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SM Energy Reports Results For The Third Quarter Of 2012; Provides Operations Update

SM Energy Company (NYSE: SM) announces financial results for the third quarter of 2012 and provides an operations update. In addition, a new presentation for the Company's third quarter earnings and operations update will be posted on the Company's website at This presentation will be referenced during the conference call scheduled for 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on November 1, 2012. Information for the earnings call can be found below.


SM Energy reported a net loss for the third quarter of 2012 of $38.3 million or $0.58 per diluted share. This compares to net income of $230.1 million, or $3.41 per diluted share, for the same period of 2011. Adjusted net income for the third quarter of 2012 was $9.7 million, or $0.14 per diluted share, compared to adjusted net income of $42.4 million, or $0.63 per diluted share, for the same period of 2011. Adjusted net income excludes certain items that the Company believes affect the comparability of operating results. The Company generally excludes non-recurring items, items whose timing and/or amount cannot be reasonably estimated, and large non-cash items, such as gains or losses on divestiture activity and unrealized gains or losses from derivative activity. The table below presents a summary of the adjustments made to arrive at adjusted net income:
Adjusted Net Income Reconciliation
(in thousands, except per share data)
Reconciliation of net income (loss) (GAAP)

to adjusted net income (Non-GAAP):

For the Three Months Ended September 30,
2012         2011
Reported net income (loss) (GAAP) $ (38,336 ) $ 230,097
Adjustments, net of tax: (1)
Change in Net Profits Plan liability 500 (15,631 )
Unrealized derivative (gain) loss 41,869 (82,877 )
(Gain) loss on divestiture activity 5,350 (119,586 )
Impairment of proved properties 30,425
Abandonment & impairment of unproved properties 280
Adjusted net income (Non-GAAP) $ 9,663   $ 42,428  
Adjusted net income per diluted common share: $ 0.14   $ 0.63  
Diluted weighted-average common shares outstanding: (2) 66,973   67,386  
(1) For the three-month periods ended September 30, 2012 and September 30, 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, as adjusted for ordinary permanent differences.
(2) For periods where the Company reports a GAAP net loss, the diluted weighted average share count is calculated 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 contingent Performance Stock Units. On a GAAP basis, these items are not treated as dilutive securities in periods where the Company reports a GAAP loss for the quarter.

Earnings before interest, taxes, depreciation, depletion, amortization, accretion, and exploration expense ("EBITDAX") was $260.9 million for the third quarter of 2012, an increase of 21% from $215.5 million for the same period of 2011.

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