JUNE 2019 INVESTOR PRESENTATION PLEASE READ THIS PRESENTATION - - PowerPoint PPT Presentation

INVESTOR PRESENTATION

JUNE 2019

NYSE: SM

PLEASE READ

THIS PRESENTATION MAKES REFERENCE TO:

2 FORWARD LOOKING STATEMENTS

This presentation contains forward-looking statements within the meaning of securities laws. The words "anticipate," "budget," "estimate," "expect," "forecast," "guidance," "plan," "project," “objectives," "target," “on track," "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
• r implied by the forward-looking statements. Forward-looking statements in this presentation include, among other things: leverage ratios for full year

2019 and beyond; second quarter and full year 2019 planned drilling and completion activity; the percentage of expected production that is hedged; the timing and results of new wells relating to 30-day peak IP rates; and, the potential for optimized well performance. 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 uncertain nature of joint venture or similar efforts and the ability to complete any such transactions; the uncertain nature of expected benefits from the actual or expected joint venture or similar efforts; 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; uncertainty regarding the ultimate impact of potentially dilutive securities; and other such matters discussed in the Risk Factors section of SM Energy's 2018 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 announcement. 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: See Appendix for reconciliations non-GAAP forward-looking metrics: See Appendix for definitions

NYSE: SM

PREMIER OPERATOR OF TOP-TIER ASSETS

FOCUSED ON TWO BASINS IN TEXAS

3

ENTERPRISE VALUE:

$4+ Billion

PRODUCTION:

~119 MBoe/d; 45% oil (1Q19)

PROVED RESERVES:

503 MMBoe (YE 2018)

2019 CAPITAL SPEND:

~1,035 MM(1)

(1) Mid-point of full-year 2019 guidance

MIDLAND BASIN

▪ ~82,000 net acres ▪ 6 Rigs / 4 completion crews

SOUTH TEXAS

▪ ~163,000 net acres ▪ 1-2 Rigs / 1-2 completion crews

NYSE: SM 4

Grow within cash flow Reduce leverage Prove-up and grow inventory

ON TRACK WITH OUR 2019 PRIORITIES

• Value creation through testing of new

intervals in South Texas and Permian

• FCF leads to absolute debt reduction

NYSE: SM

BALANCE SHEET FOCUS

2019 AND BEYOND: IMPROVING DEBT METRICS

5

• Liquidity of $1.2B(1); no near-term maturities
• Borrowing Base increased to $1.6B; lender commitments increased to $1.2B(2)
• Net debt to trailing twelve-month adjusted EBITDAX projected to be ~3 times at

year-end; targeting ~2 times at year-end 2020

$500 $500 $500 $500 $476.8 $172.5 $0 $250 $500 $750

$1,000 $1,250 $1,500 $1,750 2027 2026 2025 2024 2023 2022 2021 2020 2019

Debt Maturities as of March 31, 2019

(in millions)

Borrowing Base: $1.6B(2) Commitments: $1.2B(2)

$46.5 Coupon

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

Yield to worst(3)

• 6.99%

8.02% 8.08% 8.85% 8.77%

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 March 31, 2019, pro-forma for amended credit facility. (2) Borrowing base and commitment amount as of April 18, 2019. (3) YTW as of May 30, 2019.

NYSE: SM

WELL HEDGED

PERCENTAGE OF PRODUCTION HEDGED

6

Waha Gas Swaps(1)

70-75%

REGIONAL WAHA AND MIDLAND-CUSHING

• ~70-75% of expected 2Q19 – 4Q19

Permian gas production hedged at WAHA (2Q19 at $0.70/MMBtu, 3Q19 at $1.30/MMBtu, 4Q19 at $1.75/MMBtu)

• ~60% of expected 2Q19 – 4Q19

Permian oil production covered by Midland to Cushing basis hedges at ~$3.30/Bbl

• ~75%(3) of expected 2Q19 – 4Q19

production volumes hedged

• ~80% oil volumes
• ~65% gas volumes
• (NGLs hedged by product)

(1) Permian gas hedges at WAHA based on February 2019 plan Permian residue/tailgate volumes. (2) Permian Midland to Cushing basis hedges based on February 2019 plan oil volumes. (3) 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).

Note: Hedging data as of May 30, 2019

Midland to Cushing Basis(2)

~60%

NYSE: SM

MIDLAND BASIN

TOP-TIER EXECUTION, WELL PERFORMANCE AND CAPITAL EFFICIENCY

7

MARTIN

RockStar

HOWARD 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
• 27 net completions in 1Q19
• 35 net completions planned for 2Q19

GREAT NEW WELLS

• Merlin Maximus: 19 wells across three intervals have reached

30-day peak IP rates in excess of 1,400 Boe/d (87% oil)

• Middle Spraberry well reached its 30-day peak IP rate of

approximately 1,000 Boe/d (86% oil)

• New intervals: Dean and Wolfcamp D wells now producing

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

~82,000

Rigs Running: Completion Crews:

N E T A C R E S

NYSE: SM

30 60 90 120 150 30 60 90 120

Cumulative Production (MBoe) (Average Well Normalized to 10,000’) Days on Production

LS Avg

MIDLAND BASIN: MERLIN MAXIMUS RESULTS

SUCCESSFUL CO-DEVELOPMENT SIGNIFICANTLY OUTPACING PEER

8

(1) Includes all 24 Merlin Maximus wells on production (25th well intentionally shut-in to monitor sub-surface pressure). (2) Previously Reported Well Average by interval includes all (133) previously reported SM operated wells on production since 11/3/2016.

Merlin Maximus WCA Avg WCB Avg Previously Reported Wells(2) 2017 Peer Benchmark

Merlin Maximus(1) vs. Previously Reported Wells Merlin Maximus(1) vs. Peer Co-Development

Merlin Maximus Peer A Current Peer A Initial

Merlin Maximus

50,000 100,000 150,000 200,000 250,000 300,000

• 60

120 180 240 300 360

Cumulative Production (Boe) Days on Production

(1) (1)

NYSE: SM

MIDLAND BASIN: GREAT NEW ROCKSTAR RESULTS

NEW WELL PERFORMANCE CONSISTENT WITH PRIOR WELLS(1)(2)

9

50,000 100,000 150,000 200,000 250,000 30 60 90 120 150 180 210 240 270 300 330 360

Cumulative Production (Boe) Days on Production Previously Reported Well Avg New Well Avg

(1) (2)

(1) Previously Reported Well Average includes all (133) previously reported SM operated wells on production since 11/3/2016. (2) New Well Average includes 20 new wells that have not been previously reported.

ALL NEW WELLS FULLY OR HALF BOUNDED

NYSE: SM

MIDLAND BASIN: TOP-TIER CAPITAL EFFICIENCY

RECENT DC&E WELL COSTS AT ~$765 PER LATERAL FOOT

10

510 562 599

2017 2018 1Q19

Drilling Faster

Lateral Ft Drilled per Day(1) 9,300 10,100 10,700

2017 2018 1Q19

Longer Laterals

Avg Lateral Length Completed

• 0.1

0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 Jan Mar May Jul Sep Nov Jan Mar

Lower Sand Costs

Indexed to January 2018(3)

+17%

Increase in Lateral Feet Drilled / Day

(1Q19 / 2017)

+64% +15%

• 73%

Increase in Lateral Feet Completed / Day

(1Q19 / 2017)

Increase in Avg. Lateral Length Completed

(1Q19 / 2017)

Decrease in Sand Costs

(Mar. 19 / Jan. 18)

(1) Total lateral feet delivered per day, spud to rig release. (2) Lateral feet completed per fleet per day.

765 1,025 1,256

2017 2018 1Q19

Completing Faster

Lateral Feet Completed per Day(2)

(3) Excludes last mile logistics as there is variability in these charges among vendors.

NYSE: SM

SOUTH TEXAS

FOCUSED ON EXECUTION AND RETURNS ENHANCEMENT

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DIMMIT COUNTY WEBB COUNTY North Area South Area East Area

COMPLETIONS EXECUTION

• ~18 net completions planned for 2019
• 2 net completions in 1Q19
• 14 net completions planned for 2Q19

AUSTIN CHALK SUCCESS

• Second Austin Chalk test well with peak IP-24 rate of

more than 3,500 Boe/d (>55% liquids, 3-stream)

VALUE ENHANCEMENT THROUGH HIGHER RETURN WELLS

• Progress toward optimal well design implementation

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

Rigs Running: Completion Crews:

~163,000

N E T A C R E S

NYSE: SM

EAGLE FORD: TOP-TIER CAPITAL EFFICIENCY

RECENT D&C WELL COSTS AT ~$650 PER LATERAL FOOT

12

666 721 817

2017 2018 1Q19

Drilling Faster

Lateral Ft Drilled per Day(1) 8,392 10,483 12,531

2017 2018 2019

Drilling Longer

• Avg. Lateral Length Completed(3)

851 737 654

2017 2018 1Q19

Lower Costs

D&C Cost / Lateral Foot(4) 1,210 1,256 1,646

2017 2018 1Q19

Completing Faster

Lateral Feet Completed per Day(2)

(1) Total lateral feet delivered per day, spud to rig release. (2) Lateral feet completed per fleet per day.

+23% +49% +36%

• 23%

Decrease in Well Costs

(1Q19 / 2017)

(3) 2019 includes drilled and planned wells. (4) Includes drilling, toe-prep, stim, drill-out & flowback.

Increase in Lateral Feet Completed / Day

(1Q19 / 2017)

Increase in Lateral Feet Drilled / Day

(1Q19 / 2017)

Increase in Avg. Lateral Length Completed

(2019 / 2017)

NYSE: SM

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 50 100 150 200

Boe/Day (3 stream) Days Online

SOUTH TEXAS: AUSTIN CHALK SUCCESS

WATSON (SA2) STATE 167H

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>55% LIQUIDS CONTENT = HIGHER RETURNS

Watson (SA2) State 167H 12,875’ Lateral Peak IP-24: >3,500 Boe/d (3-stream)

Watson (SA2) State 167H Galvan Ranch C 917H Well shut-in for tubing installation Galvan Ranch C 917H (7,886’ LL) Watson (SA2) State 167H (12,875’ LL) AC Partial Penetration Producing AC Target – 2019 drill plan

NYSE: SM

200 400 600 50 100 150 200 250 300 350

Cumulative Production (Mboe) Producing Days

20 40 60 50 100 150 200 250 300 350

Cumulative Production (MBoe / 1,000’) Producing Days

SOUTH TEXAS: VALUE ENHANCEMENT

PROGRESS TOWARD OPTIMAL WELL DESIGN

14

• Implementing wider spacing/optimized

completion expected to improve productivity per lateral foot

• Increasing lateral length with less capex per

lateral foot

• Higher productivity with greater lateral length

and lower cost much higher returns expected

1Q18 wells

(unbounded)

2017 wells

(562’ spacing)

4Q18 wells

(moderate spacing: 807’)

2 0 1 7 2 0 2 0

P R O G R E S S T O W A R D S I M P L E M E N T I N G O P T I M A L W E L L D E S I G N

C U R R E N T

4Q18 wells

(Scaled to 12,500’ lateral length)

2017 wells

(562’ spacing, 7,850’ LL)

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

2 0 1 8 ( S C A L E D T O 1 2 , 5 0 0 ’ ) V S . 2 0 1 7

NYSE: SM

PREMIER OPERATOR OF TIER 1 ASSETS

ACTIVELY MANAGING TO LONG-TERM VALUE CREATION

15

PORTFOLIO OPTIMIZATION: PERMIAN & EAGLE FORD

• Acquired $2.6B Tier 1 assets 2016
• Sold $2.5B non-core assets 2015-2018

ECONOMIC VALUE CREATION 2015-2018

• Oil production increased from 31% to 45% of commodity mix
• Operating margin up 2.4X per Boe

OUTSTANDING EXECUTION

• Well performance top-tier; among highest revenue generating

wells in all of the Permian Basin

• Well costs top-tier; among most capital efficient operators in

all of the Permian Basin

• Re-design of Eagle Ford development program drives

significant value enhancement

• Pursuing multiple catalysts for organic inventory growth

COST STRUCTURE EFFICIENCIES

• Reduced headcount by 1/3 2015-2018
• Closed three satellite offices 2015-2018
• Continuing focus on reducing total G&A as a % of revenue

NYSE: SM

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

MAKING PEOPLE’S LIVES BETTER BY RESPONSIBLY PRODUCING OIL & NATURAL GAS

16

2 0 1 8 C R R R E P O R T

S M - E N E R G Y . C O M

SM’S BOARD OF DIRECTORS IS ACTIVELY ENGAGED IN ESG OVERSIGHT

• Board composition includes: independent chairman; 8 of 9 independent

directors; diversity of gender, race, geography, tenure and expertise

• Executive compensation aligned with corporate long-term strategy and

value creation objectives with relative performance measures

• Board annually establishes top quartile EHS performance goals, which

are reviewed quarterly and impact compensation of every employee

• Committed to building and maintaining partnerships with our

stakeholders by investing in and connecting with the communities where we live, work and operate

• Valuing employee development exemplified by Leadership Learning

Journey program to involve 100% of employees in leadership training

• Support volunteering of all employees in local community and

national programs plus charitable contribution matching; SM contributions totaled approximately $1.7 million in 2018

• Member in API Environmental Partnership – energy companies

committed to improving the industry’s environmental performance

• Since 2017, employed lead detection and repair (LDAR) program at

new facilities to monitor fugitive emissions

• Implemented Spill Reduction Planning in each region that exceeds

EPA requirements

E S G

NYSE: SM

SM ENERGY – WHY INVEST?

GREAT ASSETS, EXCEPTIONAL EXECUTION, AND TOP-TIER CAPITAL EFFICIENCY DRIVING HIGH RETURNS AND CASH FLOW GROWTH

17

G R E AT A S S E T S

Wells Ranked

#1

in Midland Basin(1)

O U T S TA N D I N G E X E C U T I O N

EXCEPTIONAL

TRACK RECORD T O P - T I E R C A P I TA L E F F I C I E N C Y

Co-development, completions optimizations and local sand usage =

LOWER WELL COSTS

FREE CASH FLOW TARGETED 2H19

(1) Baird Equity Research 3/20/19 – Joseph Allman; Midland Basin, October 2017 – September 2018 first production.

NYSE: SM 18

APPENDIX

NYSE: SM

FIRST QUARTER 2019 PERFORMANCE

19

Production & Pricing 1Q19

Total Production (MMBoe / MBoe/d) 10.7/118.7 Oil Percentage 45% Pre-Hedge Realized Price ($/Boe) $31.86 Post-Hedge Realized Price ($/Boe) $31.39

Costs $/Boe

LOE $5.20 Ad Valorem $0.76 Transportation $4.08 Production Taxes $1.31 Production Expenses $11.35 Cash Production Margin (pre-hedge) $20.51 G&A – Cash $2.57 G&A – Non Cash $0.43 Operating Margin (pre-hedge) $17.51 DD&A $16.63

Earnings 1Q19

EPS (Diluted) $(1.58) Adjusted EPS(1) $(0.34) Adjusted EBITDAX(1) ($MM) $186.5

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

+34%

Permian Production Increase (1Q19 / 1Q18)

Capital Under Guidance

(1Q19 actual vs. 1Q19 guidance)

NYSE: SM

1Q19 REALIZATIONS BY REGION

20

Benchmark Pricing NYMEX WTI Oil ($/Bbl) $54.90 NYMEX LLS Oil ($/Bbl) $62.32 NYMEX Henry Hub Gas ($/MMBtu) $3.15 Hart Composite NGL ($/Bbl) $26.28 Production Volumes South Texas(1) Permian Total Oil (MBbls) 286 4,546 4,832 Gas (MMcf) 17,009 6,884 23,893 NGL (MBbls) 1,871 1 1,872 Total (Mboe) 4,992 5,695 10,687 Revenue (in thousands) Oil $13,814 $225,247 $239,061 Gas 49,521 15,592 65,113 NGL 36,281 21 36,302 Total $99,616 $240,860 $340,476 Expenses (in thousands) LOE $13,189 $42,361 $55,551 Ad Valorem $2,267 $5,859 $8,125 Transportation $43,537 $50 $43,587 Production Taxes $2,488 $11,554 $14,042 Per Unit Metrics: Realized Oil per Bbl $48.30 $49.54 $49.47 % of Benchmark - WTI 88% 90% 90% Realized Gas per Mcf $2.91 $2.27 $2.73 % of Benchmark – NYMEX HH 92% 72% 87% Realized NGL per Bbl $19.39 nm $19.39 % of Benchmark – HART 74% nm 74% Realized per Boe $19.96 $42.29 $31.86 LOE per Boe $2.64 $7.44 $5.20 Transportation per Boe $8.72 $0.01 $4.08 Ad Val per Boe $0.45 $1.03 $0.76 Production Tax - per Boe/% of Pre-Hedge Revenue $0.50/2.5% $2.03/4.8% $1.31/4.1% Production Margin per Boe $7.65 $31.78 $20.51

Simplified Portfolio:

2 Top Tier Areas of Operation

Note: Totals may not calculate due to rounding and other classifications. (1) Includes nominal amounts of other production and expenses from the region.

NYSE: SM

2019 ACTIVITY BY REGION

WELLS DRILLED, FLOWING COMPLETIONS AND DUC COUNT

21

Wells Drilled Flowing Completions DUC Count

1st Quarter 2019 1st Quarter 2019 March 31, 2019

Region

Gross Net Gross Net Gross Net

Permian Sweetie Peck

4 3 6 4 3 2

RockStar

27 25 24 23 59 54

Permian total

31 28 30 27 62 56

South Texas(1)

8 7 2 2 34 28

Subtotal Operated Wells

39 35 32 29 96 84

Non-operated Wells(2)

n/a

• n/a
• n/a
• Total

n/a 35 n/a 29 n/a 84

As of March 31, 2019

(1) During the first quarter of 2019, there was one gross joint development well drilled. As of March 31, 2019, there were seven gross joint development DUCs. (2) Non-operated activity relates to wells located in the Permian Basin.

NYSE: SM

LEASEHOLD SUMMARY

22

Region

Net Acres(1) March 31, 2019 Midland Basin RockStar 64,760 Sweetie Peck(2) 16,850 Midland Basin Total 81,610 South Texas 162,990 Rocky Mountain Other(3) 173,980 Other Areas/Exploration 26,380

Total 444,960

(1) Includes developed and undeveloped oil and gas leasehold, fee properties, and mineral servitudes held as of March 31, 2019. (2) Sweetie Peck acreage includes 1,740 net drill-to-earn acreage. (3) Rocky Mountain Other includes non-core Williston Basin, and other non-core acreage located in North Dakota, Montana, Wyoming, and Utah.

NYSE: SM

NGL REALIZATIONS

23

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

based contracts

• Differential reflects NGL barrel product mix, transportation and

fractionation fees

53% 21% 7% 7% 12%

SM Typical NGL Bbl(1)

Ethane Propane Isobutane Normal Butane Natural Gasoline

1Q18 2Q18 3Q18 4Q18 1Q19

• Mt. Belvieu ($/Bbl)

$30.87 $33.10 $37.97 $29.91 $26.28

SM Realization ($/Bbl)

$25.53 $27.55 $30.77 $24.01 $19.39

% Differential to

• Mt. Belvieu

83% 83% 81% 80% 74%

(1) Reflects ethane processing; if the Company elects not to process ethane, the typical NGL barrel would consist of 42% ethane, 27% propane, 13% natural gasoline, 9% normal butane, and 9% isobutane. During 2018, the Company elected to process ethane in May, July, and August through November. As of 5/30/19, the Company has elected to process ethane in January through June.

NYSE: SM

OIL AND GAS DERIVATIVE POSITIONS(1)

BY QUARTER THROUGH 2020

24 Midland - Cushing Oil Swaps Oil Collars Oil Basis Swaps

Period Volume (MBbls) $/Bbl(2) Volume (MBbls) Ceiling $/Bbl(1) Floor $/Bbl(2) Volume (MBbls)

Price Differential $/Bbl(2) 2Q’19 575 $55.52 3,034 $64.32 $52.39 2,571 ($4.49) 3Q’19 1,217 $61.41 2,547 $62.64 $49.50 3,291 ($2.86) 4Q’19 1,686 $61.38 3,168 $62.49 $50.54 3,338 ($2.87) 1Q’20 1,097 $63.94 2,266 $63.91 $55.00 3,388 ($1.00) 2Q’20 1,106 $63.25 1,610 $62.50 $55.00 2,792 ($1.04) 3Q’20 676 $65.28 933 $64.33 $55.00 2,756 ($1.05) 4Q’20 608 $64.36 284 $66.43 $55.00 2,665 ($1.05)

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)

2Q’19 11,177 $2.82 4,358 $2.83 $2.50 4,546 $0.70 3Q’19 14,102 $2.84 5,066 $2.83 $2.50 4,340 $1.30 4Q’19 14,433 $2.88 4,818 $2.83 $2.50 2,962 $1.75 1Q’20 9,123 $2.98

• 2,060

$2.20 2Q’20

• 3Q’20
• 4Q’20
• (1)

Includes derivative contracts for settlement at any time during the second quarter of 2019 and later periods through 2020, entered into as of 5/30/19. (2) Prices are weighted averages; natural gas prices reflect the weighted average of regional contract positions and are no longer adjusted to a NYMEX equivalent.

NYSE: SM

NGL DERIVATIVE SWAP POSITIONS(1)

OPIS MT. BELVIEU

25

(1) Includes derivative contracts for settlement at any time during the second quarter of 2019 and later periods through 2020, entered into as of 5/30/19. (2) Weighted-average contract price.

Ethane Purity

Period Volume (MBbls) $/Bbl(2)

2Q’19 877 $12.29 3Q’19 907 $12.34 4Q’19 896 $12.36 2019 Total 2,680 1Q’20 447 $11.53 2Q’20 264 $11.13 2020 Total 711

Propane

Period Volume (MBbls) $/Bbl(2)

2Q’19 631 $31.02 3Q’19 707 $30.98 4Q’19 660 $31.60 2019 Total 1,998 1Q’20 99 $28.88 2Q’20 99 $27.72 3Q’20 106 $27.72 4Q’20 116 $27.72 2020 Total 420

Isobutane

Period Volume (MBbls) $/Bbl(2)

2Q’19 29 $35.70 3Q’19 30 $35.70 4Q’19 29 $35.70 2019 Total 88

Natural Gasoline

Period Volume (MBbls) $/Bbl(2)

2Q’19 49 $50.93 3Q’19 50 $50.93 4Q’19 50 $50.93 2019 Total 149

Normal Butane

Period Volume (MBbls) $/Bbl(2)

2Q’19 38 $35.64 3Q’19 39 $35.64 4Q’19 39 $35.64 2019 Total 116

NYSE: SM

DEFINITIONS OF NON-GAAP MEASURES AS CALCULATED BY THE COMPANY

26

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

• bligation 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 first 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 total capital spend because components of the calculation, such as potential acquisitions, 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 LOSS & NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)

27 Reconciliation of net loss (GAAP) and net cash provided by

• perating activities (GAAP) to adjusted EBITDAX (non-GAAP):

(in thousands) Three Months Ended March 31, 2019

Net loss (GAAP) $(177,568) Interest expense 37,980 Income tax benefit (46,038) Depletion, depreciation, amortization, and asset retirement obligation liability accretion 177,746 Exploration(2) 10,143 Abandonment and impairment of unproved properties 6,338 Stock-based compensation expense 5,838 Net derivative loss 177,081 Derivative settlement loss (4,969) Net gain on divestiture activity (61) Other 4 Adjusted EBITDAX (non-GAAP) $186,494 Interest expense (37,980) Income tax benefit 46,038 Exploration(2) (10,143) Amortization of debt discount and deferred financing costs 3,789 Deferred income taxes (47,003) Other, net (2,534) Net change in working capital (20,159) Net cash provided by operating activities (GAAP) $118,502 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 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 LOSS (GAAP)

28 Reconciliation of net loss (GAAP) to adjusted net loss(non-GAAP): (in thousands, except per share data) Three Months Ended March 31, 2019

Net loss (GAAP) $(177,568) Net derivative loss 177,081 Derivative settlement loss (4,969) Net gain on divestiture activity (61) Abandonment and impairment of unproved properties 6,338 Other, net 213 Tax effect of adjustments(2) (38,757) Adjusted net loss (non-GAAP) $(37,723) Net loss per diluted common share (GAAP) $(1.58) Net derivative loss 1.58 Derivative settlement loss (0.04) Net gain on divestiture activity

• Abandonment and impairment of unproved properties

0.06 Other, net

• Tax effect of adjustments(2)

(0.36) Adjusted net loss per diluted common share (non-GAAP) $(0.34) Diluted weighted-average common shares outstanding (GAAP): 112,252 Note: Amounts may not calculate due to rounding 1) See “Definitions of non-GAAP Measures as Calculated by the Company” above. 2) The tax effect of adjustments is calculated using a tax rate of 21.7% for the three-month period ended March 31, 2019. This rate approximates the Company's statutory tax rate adjusted for ordinary permanent differences.

NYSE: SM

DISCRETIONARY CASH FLOW(1)

RECONCILIATION TO NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)

29 Reconciliation of net cash provided by operating activities (GAAP) to discretionary cash flow (non-GAAP): (in millions) Three Months Ended March 31, 2019

Net cash provided by operating activities (GAAP):

$118.5

Net change in working capital

20.2

Exploration(2)(3)

10.1

Discretionary cash flow (non-GAAP):

$148.8

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

TOTAL CAPITAL SPEND(1)(2)

RECONCILIATION TO COSTS INCURRED (GAAP)

30 Reconciliation of costs incurred in oil and gas activities (GAAP) to total capital spend (non-GAAP): (in millions) Three Months Ended March 31, 2019

Costs incurred in oil and gas activities (GAAP):

$322.0

Asset retirement obligations

(0.5)

Capitalized interest

(4.9)

Proved property acquisitions

0.3

Other

(1.4)

Total capital spend (non-GAAP):

$315.5

1) See “Definitions of non-GAAP Measures as Calculated by the Company” above. 2) The Company completed several primarily non-monetary acreage trades in the Midland Basin during the first quarter of 2019 totaling $65.8 million of value attributed to the properties surrendered. This non-monetary consideration is not reflected in the costs incurred or capital spend amounts presented above.

NYSE: SM

HOWARD COUNTY OPERATORS

31

NYSE: SM

SWEETIE PECK OPERATORS

32

NYSE: SM

EAGLE FORD OPERATORS

33

NYSE: SM

CONTACT INFORMATION

34

Jennifer Martin Samuels Vice President - Investor Relations 303-864-2507 jsamuels@sm-energy.com