SM Energy mulls leverage, debt levels when considering activity level

By Devika Patel

Knoxville, Tenn., Dec. 15 – SM Energy Co. management is focused on cutting leverage and decreasing debt levels, which is the main driving force behind executive decisions alongside increasing free cash flow.

“Just going back to the priorities, where our focus is right now, it’s about reducing our debt, improving our free cash flow and reducing our leverage and that’s really what’s improved equity performance,” president and chief executive officer Herb Vogel said at the MKM Partners Virtual Conference on Tuesday.

The company is focused on improving leverage, which is helped by increased production activity due to higher activity leading to higher earnings.

“The growth that we have in our production is really an outcome of what we’re doing [on the balance sheet],” Vogel said.

“So, when we’re setting up our plans, we look out two to three years or so, and we’ll say, OK, we want to be at this certain leverage level.

“We really say ‘how much EBITDAX do we need at that point, given the debt we anticipate having at that time?’, and that’s what leads to where we are on the production side, so we say, ‘OK, to get to that EBITDAX, to get to that leverage, this is what we need to do,’” he said.

SM Energy is a Denver-based energy company focused on exploration and production of crude oil, natural gas and natural gas liquids in onshore fields in North America.

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