SM: Uinta Still Economic at $55 WTI

SM Energy is sticking to its $1.3 billion capex plan for 2025, including in its new 63,600 net Uinta Basin acres, despite WTI roughly $20 or 27% less than in January.

The 12-month strip that has been struggling to stay above $60 fell to $56 at press time in trading as OPEC+ members decided to add twice as much additional supply to the market than expected to now total more than 800,000 bbl/d.

“Even at current prices—and certainly if you assume something like $55—we generate a lot of free cash flow,” Wade Purcell, SM’s CFO, told investors in a call May 2. At the time, WTI was $58.

“If prices for oil were to drop below $50 per barrel, you'd expect most companies to really revisit their programs and we're kind of in that situation,” said Herb Vogel, SM president and CEO.

“… We're really comfortable above $55 with the program we have that delivers everything we want.”

The price would have to change dramatically “for us to consider doing something different,” he added. “But we do have plans made as for contingency on what we do later in the year were something to change.”

SM has seven rigs drilling in its three-play portfolio and plans to drop to six later this year. Would the company go back to seven in 2026?

“I have to say, ‘Hey, what do you think the strip will look like in November of 2025?’ I don’t know,” Vogel said. “… We have to sort out what is a short-term phenomenon versus a trend.”

With $58 WTI during the call, though, he said, “we can say, ‘Hey, we stick with this plan at current strip.’ It looks good down to $55. And then below that, we’d start looking at ‘Do we change anything? How long would that last?’ That’s really how we look at it.”

Purcell added, “At $55 flat, you see us generating lots of free cash flow, paying the dividend, paying off maturities [and getting to] a leverage metric … that we’re very comfortable in.”

Tariffs, gas prices

As for the double squeeze of higher oilfield equipment costs due to tariffs, “things are looking pretty good that tariffs are really only influencing a small percentage of our cost,” Vogel said.

Of SM’s seven rigs drilling currently, three are in the Uinta, three in the Midland and one in South Texas. Each play has one frac spread. Plans are to pare the rig count by one by dropping a rig in the Uinta later this year.

Where its six rigs later this year are drilling could change, though, such as by diverting more capex to the gassier and NGL-rich Eagle Ford. Gas netbacks there are better than for Permian Basin associated gas; meanwhile, Uinta production is 90%-plus oil.

SM holds 155,000 net acres in South Texas and 11,000 net in the Midland Basin.

“If we drill more on the South Texas side because of the gas and NGL prices being better, then obviously it’s easier to be above flattish,” Vogel said.

“If you drill more heavily into the oil, you’d be at the lower end just because of the nature of boe’s versus barrels of oil.”

Uinta wells, production

The operator reported six new wells in deeper Uinta benches came on with 30-day IP’s averaging 1,193 boe/d each, 91% oil, from laterals averaging 12,089 ft.

It has three rigs and one frac spread at work there with 2025 plans to drill 35 wells and complete 50 with laterals averaging 11,200 ft.

Production is averaging 33,000 bbl/d.

The operator’s focus for cash flow from its 197,000 boe/d, 53% oil, of Uinta, Permian and Eagle Ford/Austin Chalk production is to reduce its 1.3x net debt ($2.8 billion) to EBIDTA back to 1.0x rather than buying back stock.

“We are prioritizing debt reduction until we get there,” Purcell said. “… But I wouldn’t take off the table our ability to step in occasionally to support the stock.”

Analysts and investors were expecting to hear SM’s Uinta production grew 15% in the first quarter after its nonop partner in the play, Northern Oil & Gas (NOG), reported its net volume had grown that much.

Instead, SM reported its Uinta volume was up 6% from fourth-quarter 2024.

Zach Parham, analyst with J.P. Morgan Securities, wrote, “SM cited different accounting methodologies.”

Gabe Daoud, analyst with TD Cowen, reported, “Our understanding is NOG's growth rate was impacted by a one-month catch-up.”