SM Energy Company (NYSE:SM) Q3 2023 Earnings Call Transcript
SM Energy Company (NYSE:SM) Q3 2023 Earnings Call Transcript November 2, 2023
Jennifer Samuels: Good afternoon, and welcome to SM Energy's Third Quarter 2023 Results Webcast. Before we get started on our prepared remarks, I'll remind you that our discussion today will include forward-looking statements. I direct you to Slide 2 of the accompanying slide deck, Page 6 of the accompanying earnings release and the 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 will also discuss non-GAAP measures and metrics, definitions and reconciliations of non-GAAP measures and metrics to the most directly comparable GAAP measures and discussion of forward-looking non-GAAP measures can be found in the back of the slide deck and earnings release. Today's prepared remarks will be given by our President and CEO, Herb Vogel; and our CFO, Wade Pursell. I will now turn the call over to Herb.
Herbert Vogel : Thank you, Jennifer. Good afternoon, and thank you for your interest in SM Energy. I will start on Slide 4. We are very pleased today to discuss our third quarter and year-to-date results. You'll see that we continue to deliver on our core strategic objectives for 2023, demonstrate the quality of our assets and position our company for an even stronger 2024. I'll start by reviewing our progress against the objectives we set forth early in the year. First, deliver an increased return of capital to our shareholders. In the third quarter, return of capital amounted to $114 million, which is up 31% from the previous quarter. In addition to the dividend, we repurchased and retired 2.35 million shares of stock. From inception of the return of capital program in September 2022, we have now repurchased 7.7 million shares or around 6% of the shares that were outstanding as of September 2022.
Looking ahead, I'm very pleased to announce a 20% increase in our fixed dividend policy. As we emphasize when we initiated the return of capital program, we seek to offer a sustainable dividend through the cycles in our industry. This increase is a testament to the confidence we have in our assets, capabilities, performance and outlook. Turning now to Slide 5. The second objective is to focus on operational execution. This quarter, we enjoyed continued strong well performance in both the Midland Basin and South Texas. This was complemented by faster drilling and the accelerated completion of three wells in South Texas. Also this quarter, our land team executed an asset exchange at our Sweetie Peck location. This increased our working interest from around 42% to nearly 100% in 9 15,000-foot lateral drilled but uncompleted wells which we expect to be strong performers when they are turned in line early in 2024.
Looking ahead, these wells are expected to contribute to our estimated mid-single-digit oil growth next year. Our third objective is to replace and build inventory during 2023. Year-to-date, we have increased our Midland Basin footprint by just over 29,000 acres or about 35%. We contracted a fourth rig for the Midland Basin that commenced drilling on a Howard County pad in early October. We intend to move it to our new acreage position in North Martin and South Dawson Counties in December once permits and other logistics are in place. Looking ahead, this rig is currently contracted for 6 months, and we are excited to initiate drilling in the new area, which we expect to contribute to both our high-quality inventory and 2024 oil production growth.
In short, we have exceeded expectations on all fronts this year. As we wrap up the last 2 months of 2023, we expect to remain well positioned for a positive trajectory in 2024. I'll now turn it over to Wade to speak to some of the specifics behind these results and what to expect in the fourth quarter. Wade?
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