SM Energy to pay down callable debt, lower leverage ratio to below 2x

By Devika Patel

Knoxville, Tenn., April 9 – SM Energy Co. plans to reduce its leverage to below 2x over the next year and intends to address some of its callable debt next year.

One of the company’s key priorities in 2019 is “to continue to push down our leverage,” president and chief executive officer Jay Ottoson said at the 25th Annual Oil & Gas Investment Symposium hosted by the Independent Petroleum Association of America in New York on Tuesday.

“We made some acquisitions and stretched our balance sheet to some extent.

“We’ll be at 3x trailing leverage by the end of this year and be moving down into the twos next year with our target to get below 2x over the next year or so.”

The company has “plenty” of liquidity, and cash flow is growing, providing management with an opportunity to pay down some of its callable debt.

“We did stretch the balance sheet somewhat, but we have plenty of liquidity, liquidity of $1.1 billion,” he said.

“At the end of the year, we had nothing drawn on our revolver.

“We have no near-term maturities.

“Our net debt to EBITDA should be about 3x trailing at the end of this year, targeting about 2x as we go forward.

“And [we have] a really nice stack of callable debt over time, so as we get to that point, this next year where we are growing within our cash flow, we have this unique opportunity to pay down debt in a way that will increase debt-adjusted per-share cash flow growth for our shareholders, so we’re really looking forward to that time, just almost there at this point.”

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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