SM Energy Co., Denver, has increased its full year 2022 capital expenditure guidance to $870-900 million, up from its February 2022 estimate of $750 million, excluding acquisitions. The increase incorporates higher than expected inflation and a decision to retain current rig and pressure pumping crews through yearend “to better ensure continuous and efficient operations in a supply-constrained environment,” the company said as part of its second-quarter 2022 results Aug. 3.
The company expects to drill 98 net wells and complete 81 net wells in 2022, or with 52 net wells drilled and 54 net wells completed in second-half 2022, an increase of 6 and 3, respectively, from the February guidance.
Production in 2022 is guided to 54-55 MMboe or 148,000-151,000 boe/d, representing a 4% increase at the mid-point, the result of well performance exceeding original expectations in both the Midland basin and South Texas, the company said. Full year production is expected to be 46-47% oil.
Third-quarter 2022 capital expenditures (net of the change in capital accruals) is set at $250-270 million. In the third quarter, SM Energy expects to drill 24 net wells, of which 11 are planned for South Texas and 13 are planned for the Midland basin, and turn-in-line 35 net wells, of which 21 are planned for South Texas and 14 are planned for the Midland basin. Production of 13.2-13.6 MMboe, or 143,000-148,000 boe/d (46% oil) is expected.
In second-quarter 2022, production was 13.3 MMboe (146,600 boe/d) and was 46% oil, up 7% compared with the same period in 2021 and down 3% sequentially. During the quarter, the company drilled 23 net wells, of which 10 were in South Texas and 13 were in the Midland basin, and added 9 net flowing completions, of which 2 were in South Texas and 7 were in the Midland basin. The company projected 20 flowing completions in the second quarter and, while all wells were fracture stimulated, drill out operations on certain wells took longer than anticipated, pushing 11 flowing completions into early July.
Net income in the second quarter was $323.5 million, compared with a net loss of $223 million for the same period in 2021. Net cash provided by operating activities after net change in working capital totaled $514.4 million, up $300.5 million, or 140%, from the same period in 2021.
Second quarter 2022 adjusted net income was $272.8 million, which compares with adjusted net income of $1 million for the same period in 2021.