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SM Energy Reports Results For Fourth Quarter And Full Year Of 2012 And Provides Operational Update

Stocks in this article: SM

SM Energy Company (NYSE: SM) ("SM Energy" or the "Company") reports financial results for the fourth quarter of 2012 and provides an update on the Company's operating activities. In addition, a new presentation for the fourth quarter earnings and operational update has been posted on the Company's website at www.sm-energy.com. This presentation will be referenced during the conference call scheduled for 8:00 a.m. Mountain Time (10:00 a.m. Eastern time) on February 21, 2013. Information concerning access to the Company's earnings call can be found below.

MANAGEMENT COMMENTARY

Tony Best, CEO, remarked, "SM Energy had a record-breaking year in 2012 with new highs for proved reserves and annual production, completing the year with record quarterly production. These results were driven by our high rate of return oil and liquid-rich programs in the Eagle Ford shale and Bakken/Three Forks, which are expected to continue to drive our growth in 2013. The quality of our development programs is demonstrated by the significant improvement in our finding and development costs and reserve replacement ratios in 2012. Our New Ventures program, which focuses on finding the next stages of growth for the Company, has captured additional acreage in the Permian Basin and in East Texas that has the potential to add significant oily inventory to our portfolio. Our balance sheet and liquidity position remain strong, and we are positioned to execute on our 2013 plan, which I expect will result in another record production year for the Company."

FOURTH QUARTER 2012 RESULTS

SM Energy posted a GAAP net loss for the fourth quarter of 2012 of $(67.1) million, or $(1.02) per diluted share. Adjusted net income for the fourth quarter was $30.4 million, or $0.45 per adjusted diluted share. Adjusted net income excludes certain items that the Company believes affect the comparability of operating results. Items excluded are generally one-time items or are items whose timing and/or amount cannot be reasonably estimated. A summary of the adjustments made to arrive at adjusted net income is presented in the table below:

 
Reconciliation of Net Loss (GAAP)
To Adjusted Net Income (Non-GAAP):
(in thousands, except per share data)
 

For the ThreeMonths EndedDecember 31,

2012
 
Reported Net Loss (GAAP) $ (67,138 )
Adjustments, net of tax: (1)
Change in Net Profits Plan liability (7,249 )
Unrealized portion of derivative gain (2,589 )
Gain on divestiture activity (2,651 )
Impairment of proved properties 106,841
Abandonment and impairment of unproved properties 3,164
 
Adjusted Net Income (Non-GAAP) $ 30,378  
 
Adjusted net income per diluted common share $ 0.45  
 
Adjusted diluted weighted-average shares outstanding (2) 66,906  
 
(1) For the three-month period ended December 31, 2012, 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 adjusted for ordinary permanent differences.
 
(2) Adjusted net income per adjusted diluted share is calculated by assuming the Company had net income in the period and therefore includes potentially dilutive securities related to unvested restricted stock units, in-the-money outstanding options to purchase the Company’s common stock, contingent Performance Share Units, and contingent Performance Share Awards. On a GAAP reporting 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") were $298.2 million for the fourth quarter of 2012, a 14% sequential increase from the prior quarter and an increase of 19% from $250.7 million for the same period in 2011.

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