGL ($/Bbl) $18.89

Production Volumes South Texas Permian Total

Oil (MBbls) 348 5,076 5,424

Gas (MMcf) 20,417 9,079 29,496

NGL (MBbls) 2,061 5 2,067

Total (Mboe) 5,812 6,595 12,407

Revenue (in thousands)

Oil $15,496 $277,362 $292,858

Gas 46,267 17,780 64,046

NGL 32,392 124 32,515

Total $94,154 $295,265 $389,419

Expenses (in thousands)

LOE $14,242 $44,452 $58,694

Ad Valorem $3,238 $1,560 $4,797

Transportation $49,515 $61 $49,576

Production Taxes $1,805 $14,170 $15,975

Per Unit Metrics

Realized Oil per Bbl $44.50 $54.64 $53.99

% of Benchmark - WTI 79% 97% 96%

Realized Gas per Mcf $2.27 $1.96 $2.17

% of Benchmark – NYMEX HH 102% 88% 97%

Realized NGL per Bbl $15.71 nm $15.73

% of Benchmark – HART 83% nm 83%

Realized per Boe $16.20 $44.77 $31.39

LOE per Boe $2.45 $6.74 $4.73

Transportation per Boe $8.52 $0.01 $4.00

Ad Val per Boe $0.56 $0.24 $0.39

Production Tax - per Boe/% of Pre-Hedge Revenue $0.31/1.9% $2.15/4.8% $1.29/4.1%

Production Margin per Boe $4.36 $35.63 $20.98

Note: Amounts may not calculate due to rounding and other classifications.

SIMPLIFIED PORTFOLIO: 2 TOP-TIER AREAS OF OPERATION

Permian realized

price/Boe reflects high oil

content of production

NYSE: SM

2019 ACTIVITY BY REGIONWELLS DRILLED, FLOWING COMPLETIONS AND DUC COUNT

19

As of September 30, 2019

(1) During the third quarter of 2019, there were twelve gross joint development wells completed.

(2) Non-operated activity relates to wells located in the Permian Basin. The single well that was drilled during the second quarter of 2019 was included in a trade

that closed in June 2019.

Wells Drilled Flowing Completions DUC Count

3rd Quarter 2019 2019 YTD 3rd Quarter 2019 2019 YTD As of September 30, 2019

Region Gross Net Gross Net Gross Net Gross Net Gross Net

Permian

Sweetie Peck 5 4 12 9 - - 11 8 6 5

RockStar 20 18 70 66 21 19 76 70 50 47

Permian total 25 22 82 75 21 19 87 78 56 52

South Texas(1) 6 6 21 16 17 6 30 19 19 19

Subtotal Operated Wells 31 28 103 91 38 25 117 97 75 71

Non-operated Wells(2) n/a - n/a 1 n/a - n/a - n/a -

Total n/a 28 n/a 92 n/a 25 n/a 97 n/a 71

NYSE: SM

SOUTH TEXAS 3Q19 WELL RESULTS DETAILJOINT DEVELOPMENT & AUSTIN CHALK WELLS COMPLETED DURING THE QUARTER

20

Well Name ZoneFirst

Production

Lateral

Length

IP24 Gas

Wet

(Mcf/d)

IP24 Oil

(Bbl/d)

IP24

(Boe/d)

(3-stream)

IP24

Oil%

IP30 Gas

Wet

(Mcf/d)

IP30 Oil

(Bbl/d)

IP30

(Boe/d)

(3-stream)

IP30

Oil%

API

Gravity

GALVAN RANCH B904H AC August 2019 11,306’ 11,109 1,082 3,900 27% 10,315 896 3,599 25% 53.5

BRISCOE G (SA4) 253H LEF August 2019 9,815’ 8,805 759 3,042 25% 7,964 531 2,647 20% 58.1

BRISCOE G (SA5) 1282H LEF August 2019 14,834’ 11,034 802 3,746 21% 9,321 599 3,080 19% 59.8

BRISCOE C (SA1) STATE 108H AC August 2019 11,269’ 4,307 1,081 2,160 49% 3,412 787 1,710 46% 50.0

BRISCOE R (SA14) 1132H LEF August 2019 8,237’ 7,527 530 2,540 21% 7,083 378 2,270 17% 61.6




BRISCOE G GU1 (SA3) 1253H LEF August 2019 14,503’ 7,009 600 2,470 24% 6,443 518 2,235 23% 57.7

BRISCOE G GU1 (SA4) 1232H LEF August 2019 14,973’ 6,932 603 2,408 25% 6,386 543 2,255 24% 57.7

BRISCOE G (SA6) 1192H LEF July 2019 12,560’ 6,651 671 2,416 28% 6,244 554 2,245 25% 58.1

BRISCOE G (SA7) 1173H LEF July 2019 12,324’ 6,458 673 2,409 28% 6,087 558 2,199 25% 57.9

BRISCOE R (SA17) 793H LEF July 2019 15,338’ 13,233 749 4,293 17% 12,010 527 3,747 14% 61.3

BRISCOE R (SA18) 812H LEF July 2019 15,375’ 12,860 841 4,273 20% 11,881 597 3,790 16% 61.9

NYSE: SM

LEASEHOLD SUMMARY

21

RegionNet Acres(1)

September 30, 2019

Midland Basin

RockStar 64,000

Sweetie Peck(2) 17,500

Midland Basin Total 81,500

South Texas 163,000

Rocky Mountain Other(3) 34,500

Other Areas/Exploration 26,400

Total 305,400

(1) Includes developed and undeveloped oil and gas leasehold, fee properties, and mineral servitudes held as of September 30, 2019.

(2) Sweetie Peck acreage includes 2,110 net drill-to-earn acreage.

(3) Rocky Mountain Other includes non-core acreage located in North Dakota, Montana, Wyoming, and Utah. The reduction in Rocky Mountain

Other acreage from 6/30/19 relates to Federal leases that were released back to the Bureau of Land Management.

SM HAS NO FEDERAL ACREAGE IN THE MIDLAND BASIN OR SOUTH TEXAS REGIONS

NYSE: SM

NGL REALIZATIONS

22

• NGL price realizations are predominantly tied to Mont Belvieu, fee

based contracts

• Differential reflects composite NGL barrel product mix, transportation

and fractionation fees

42%

27%

9%

9%

13%

SM Typical NGL Bbl(1)

Ethane Propane

Isobutane Normal Butane

Natural Gasoline

3Q18 4Q18 1Q19 2Q19 3Q19

Mt. Belvieu ($/Bbl) $37.97 $29.91 $26.28 $22.23 $18.89

SM Realization

($/Bbl)$30.77 $24.01 $19.39 $16.42 $15.73

% Differential to

Mt. Belvieu81% 80% 74% 74% 83%

(1) Reflects ethane rejection; if the Company were to process ethane, the typical NGL barrel would consist of 51% ethane,

23% propane, 12% natural gasoline, 7% normal butane, and 7% isobutane. During 2019, the Company elected to

process ethane in January through June. The Company rejected ethane July – Sept. 2019 and expects to continue

rejecting ethane during the fourth quarter.

NYSE: SM

OIL AND GAS DERIVATIVE POSITIONS(1)

BY QUARTER THROUGH 2020

23

Midland - Cushing

Oil Swaps Oil Collars Oil Basis Swaps

Period

Volume

(MBbls) $/Bbl(2)

Volume

(MBbls)

Ceiling

$/Bbl(2)

Floor

$/Bbl(2)

Volume

(MBbls)

Price

Differential

$/Bbl(2)

4Q’19 1,686 $61.38 3,168 $62.49 $50.54 3,338 ($2.87)

1Q’20 1,938 $60.35 2,266 $63.91 $55.00 4,193 ($0.68)

2Q’20 2,192 $59.67 1,881 $62.17 $55.00 3,311 ($0.77)

3Q’20 2,592 $56.79 1,252 $62.90 $55.00 3,325 ($0.74)

4Q’20 1,584 $59.00 610 $61.90 $55.00 3,261 ($0.73)

IF HSC Gas Swaps IF HSC Gas Collars WAHA Gas Swaps

Period

Volume

(BBTU) $/MMBTU(2)Volume

(BBTU)

Ceiling

$/MMBTU(2)

Floor

$/MMBTU(2)

Volume

(BBTU) $/MMBTU(2)

4Q’19 14,433 $2.88 4,818 $2.83 $2.50 2,962 $1.75

1Q’20 9,123 $2.98 - - 3,099 $1.93

2Q’20 4,160 $2.20 - - 3,196 $0.56

3Q’20 4,493 $2.41 - - 3,268 $1.03

4Q’20 3,722 $2.36 - - 3,419 $1.17

(1) Includes derivative contracts for settlement at any time during the fourth quarter of 2019 and later periods through 2020, entered into as of 10/31/19.

(2) Weighted-average contract price.

NYSE: SM

NGL DERIVATIVE SWAP POSITIONS(1)

OPIS MT. BELVIEU

24

(1) Includes derivative contracts for settlement at any time during the fourth quarter of 2019 and later periods through 2020, entered into as of 10/31/19.

(2) Weighted-average contract price.

Ethane

Period

Volume

(MBbls) $/Bbl(2)

4Q’19 896 $12.36

1Q’20 447 $11.53

2Q’20 264 $11.13

2020 Total 711

Propane

Period

Volume

(MBbls) $/Bbl(2)

4Q’19 660 $31.60

1Q’20 382 $22.64

2Q’20 382 $22.34

3Q’20 409 $22.33

4Q’20 466 $22.29

2020 Total 1,639

Isobutane

Period

Volume

(MBbls) $/Bbl(2)

4Q’19 29 $35.70

Natural Gasoline

Period

Volume

(MBbls) $/Bbl(2)

4Q’19 50 $50.93

Normal Butane

Period

Volume

(MBbls) $/Bbl(2)

4Q’19 39 $35.64

NYSE: SM

DEFINITIONS OF NON-GAAP MEASURES AS CALCULATED BY THE COMPANY

25

The following non-GAAP measures are presented in addition to financial statements as the Company believes these metrics and performance measures are

widely used by the investment community, including investors, research analysts and others, to evaluate and compare investments among upstream oil and gas

companies in making investment decisions or recommendations. These measures, as presented, may have differing calculations among companies and

investment professionals and may not be directly comparable to the same measures provided by others. Non-GAAP measures should not be considered in

isolation or as a substitute for the related GAAP measure or any other measure of a company’s financial or operating performance presented in accordance with

GAAP. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measure or measures is presented below. These

measures may not be comparable to similarly titled measures of other companies.

Adjusted EBITDAX: Adjusted EBITDAX is calculated as net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement

obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of

settlements, gains and losses on divestitures, and certain other items. Adjusted EBITDAX excludes certain items that the Company believes affect the comparability of operating results, including

items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that the Company presents because

management believes it provides useful additional information to investors and analysts, as a performance measure, for analysis of our ability to internally generate funds for exploration,

development, acquisitions, and to service debt. Adjusted EBITDAX is also important as it is considered among financial covenants under the Company’s Credit Agreement, a material source of

liquidity for the Company. Please reference the Company’s second quarter of 2019 Form 10-Q and 2018 Form 10-K for discussion of the Credit Agreement and its covenants.

Adjusted net income (loss): Adjusted net income (loss) excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-

recurring in nature or whose timing and/or amount cannot be reasonably estimated. These items include non-cash and other adjustments, such as derivative gains and losses net of settlements,

impairments, net (gain) loss on divestiture activity, and materials inventory loss. Adjusted net income (loss) is presented because management believes it provides useful additional information to

investors for analysis of the Company’s fundamental business on a recurring basis. In addition, management believes that adjusted net income (loss) attributable to common shareholders is widely

used by professional research analysts and others in the valuation, comparison, and investment recommendations of upstream oil and gas companies.

Total capital spend: Total capital spend is calculated as costs incurred, less asset retirement obligations (“ARO”), capitalized interest and acquisitions. Total capital spend is presented because

management believes that it provides useful information to investors in the analysis of SM Energy Company and 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. Total capital spend should not be used in isolation or as a substitute to costs

incurred or other capital spending measures under GAAP.

Discretionary cash flow: Discretionary cash flow is calculated as net cash provided by operating activities excluding changes in current assets and current liabilities, and exploration. Exploration

expense is added back in the calculation because, for peer comparison purposes, this number is included in our total capital spend. The Company believes this measure is important to investors

because it provides useful additional information to investors for analysis of the Company’s ability to generate cash to fund exploration and development, and to service indebtedness. In addition,

management believes that discretionary cash flows is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of upstream oil and

gas companies.

FORWARD-LOOKING NON-GAAP MEASURES

The Company is unable to present a reconciliation of forward-looking discretionary cash flow and total capital spend because components of these calculations

include assumptions and estimates that are inherently unpredictable. Moreover, estimating the most directly comparable GAAP measures with the required

precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort.

NYSE: SM

ADJUSTED EBITDAX(1)

RECONCILIATION TO NET INCOME (LOSS) & NET CASH PROVIDED BY

OPERATING ACTIVITIES (GAAP)

26

Reconciliation of net income (loss) (GAAP) and net cash provided

by operating activities (GAAP) to adjusted EBITDAX (non-GAAP):

(in thousands)

Three Months Ended

September 30, 2019

Nine Months Ended

September 30, 2019Net income (loss) (GAAP) $42,234 $(84,946)

Interest expense 40,584 118,191

Income tax expense (benefit) 16,111 (16,337)

Depletion, depreciation, amortization, and asset retirement obligation liability accretion 211,125 595,201

Exploration(2) 10,341 30,070

Abandonment and impairment of unproved properties 6,337 25,092

Stock-based compensation expense 6,766 18,758

Net derivative gain (100,889) (3,463)

Derivative settlement gain 24,722 23,843

Net gain on divestiture activity - (323)

Other, net 434 1,129

Adjusted EBITDAX (non-GAAP) $257,765 $707,215

Interest expense (40,584) (118,191)

Income tax (expense) benefit (16,111) 16,337

Exploration(2) (10,341) (30,070)

Amortization of debt discount and deferred financing costs 3,921 11,554

Deferred income taxes 19,617 (13,620)

Other, net (1,438) (3,420)

Net change in working capital (9,673) 11,781

Net cash provided by operating activities (GAAP) $203,156 $581,586

1) See “Definitions of non-GAAP Measures as Calculated by the Company” above.

2) Stock-based compensation expense is a component of exploration expense and general and administrative expense on the unaudited condensed consolidated statements

of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the statements of operations for the component of

stock-based compensation expense recorded to exploration expense.

NYSE: SM

ADJUSTED NET LOSS(1)

RECONCILIATION TO NET INCOME (LOSS) (GAAP)

27

Reconciliation of net income (loss) (GAAP) to

adjusted net loss (non-GAAP):

(in thousands, except per share data)

Three Months Ended

September 30, 2019

Nine Months Ended

September 30, 2019Net income (loss) (GAAP) $42,234 $(84,946)

Net derivative gain (100,889) (3,463)

Derivative settlement gain 24,722 23,843

Net gain on divestiture activity - (323)

Abandonment and impairment of unproved properties 6,337 25,092

Other, net 435 1,347

Tax effect of adjustments(2) 15,058 (10,090)

Adjusted net loss (non-GAAP) $(12,103) $(48,540)

Net income (loss) per diluted common share (GAAP) $0.37 $(0.76)

Net derivative gain (0.89) (0.03)

Derivative settlement gain 0.22 0.21

Net gain on divestiture activity - -

Abandonment and impairment of unproved properties 0.06 0.22

Other, net - 0.01

Tax effect of adjustments(2) 0.13 (0.09)

Adjusted net loss per diluted common share (non-GAAP) $(0.11) $(0.43)

Diluted weighted-average common shares outstanding (GAAP): 113,334 112,441

Note: Amounts may not calculate due to rounding.


2) The tax effect of adjustments is calculated using a tax rate of 21.7% for the three and nine month periods ended September 30, 2019. This rate approximates the

Company's statutory tax rate adjusted for ordinary permanent differences.

NYSE: SM


2) Exploration expense is added back in the calculation of discretionary cash flow because, for peer comparison purposes, this number is included in our

reported total capital spend.

3) Stock-based compensation expense is a component of exploration expense and general and administrative expense on the unaudited condensed

statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the statements

of operations for the component of stock-based compensation expense recorded to exploration expense.

DISCRETIONARY CASH FLOW(1)

RECONCILIATION TO NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)

28

Reconciliation of net cash provided by operating

activities (GAAP) to discretionary cash flow (non-GAAP):

(in millions)

Three Months Ended

September 30, 2019

Nine Months Ended

September 30, 2019

Net cash provided by operating activities (GAAP): $203.2 $581.6

Net change in working capital 9.7 (11.8)

Exploration(2)(3) 10.3 30.1

Discretionary cash flow (non-GAAP): $223.3 $599.9

Note: Amounts may not sum due to rounding.

NYSE: SM

TOTAL CAPITAL SPEND(1)

RECONCILIATION TO COSTS INCURRED (GAAP)

29

Reconciliation of costs incurred in oil and gas

activities (GAAP) to total capital spend (non-GAAP):

(in millions)

Three Months Ended

September 30, 2019

Nine Months Ended

September 30, 2019

Costs incurred in oil and gas activities (GAAP): $270.9 $861.4

Asset retirement obligations (0.3) (1.1)

Capitalized interest (4.2) (14.1)

Proved and unproved property acquisitions(2) (2.9) (2.6)

Other - (3.4)

Total capital spend (non-GAAP): $263.4 $840.2


2) The Company completed several non-monetary acreage trades in the Midland Basin during the first nine months of 2019 totaling $70.8 million of

value attributed to the properties transferred. This non-monetary consideration is not reflected in the costs incurred or capital spend amounts

presented above.

Note: Amounts may not sum due to rounding.

NYSE: SM

CONTACT INFORMATION

30

Jennifer Martin SamuelsVice President - Investor Relations [email protected]

3Q19 EARNINGS · (1) Previously Reported Well Average includes all (182) previously reported SM...

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