We're lucky to have the CFO of SM Energy, Wade Pursell. Wade's been a consistent attendee at these events for some time. We're happy to have him here to talk about his company. As those of you don't remember, Permian, South Texas, and now, Uinta, as a recent acquisition. But, in terms of being an E&P company, I'm gonna pass it to Wade, who's gonna give us a state of the company, and then we'll jump into Q&A. I'll remind you, if you have questions, please raise your hand. I will call on you.
Thanks, Greg. I will kind of fly through the presentation this morning and give you plenty of time for questions. I'm assuming this works. Maybe it doesn't. Do we have slides?
Do we have slides, Beth? There you go. There we go.
Yeah. Oops. Getting way ahead here. Okay. Good. So, good morning. Thanks for coming. Thanks for showing interest in, in the company today. It's. And thanks, Greg. Thanks for the invitation to come share the story and, and meet with lots of investors while we're here in beautiful Florida. It's a wonderful time of year to be in Florida. I know you all agree with me today. So, I am gonna be talking about the future a lot. And this is just my typical warning. I'm not a prophet. So, keep that in mind as I'm talking about the future. So, you know, for those of you that may not know, or even for those of you that do know us, kind of our, our tagline the last few years describing who we are is really two words. If you just wanna remember two words today, it's sustainable and repeatable.
I think that's the best explanation of what we're trying to accomplish at SM. And what do I mean by that? Well, we're a premier operator of top-tier assets generating a sustainable return of capital. And then we say, empowered by the world-class technical team, which I think differentiates us, especially for companies our size, and the strong balance sheet, we're poised to repeat that success. So the presentation's kind of organized in that way, actually kind of geographically. We're in Texas and now in Utah. So the sustainable part of the company, I like to say, is in Texas. That's where we've been generating this significant free cash flow from these very top-tier assets that has enabled us to pay that very sustainable return of capital, the last few years especially.
And then the repeatable part is the recent acquisition of the Uinta Basin asset in Utah, which I'll talk about at the end. So I'll start with the sustainable part by talking about our two assets in Texas. One is the Midland Basin, 111,000 net acres. We've been there for quite a while, over 15 years now, primarily in kind of the southern part of where we are. And you can see it on the map there. That's what we call the Sweetie Peck area. That's where we've been over 15 years. And then more recently, kind of the big story in the Midland Basin for us has been the northern part, which that's mostly Howard County and Martin County, which we stepped into back in 2016 with a couple of large acquisitions. And then down in South Texas, 155,000 net acres. Some history there.
That we've been there for over 15 years as well. And that was the story of the Eagle Ford play for a very long time for us. That was kind of the anchor asset of the company, a wet gas asset that was very, very good to the company, very good to investors. And then lately, though, the last five years has been the Austin Chalk story. And that's an interval that lies above the Eagle Ford. And I'll talk, I'll give you a little update on that as well as we go through. So just really, really an update on these, on those two assets. They're both doing really well. I guess from a recent news standpoint in the Midland Basin, a couple of slides, one with respect to a newer interval that we're testing, the Woodford Barnett, and then I'll talk about Klondike on the next slide.
This is really exciting. A couple of wells that we recently were able to release results on. Early days. You can see the green line is one of the wells and the blue line is the other well. Great early results for these wells compared to the peer average. This is down in the Sweetie Peck area. Again, very early days, but you know, stay tuned in 2025. I suspect we'll have some more wells in this area to report and significant upside for inventory. I mean, it's 20,000+ net acres of our acreage is exposed to the Woodford Barnett. So we're cautiously optimistic, but excited. Then the other area in the Midland Basin, it's kind of breaking news, I guess you could say, is further north, the Klondike area. That's what we call it.
This was the acquisition we made a little over a year ago, the Reliance acquisition. And we've been testing wells here. We have eight wells flowing. They're all in the Dean. Two of them have reached IP 30, and we announced those results with the quarter. And you can say these are good wells. They're slightly better than what we assumed in the acquisition economics, 918 average BOE per day, very oily, which is great, 93% oil. So moving down to South Texas, you know, the report here is just, you know, more of the same. I mean, this is a great asset. And I think the most recent inventory number we gave last year, which we give once a year, was 465 locations. That was a number that we were able to grow.
We're over 100 wells into our position. The results have been very consistent, very good returns, very similar to the Permian Basin asset, which makes it a top-tier asset. On the map on the right, we're just updating for some recent well results. These are two wells that reached IP30. You can see on the map where they are. They're over in the eastern liquids gas rich area. Boomer wells, 2,300 BOE per day average, great wells. Then over on the left, we continue to kind of update these Briscoe C wells, seven fully bounded wells that we reported earlier in the year. We continue to update their progress, and progress is really good.
These wells are averaging better than the average Austin Chalk wells last year and the year before, which were all great wells. We're very excited about this area also. This well is just kind of a Texas combo slide, which we continue to update as Howard County on the left, Permian Basin, and then Austin Chalk, South Texas on the right. These are an accumulation of a lot of wells. This is inverse data, comparing our well results to average other peers in these two areas in Howard County on the left. You can see we continue to average around 30% better cumulative oil production per well, normalized to 10,000-foot laterals. The same holds true.
Interesting how similar, over in the Austin Chalk, where these wells continue to also consistently outperform the average wells to the tune of 30%. If you're also looking at the y-axis, it might intrigue you that the actual number, the actual oil production, cumulative oil production, you know, once you get out there to around 20 months is very similar between the two basins. These are clearly top-tier assets, and they're actually very comparable from a return standpoint, and this is oil production. So just to kind of close the loop on premier operator, you know, we love to say, we've said for a long time that you can't call yourself a premier operator unless you're a top ESG performer also, and that that's truly part of our DNA, has been for a very, very long time.
I won't get into many of the statistics here, but I will point you, if you really wanna dive in, we very recently updated our sustainability reports. They're on the website. I encourage you to go look at those if you want to. A lot of data there. You know, it's, again, very much part of who we are. Okay. So that, again, the premier operator, top-tier assets generating the sustainable return of capital. This is just a summary of the return of capital program. I'll just remind you that we kind of stepped into this in a big way a couple of years ago, back in 2022. We first of all said, before we're going to go meaningful with respect to return of capital to shareholders, we wanted to have the balance sheet in a very, very strong place.
We defined that back then as one to one, one times debt EBITDAX and absolute debt also in the $1 billion area. As we got to that level, we were able to announce this program, and we believe in using a very consistent, predictable, hopefully one that can grow fixed dividend, coupled with a share buyback program. We came out with $0.15 per quarter fixed dividend, hoping that we would be able to grow that. We have, we've grown it actually twice. We've increased it twice since then. It's now sitting at $0.20 per quarter. Then also on the share buyback side, we announced a $500 million share buyback program. To date, we've actually done $369 million, I believe, of share buybacks, reducing the share count by around 8%.
Once we did the Uinta acquisition, we did that acquisition with all cash, and I'll talk more about that in a second, but that took the leverage back above one times, so for now, we're prioritizing free cash flow to getting the debt back down to what we consider a very strong level, and that is the objective in the near term. The board authorized a brand new $500 million share buyback program through the end of 2027, but as I mentioned, for now, you'll see most of our free cash flow, maybe not all of it. It's not a black and white thing with us. You very well may see us step in and buy stock opportunistically, especially on days of weakness, but the clear priority is to get the balance sheet back to that one times area.
We actually projected that, you know, depending on commodity prices, should happen sometime next year, depending on commodity prices. So speaking of the balance sheet, I'll just say a few more words about that. This slide kind of shows you two balance sheets. The one as of the end of the quarter became somewhat stale the next day. October 1st, we closed the Uinta acquisition. So I'll focus more on that, you know, around $2.7 billion of bonds, and then the $190 million of revolver balance that we used to fund the Uinta acquisition. You look at that on a pro forma level. We have a very rough estimate of what XCL's trailing 12-month EBITDAX would've been. You'd get a pro forma leverage a little above 1.2x . So not too far away from our one target, but it is above it.
Again, we'll be looking to get that down to one times. And as we do that, a lot of questions on, well, are you actually going to pay down debt also? And if the answer is yes, the first target obviously would be to get the revolver down to zero. And then after that, you know, you have a pretty level stack of bonds moving from left to right. And the 2026 is a little over $400 million. Those are callable at par right now. So those would be targeted. And I could imagine if commodities hold in and free cash flow generation, that those get taken out next year. And then you're left with around $2.3 billion of bonds.
And if you think about, depending on commodity prices, what you look at, your estimate for EBITDAX, annual EBITDAX, it's probably not far from that number. So that you're, you're kind of in that one times area. So if you're thinking about actual debt being paid off, that, that's what, I think that's what you can assume. I, I should say a few words about the revolver. It, it was redone. It is a brand new, a brand new revolver. The banks agreed to push the maturity out to 2029 and push the borrowing base up to at $3 billion. That's after putting the Uinta asset in. So a ton of liquidity. The actual commitment level of the banks sits at $2 billion. So a lot of, a lot of liquidity within the revolver.
And then a lot of folks love to ask about our hedging strategy, especially after the acquisition. And our strategy has not changed. It's been the same for a very long time. And the level of hedging changes with respect to the balance sheet. So it correlates to the balance sheet. And we're simply strategically trying to protect a level of cash flow depending on how much leverage we have. We think that right percentage is in the 30% area when we're in the one times area. So with the acquisition and the increased leverage, we've bumped up the oil target to 37%-38%. And the gas target remains at 30%. So currently we have, I think, 37% of oil hedged this quarter and 37% of oil hedged next quarter.
In the outer quarters in 2025, we're working up to that desired percentage. Something a little unique on the gas side is we've been hedging further out the curve on gas recently, with the inverted curve and kind of chasing the LNG story a little bit. Anything near $4 we've been hedging, even if it's out in 2027, up to a certain level. I mean, we're not gonna go above 30%, but we do think those prices are very attractive. Okay. Moving on to the repeatable side of the story and the Uinta acquisition, just a couple of slides updating this as well. You know, we were very pleased with the opportunity.
I mean, this is the world-class technical team and this is very consistent with the two assets that I just showed you that are top-tier assets. And if you go back to 2016 and the big Howard County acquisitions we made, if you remember that year, the actual lines drawn around the Midland Basin by most experts would've had Howard County outside of that line. And the technical team saw things that showed that that was not the case and they were right. A little bit ahead of the curve there. And then the similar story on the Austin Chalk.
I mean, it's taken 100 wells, I think for a lot of people to believe that that's truly a top-tier asset, because the old Austin Chalk tended to be disappointing, and very sporadic and inconsistent. This was very different rock from that old Austin Chalk. Obviously, a lot of the technology has changed since then as well. It's proven to be a top-tier asset again. Now moving into the Uinta Basin, we're very pleased, you know, this $2.1 billion acquisition over 63,000 net acres. This really does fit what we are looking for in an asset. Very high returns, very oily, 87% oil, 4,000 feet of pay, 17 potential intervals, just a wonderful playground of potential inventory for the company.
On the picture here, I'll point you to a couple of things that are unique and new to the company. The bottom left two pictures are both of a sand mine, which we now own, so we're excited about that. And I don't wanna get too far ahead of myself. It's just, you know, started operation, but we believe that it can produce, I don't know, a million tons of sand a year, which should be enough for our program. We think it's at least a couple hundred thousand dollars of savings per well, so very interested to see how that's gonna play out, and then the picture at the bottom right, a rail transfer facility.
As most of you are probably aware, I think about 15%-20% of our oil in Utah will stay in Utah and go to the Salt Lake refinery. But then the other 80% or so gets railed out to different locations, either the Rockies or Cushing or the Gulf Coast. And we have contracts in place for all of the oil that we're going to be in our forecasted leaving the area. This is a waxy crude. A lot of questions about that. It's actually a very desirable crude for a lot of the folks on the Gulf Coast, lubricants, things like that. So it does, at times, actually get a slight premium to WTI. Very excited about the asset. It's clearly a top-tier asset.
And these charts show that the chart on the left, very similar chart that I showed earlier on the two Texas assets, cumulative production plot. The green line that's above the other lines, that is the lower cube within the acreage. And this is very much a lower cube and upper cube, and then a deep cube play of those 17 intervals I was talking about earlier. The lower cube is frankly what is the most known and most of our acquisition economics are valued in the lower cube, but lots of upside in the upper cube as well. And we think the deep cube also. Then the chart on the right just shows these areas compared to other basins in the country, very comparable, really good returns.
I mentioned the fact that the lower cube is the area that's most known and we've put the most value to, but we're also excited about the potential in the upper cube. We were very pleased with these early well results in Douglas Creek. These are wells that we were able to announce at the quarter call, 870 BOE per day, very oily, 94% oil. This is just kind of an early indicator of the level of excitement with potential inventory adds in the area. I love this slide. This is the last slide and it's a picture of three rigs that is the sun rising, not the sun setting. I've heard the term lately, morning in America again.
We like to say morning at SM and very excited about where we are with respect to what the macro could bring. You know, we feel like we're just in a great position and no matter what that is with three basins that have very long inventory life that generate very high returns at oil prices a lot lower than where we're trading today. With that, I'll open it up to questions, Greg.
Yeah, maybe you can flip back to the Uinta slides.
Sure.
'Cause you mentioned what the upper cube, maybe the one before that. When I look at the compared industry, the basins, the lower cube competes with Delaware. The upper cube's competing with other places, but it's a bit lower. Obviously we're early here. So is there potential for that to be as competitive as the lower cube? Obviously this is showing you cumulative production.
Mm-hmm.
But there's also upper cube. What are the drilling and completion costs? What do the economics look like relative to the upper cube?
Yeah. Yeah. No, that's a great question. It's obviously early days. The technical team did a ton of work on both cubes and the deeper. And all I can say is we're very excited about the possibilities in the upper cube. And we're kind of seeing that with these early well results. Yeah, beyond that, it's just too early to tell.
And there's, I know it's early, but I'll just ask in terms of inventory potential.
Mm-hmm.
There, is there a way to quantify how big that can be or how much it could add in terms of?
Yeah. All. Yeah. It's, it'd be early to throw out numbers. I mean, you know, we said 390 locations, which is a really strong number to begin with, but with obviously potential to add many more to that.
When are the original acquisition? What you understand?
The original acquisition.
Which is lower cube mostly, right?
Yeah. Yeah. Yeah. With some in the other areas, risked, right? A lot of risking in the other parts. But again, the 17 intervals, the 4,000 feet of pay, I mean, those are really big numbers.
Got it. There was a recent acquisition in the Uinta, away from you.
Yep.
This event of selling assets. The fact that you were not the winner, what is that because you're currently not looking at additional assets of that size or is there something?
Yeah.
Or could you have been, would you have been willing to buy that with your balance sheet where it is today?
Yeah. I would say there's a couple of reasons why we weren't a player there. And one is the timing wasn't perfect, right? We just closed this acquisition. But the other was clearly FTC concerns in that area, just based on some things that they had been focused on prior to that. And I suspect those would've been concerns for the seller as well, a potential buyer that could be an issue with FTC.
Going forward, I mean, it's hard to predict, right? But it seems to us that that wouldn't be as great a concern going forward, just given a couple of things. One is the amount of oil that's now coming out of the region as far versus just being capped versus being staying in the area. That's one thing. And then, of course, the new administration is a factor as well.
So it's not, going forward, not an issue. You said there was a couple reasons, one of them being administration change.
That's just speculation. Yeah.
But because it begs the question, can there be additional consolidation within the?
Right.
With the players in there? Obviously not the stuff that's for sale but.
Mm-hmm.
And you're saying even though it was a concern potentially buying this going forward, you don't think it will be?
Well, we think the fundamentals of the area have changed since a lot of the concern was brought up by the FTC. So we think that's a big part of reason for potential in the future. And just the current administration will be likely less regulating.
Okay. You touched on your potential in additional areas. You're in South Texas. There's gasier areas there.
Mm-hmm.
I haven't heard you mention that at all. Is there a possibility you would consider investing in your drier gas opportunities?
Yeah.
How do you think about that? You mentioned you're hedging $4 off the curve. What's the approach there? Yeah.
No, there's clearly a lot of strong long-term fundamentals for the gas market potentially. I would say that we have a very big gas option that we own, and that is the South Texas area, whether it's Austin Chalk, there's some gassy areas, the Austin Chalk and the Eagle Ford, very large gas option. So if gas prices move up significantly and all of that is real, then we'll have a lot of value to unlock with what we own. So I don't never say never, but it's very unlikely you'd see us feel the need to add a lot more gas with an acquisition.
Yeah. What about potentially selling?
What's that?
How about potential selling some assets?
Every, you know, we look at those possibilities as well. And if someone wants to make a huge bet on gas, we'd be willing to listen. So.
Do you see? I know this is early days, but there's talks of a lot of people look at the Haynesville as that will need to grow to meet the gas demand.
Mm-hmm.
There's also some people that think South Texas can provide that.
Mm-hmm.
I'm curious how you, it seems like you agree with that based on that nod. I'm curious what you see. Could South Texas fit into the growth? Are there any, as you look, are there any midstream or pipeline constraints that prevent it from growing?
Yeah.
How do you think about that?
Yeah. It's a great question. I think South Texas has potential to fill in a big piece of that. I haven't really looked at the numbers on total capacity for the area. So I can't speak intelligently on that, but there's a lot of capacity. I know that.
Okay. Now, in terms of next year, in terms of a drilling program, how should we think about that? How does that potentially change with commodity price?
Mm-hmm.
That's the question.
Yeah. No, we're doing a lot of work right now on the program, running a ton of scenarios. We always do this time of year. I would say more than ever, given the new asset. When I say multiple scenarios, it's also multiple commodity price assumptions.
We had said, and it still holds generally, that we would be looking to right size the program from a capital efficient standpoint, maximizing free cash flow over multiple years. Kind of the same thing we always do, but now with this new asset, you know, XCL had really ramped it up as is typically the case, private company model, private equity model. And so we're now looking at what is the optimal program. And I think we even said preliminarily, you could imagine us going from, you know, if we're at nine rigs day one, three rigs with XCL on top of our six, that we might be working towards something in the around the six rig area company wide. And that would be as we move through 2025, to exit.
That's just a general statement and the one that we said last. So we're working that as a possibility and other possibilities. And you can imagine the kind of mix between the basins being pretty level, because the returns are all very similar. The inventory life is similar. All three assets generate really good returns at commodity prices much lower than where we are currently. So the answer to your question about lower commodity prices and activity impact to that is, I don't think that really changes our activity unless there's a real collapse in commodity prices.
And working towards six rigs, is that just having your rig contracts roll off?
Yeah. Yeah. As we move through the year.
Got it. And that six rigs you said sort of maximizes free cash flow. What's that?
Yeah.
What's that to your production profile?
What's that?
What is that? What happens to your production profile in that scenario?
Well, I mean, it's yeah, and it, it's too early to talk about where that goes. Yeah, it's just too early to talk about. We'll give some really specific guidance on that February.
And just remind us. I know as credit guys love to ask you the maintenance CapEx program. What's that? How much is maintenance CapEx today?
Yeah. That's a really hard number to pin down right now as we're putting this program together and figuring out where our starting point is, to be honest. Again, we want to get a program that really does maximize free cash flow and grows the production modestly.
It's not just about maximizing free cash flow. You could start declining and do that. That's not what we wanna do,
So the technology, efficiency gains has been a big part of the story this year. When you look out towards next year, how do you think about that? Do you see, does that seem to see opportunities to improve efficiencies? And also you talk a bit about, a little bit about the service cost environment. What you're expecting in terms of cost reduction?
Yeah. I would say that the work on the efficiency gains is gonna be more of the same.
I mean, the team really does work every well, you know, as if it's a new, somewhat of an experiment, doing new things to try to test new things and whether that's on the completion side or the drilling side, using a ton of data analytics, hitting landing zones, so applying a lot of what we've done, you know, in Texas, in Utah is very exciting. It's a very well operated asset. A lot of XEOG folks, so it's not like, you know, there's just a lot of low hanging fruit that we see. However, we do look forward to doing a lot of the things that we've done in Texas on the wells there, in terms of spacing also.
But it's, it's really, it's really all of that. And on the cost side, you know, we have had some nice tailwinds recently on the deflation side. I think the last number we reported, we like to talk in terms of, you know, cost per foot because, you know, you got the long laterals and depending on what you're doing on the completions, et cetera. But it's, I think $800 was the last number we reported and we're now well into the kind of mid-low 700s at this point. And also like to remind people when we're talking about cost, we're talking about DC and E. So it's a pretty fully loaded number. And comparing that to other companies, sometimes other companies just do D and C and our completions are also typically bigger completions.
So factor that in as well.
And do you see opportunities to reduce cost further?
Yeah. It's, we're working that hard on the efficiency side always. On the real deflation with, you know, rebidding with the service providers, that has been, I'll be honest, starting to flatten somewhat. So I certainly don't anticipate any inflation, but how much more deflation is a question that we're trying to get answered right now.
Right. And I think we're over. So I'll ask one last question just because that's a good one, I think. So you mentioned additional M& A are not necessarily limited anymore in the Uinta. Uh-huh. How do you think about it? Is there, are there opportunities to buy right now?
Is it something you're looking at or is it clearly an asset that some assets you can develop?
I would just say that we continue to look at everything which we have in the past and we will continue to, and especially in the basins that we're in, whether it's, and that includes M&A, that includes someone buying us, us buying someone, assets being potential. Anything that we believe increases the value of the company is something that we are always gonna be interested in. It's just hard to predict when opportunity lines up, you know, with our level of excitement.
Well, I appreciate you coming and speaking with us today. This was educational as always. Let's have a round of applause for Wade. Thank you, Wade.
Thank you.