SM Energy Reports Results for Fourth Quarter and Full Year of 2012 and Provides Operational Update

  SM Energy Reports Results for Fourth Quarter and Full Year of 2012 and
  Provides Operational Update

  *Record proved reserves of 1,761 BCFE (293 MMBOE) at year-end 2012, up 40%
    from 2011; liquids account for 53% of total proved reserves at year-end
    2012
  *Drilling finding and development costs decrease to $1.74 per MCFE for
    2012; drilling reserve replacement increases to 411% for same period
  *Annual production increases 29% to a record 218.9 BCFE (36.5 MMBOE);
    record quarterly production of 60.7 BCFE exceeds guidance of 57.5 - 60.5
    BCFE
  *Fourth quarter GAAP net loss of $67.1 million or $1.02 per diluted share;
    adjusted net income of $30.4 million, or $0.45 per diluted share
  *Quarterly cash flow from operations (GAAP) of $268.4 million; quarterly
    EBITDAX of $298.2 million, a 14% sequential increase over third quarter

Business Wire

DENVER -- February 20, 2013

SM Energy Company (NYSE: SM) ("SM Energy" or the "Company") reports financial
results for the fourth quarter of 2012 and provides an update on the Company's
operating activities. In addition, a new presentation for the fourth quarter
earnings and operational update has been posted on the Company's website at
www.sm-energy.com. This presentation will be referenced during the conference
call scheduled for 8:00 a.m. Mountain Time (10:00 a.m. Eastern time) on
February21, 2013. Information concerning access to the Company's earnings
call can be found below.

MANAGEMENT COMMENTARY

Tony Best, CEO, remarked, "SM Energy had a record-breaking year in 2012 with
new highs for proved reserves and annual production, completing the year with
record quarterly production. These results were driven by our high rate of
return oil and liquid-rich programs in the Eagle Ford shale and Bakken/Three
Forks, which are expected to continue to drive our growth in 2013. The quality
of our development programs is demonstrated by the significant improvement in
our finding and development costs and reserve replacement ratios in 2012. Our
New Ventures program, which focuses on finding the next stages of growth for
the Company, has captured additional acreage in the Permian Basin and in East
Texas that has the potential to add significant oily inventory to our
portfolio. Our balance sheet and liquidity position remain strong, and we are
positioned to execute on our 2013 plan, which I expect will result in another
record production year for the Company."

FOURTH QUARTER 2012 RESULTS

SM Energy posted a GAAP net loss for the fourth quarter of 2012 of $(67.1)
million, or $(1.02) per diluted share. Adjusted net income for the fourth
quarter was $30.4 million, or $0.45 per adjusted diluted share. Adjusted net
income excludes certain items that the Company believes affect the
comparability of operating results. Items excluded are generally one-time
items or are items whose timing and/or amount cannot be reasonably estimated.
A summary of the adjustments made to arrive at adjusted net income is
presented in the table below:


Reconciliation of Net Loss (GAAP)
To Adjusted Net Income (Non-GAAP):
(in thousands, except per share data)
                                              For the Three
                                             Months Ended
                                              December 31,
                                              2012
                                              
Reported Net Loss (GAAP)                      $        (67,138        )
Adjustments, net of tax:^(1)
Change in Net Profits Plan liability          (7,249                  )
Unrealized portion of derivative              (2,589                  )
gain
Gain on divestiture activity                  (2,651                  )
Impairment of proved properties               106,841
Abandonment and impairment of                 3,164
unproved properties
                                              
Adjusted Net Income (Non-GAAP)                $        30,378         
                                              
Adjusted net income per diluted               $        0.45           
common share
                                              
Adjusted diluted weighted-average             66,906                  
shares outstanding ^(2)
                                              
(1) For the three-month period ended December 31, 2012, adjustments are shown
net of tax and are calculated using an effective tax rate of 37.3%, which
approximates the Company's statutory tax rate adjusted for ordinary permanent
differences.
                                              
(2) Adjusted net income per adjusted diluted share is calculated by assuming
the Company had net income in the period and therefore includes potentially
dilutive securities related to unvested restricted stock units, in-the-money
outstanding options to purchase the Company’s common stock, contingent
Performance Share Units, and contingent Performance Share Awards. On a GAAP
reporting basis, these items are not treated as dilutive securities in periods
where the Company reports a GAAP loss for the quarter.


Earnings before interest, taxes, depreciation, depletion, amortization,
accretion, and exploration expense ("EBITDAX") were $298.2 million for the
fourth quarter of 2012, a 14% sequential increase from the prior quarter and
an increase of 19% from $250.7 million for the same period in 2011.

Adjusted net income and EBITDAX are non-GAAP financial measures - please refer
to the respective reconciliation in the accompanying Financial Highlights
section at the end of this release for additional information about these
measures.

SM Energy's average daily production of 660 MMCFE/d (110 MBOE/d) for the
fourth quarter of 2012 was approximately 3% above the midpoint of the
Company's guidance range of 625 to 658 MMCFE/d. The production mix for the
quarter was 28% oil, 53% gas, and 19% NGLs. Production growth was driven by
strong results in the Company's Eagle Ford shale and Bakken/Three Forks
programs. Production grew 6% sequentially in the fourth quarter of 2012 over
the preceding quarter, and 18% over the fourth quarter of 2011.

Total operating revenues and other income for the fourth quarter of 2012 were
$444.3 million, compared to $379.5 million for the same period of 2011. The
following table displays, by product type, the average realized price the
Company received, as well as the adjusted price received after taking into
account cash settlements for derivative transactions:


Average Realized Commodity Prices for the Quarter Ended December 31, 2012

                               Before the impact of   After the impact of
                              derivative cash       derivative cash
                               settlements            settlements
Oil ($/Bbl)                    $        84.65         $       84.76
Gas ($/Mcf)                    $        3.54          $       3.83
Natural gas liquids ($/Bbl)    $        35.60         $       37.32
Equivalent ($/MCFE)            $        7.00          $       7.21
                                                              

The table below presents actual production and per MCFE cost metrics for the
fourth quarter of 2012, along with previously issued fourth quarter guidance
for 2012:

                                                              
Production                                             Actual    4Q12 Guidance
                                                                 
Average daily production (MMCFE/d)                     660       625 - 658
Total production (BCFE)                                60.7      57.5 - 60.5
                                                                 
Costs
LOE ($/MCFE)                                           0.79      $0.82 - $0.87
Transportation ($/MCFE)                                0.71      $0.69 - $0.73
Production taxes (% of pre-derivative oil, gas, and    4.8   %   6.1%
NGL revenue)
                                                                 
G&A - cash ($/MCFE)                                    $0.32     $0.40 - $0.44
G&A - cash related to NPP ($/MCFE)                     $0.06     $0.07 - $0.09
G&A - non-cash ($/MCFE)                                $0.09    $0.11 - $0.13
Total G&A ($/MCFE)                                     $0.47     $0.58 - $0.66
                                                                 
DD&A ($/MCFE)                                          $3.37     $3.20 - $3.40
Non-cash interest expense ($MM)                        $1.1      $1.1
                                                                 

General and administrative expense for the fourth quarter was lower than
guided due to performance-based bonus compensation being lower than the target
for the year. Net income generation, which is a component of the bonus
calculation, was impacted by a proved property impairment of $170.4 million in
the fourth quarter. This non-cash charge was driven by downward engineering
revisions that resulted in the write-down of Wolfberry assets in its Permian
region.

PROVED RESERVES AND COSTS INCURRED

SM Energy's estimate of proved reserves as of December 31, 2012, was 1,760.6
BCFE (293.4 MMBOE), which is an increase of 40% from 1,259.2 BCFE (209.9
MMBOE) at the end of 2011. These reserves are comprised of 92.2 MMBbl of oil,
833.4 Bcf of natural gas, and 62.3 MMBbl of NGLs.

The Company's proved undeveloped reserves percentage increased to 43% of total
proved reserves at year-end 2012, compared to 33% at the end of 2011. The
Company's proved reserves volume of oil and NGLs increased 56% to 154.5 MMBOE
at year-end 2012 which reflects the Company's focus on liquids-rich plays.

The table below reconciles the changes in the Company's proved reserves from
year-end 2011 to year-end 2012:

                                            
2012 Proved Reserves Roll-forward             
                                              (BCFE)
Beginning of year                             1,259.2
Price revisions                               (72.7   )
Performance revisions                         (91.9   )
Discoveries and extensions                    583.7
Infill reserves in an existing proved field   316.5
Purchases of minerals in place                1.6
Sales of reserves                             (16.9   )
Production                                    (218.9  )
End of year                                   1,760.6 
                                              
Percentage liquids                            53      %
Percentage proved undeveloped                 43      %
                                                      

Prices used at year-end to calculate the Company's estimate of proved reserves
were $94.71 per barrel of oil, $2.76 per MMBTU of natural gas, and $45.65 per
barrel of NGLs, using the trailing 12-month arithmetic average of the first of
month price in accordance with SEC requirements. These prices are lower by 2%
for oil, 33% for natural gas, and 23% for NGLs than the respective prices used
at the end of 2011.

The standardized measure of discounted future net cash flows at December 31,
2012, was $3.0 billion. The before income tax PV-10 value of the Company's
estimated proved reserves at December 31, 2012, was $3.8 billion, which was
11% higher than the prior year PV-10 value of $3.5 billion. Over 80% of SM
Energy's estimated proved reserves by value were audited by an independent
reserve engineering firm.

The table below provides detail of the Company's costs incurred in oil and gas
producing activities for the year ended December 31, 2012:


Costs incurred in oil and gas producing activities:
(in thousands)                                     
                                                        For the Year Ended
                                                        December 31, 2012
                                                        
Development costs ^(1)                                  $       1,346,216
Exploration costs                                       220,921
Acquisitions:
Proved properties                                       5,773
Unproved properties                                     114,971
Total, including asset retirement obligation            $       1,687,881
^(2)(3)
                                                        
(1) Includes facility costs of $62.2 million.
(2) Includes capitalized interest of $12.1 million.
(3) Includes amounts relating to estimated asset retirement obligations of
$30.6 million.


Costs incurred in oil and gas producing activities ("Costs incurred") were
higher than previously anticipated as a result of increased capital
investments in the Company's non-operated Eagle Ford shale program, some of
which will be recovered pursuant to the Company's Acquisition and Development
Agreement with Mitsui E&P Texas LP. The Company also had a more active leasing
effort in 2012 than had been planned. Cash capital expenditures for the year
were $1.5 billion. Additionally, net cash proceeds from the sale of oil and
gas properties were $55.4 million, which are not netted against costs incurred
for accounting purposes.

The table below provides finding and development costs and reserve replacement
ratios for the year ended December 31, 2012; please refer to the respective
definitions in the accompanying Financial Highlights section below.


2012 Reserve Replacement and Finding and Development Costs

                               Reserve      Finding and
                                Replacement   Development Cost
                                Percentage    MCFE     BOE
Drilling, excluding revisions   411    %      $1.74     $10.44
All-in                          337    %      $2.29     $13.74
                                                        

Drilling finding and development costs excluding revisions decreased in 2012
by approximately 39% to $1.74 from $2.85 in 2011. In 2012, drilling reserve
replacement excluding revisions increased to 411% from 310% in 2011. Over the
last five years, the Company has made significant improvements to these
reserve metrics as it has transitioned to a leading resource play company.

FINANCIAL POSITION AND LIQUIDITY

As of December 31, 2012, SM Energy had total long-term debt of $1.4 billion. A
summary of the Company's long-term debt is shown in the table below:


Schedule of long-term debt
(in millions)             
                            
Debt issue                  Amount Outstanding at
                            December 31, 2012
Long-term credit facility   $        340
Senior Notes due 2019       350
Senior Notes due 2021       350
Senior Notes due 2023       400
Total                       $        1,440
                                     

As of December 31, 2012, SM Energy's debt-to-book capitalization ratio was 50%
and the ratio of its debt to trailing twelve month EBITDAX was 1.4 times. As
of the end of the fourth quarter, SM Energy was in compliance with all of the
covenants associated with its long-term debt.

OPERATIONAL UPDATE

Eagle Ford Shale

The Company made 77 flowing completions in its operated Eagle Ford shale
program in 2012, 23 of which were in the fourth quarter. At year-end 2012, SM
Energy had 154 wells producing, with 29 wells waiting on completion or
connection to a sales line.

SM Energy's operated acreage position in the Eagle Ford currently stands at
approximately 145,000 net acres. Approximately 4,000 net acres in the dry gas
window at the southern end of the Company's operated position were released
due to unfavorable economics.

The Company now expects that it will be able to down-space portions of its
operated acreage position at tighter spacing than previously assumed. Based on
these spacing changes and slight upward EUR revisions on the Company's type
curve assumptions, SM Energy is increasing its projected net resource
attributable to undrilled locations by approximately 500 BCFE to 5.8 TCFE.

SM Energy is currently operating five drilling rigs in this program with two
dedicated frac spreads providing completion services.

In the non-operated Eagle Ford program, SM Energy expects that the operator
will decrease its 2013 rig count by one rig to eight drilling rigs. The
Company anticipates the operator's number of gross completions for the year to
remain consistent with prior levels due to efficiency gains.

Bakken / Three Forks

SM Energy made 30 gross flowing completions in its operated Bakken/Three Forks
program in 2012, eight of which were completed in the fourth quarter of 2012.
The Company's drilling focus is in its Bear Den, Raven, and Gooseneck
prospects in North Dakota. Substantially all of the Company's activity is now
focused on infill development. SM Energy is currently operating four drilling
rigs in North Dakota. Two traditional drilling rigs will be swapped for a more
efficient walking rig later this year, at which time all of the rigs in this
program will be focused on pad drilling.

Permian Basin Mississippian

The Company's current focus in the Permian Basin is on its horizontal
Mississippian program. SM Energy has approximately 66,000 net acres in Lynn,
Borden, and Garza Counties, Texas. The Company is currently operating two
drilling rigs in the play with encouraging results. The average 30-day rate
for the last five wells was approximately 475 BOE/d. This average 30-day rate
excludes two recent wells that experienced mechanical or drilling
complications.

Exploration Program

Through its New Ventures program, SM Energy continuously evaluates new play
concepts to drive the Company's future growth. The Company is currently
testing various shale targets in the Midland Basin, where it has approximately
120,000 net acres with shale potential. In East Texas, SM Energy has assembled
approximately 95,000 net acres in areas north of Houston, Texas. The Company
is currently testing various targets in this acreage and expects to have
results based on these tests later in the year.

PRODUCTION AND PERFORMANCE GUIDANCE

SM Energy provides production and cost guidance for the first quarter and full
year 2013 in the table below:

                                                              
                                                 1Q13            FY 2013
Production (BCFE)                                59.5 - 62.5     255 - 267
Average daily production (MMCFE/d)               661 - 695       699 - 732
                                                                 
LOE ($/MCFE)                                     $0.78 - $0.82   $0.82 - $0.87
Transportation ($/MCFE)                          $0.72 - $0.75   $0.80 - $0.85
Production Taxes (% of pre-derivative O&G        5.0% - 5.5%     5.0% - 5.5%
revenue)
                                                                 
G&A - cash ($/MCFE)                              $0.40 - $0.43   $0.41 - $0.45
G&A - cash NPP ($/MCFE)                          $0.05 - $0.07   $0.05 - $0.07
G&A - non-cash ($/MCFE)                          $0.10 - $0.12   $0.09 - $0.11
G&A Total ($/MCFE)                               $0.55 - $0.62   $0.55 - $0.63
                                                                 
DD&A ($/MCFE)                                    $3.20 - $3.40   $3.20 - $3.40
                                                                 
Effective income tax rate range                                  36.9% - 37.4%
% of income tax that is current                                  <5%
                                                                 

The Company has recently elected to reject ethane during the processing of a
significant portion of its operated Eagle Ford rich gas production, which will
have a negative impact on reported production volumes. However, the Company is
reiterating its previously announced 2013 production guidance of 255 to 267
BCFE.

EARNINGS CALL INFORMATION

The Company has scheduled a teleconference to discuss these results and other
operational matters on February 21, 2013, at 8:00 a.m. Mountain time (10:00
a.m. Eastern time). The call participation number is 877-445-0811, and the
conference ID number is 89664242. An audio replay of the call will be
available approximately two hours after the call at 855-859-2056, with the
conference ID number 89664242. International participants can dial
617-401-8115 to take part in the conference call, using the conference ID
number 89664242, and can access a replay of the call at 404-537-3406, using
conference ID number 89664242. Replays can be accessed through March 7, 2013.

This call is being webcast live and can be accessed on SM Energy Company's
website at www.sm-energy.com. An audio recording of the conference call will
be available at that site through March 7, 2013.

INFORMATION ABOUT FORWARD LOOKING STATEMENTS

This release contains forward looking statements within the meaning of
securities laws, including forecasts and projections. The words “will,”
“believe,” “budget,” “anticipate,” “plan,” “intend,” “estimate,” “forecast,”
and “expect” and similar expressions are intended to identify forward looking
statements. These statements involve known and unknown risks, which may cause
SM Energy's actual results to differ materially from results expressed or
implied by the forward looking statements. These risks include factors such as
the availability, proximity and capacity of gathering, processing and
transportation facilities, the uncertainty of negotiations to result in an
agreement or a completed transaction, the uncertain nature of the expected
benefits from the actual or expected acquisition, divestiture, farm down or
joint venture of oil and gas properties, the uncertain nature of announced
divestiture, joint venture, farm down or similar efforts and the ability to
complete such transactions, the volatility and level of oil, natural gas, and
natural gas liquids prices, uncertainties inherent in projecting future rates
of production from drilling activities and acquisitions, the imprecise nature
of estimating oil and gas reserves, the availability of additional
economically attractive exploration, development, and acquisition
opportunities for future growth and any necessary financings, unexpected
drilling conditions and results, unsuccessful exploration and development
drilling, the availability of drilling, completion, and operating equipment
and services, the risks associated with the Company's commodity price risk
management strategy, uncertainty regarding the ultimate impact of potentially
dilutive securities, and other such matters discussed in the “Risk Factors”
section of SM Energy's 2012 Annual Report on Form 10-K which is expected to be
filed with the Securities and Exchange Commission on or around February 21,
2013. The forward looking statements contained herein speak as of the date of
this announcement. Although SM Energy may from time to time voluntarily update
its prior forward looking statements, it disclaims any commitment to do so
except as required by securities laws.

INFORMATION ABOUT PROVED RESERVES

This press release contains references to certain items pertaining to the
process used to estimate the Company's proved reserves and their PV-10 value,
which is equal to the standardized measure of discounted future net cash flows
from proved reserves on the applicable date, before deducting future income
taxes, discounted at 10 percent. SM Energy believes that the presentation of
pre-tax PV-10 value is relevant and useful to investors because it presents
the discounted future net cash flows attributable to the Company's proved
reserves prior to taking into account future corporate income taxes and the
Company's current tax structure. The Company further believes investors and
creditors use pre-tax PV-10 value as a basis for comparison of the relative
size and value of the Company's proved reserves to other peer companies. SM
Energy's pre-tax PV-10 value for estimated proved reserves as of December 31,
2012, may be reconciled to its standardized measure of discounted future net
cash flows as of December 31, 2012, by reducing the Company's pre-tax PV-10
value by the discounted future income taxes associated with such reserves. A
reconciliation of these adjustments is provided below.


Reconciliation of standardized measure (GAAP) to PV-10 value (Non-GAAP):
                                                          
                                                            As of December 31,
                                                            2012
                                                            (in millions)
Standardized measure of discounted future net cash flows    $    3,021.0
(GAAP)
Add: 10 percent annual discount, net of income taxes        1,742.1
Add: future undiscounted income taxes                       1,609.4        
Undiscounted future net cash flows                          $    6,372.5
Less: 10 percent annual discount without tax effect         (2,523.4       )
PV-10 value (Non-GAAP)                                      $    3,849.1   
                                                                           

Additionally, the Company believes its use of an independent reserve auditor
is a matter of interest to current and potential shareholders, and to analysts
who follow the Company. More information on these items are included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2012,
which is to be filed with the Securities and Exchange Commission on or around
February 21, 2013.

ABOUT THE COMPANY

SM Energy Company is an independent energy company engaged in the acquisition,
exploration, development, and production of crude oil, natural gas, and
natural gas liquids in onshore North America. SMEnergy routinely posts
important information about the Company on its website. For more information
about SM Energy, please visit its website at www.sm-energy.com.


SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
                                                             
Guidance Comparison           For the Three Months      For the Twelve Months
                              Ended December 31, 2012   Ended December 31,
                                                        2012
                              Actual    Guidance        Actual    Guidance
                                                                  
Average daily production      660       625 - 658       598       589 - 597
(MMCFE per day)
Total production (BCFE)       60.7      57.5 - 60.5     218.9     215.5 -
                                                                  218.5
Oil production (as % of                                 28    %   28%
total)
Natural gas production (as                              55    %   55%
% of total)
NGL production (as % of                                 17    %   17%
total)
                                                                  
Lease operating expense       $0.79     $0.82 - $0.87   $0.82     0.81 - $0.86
($/MCFE)
Transportation expense        $0.71     $0.69 - $0.73   $0.63     0.62 - $0.65
($/MCFE)
Production taxes, as a
percentage of                 4.8   %   6.1%            4.9   %   5.3%
pre-derivative oil, gas,
and NGL revenue
                                                                  
General and administrative    $0.32     $0.40 - $0.44   $0.38     $0.41 -
- cash ($/MCFE)                                                   $0.45
General and administrative                                        $0.08 -
- cash related to Net         $0.06     $0.07 - $0.09   $0.07     $0.10
Profits Plan ($/MCFE)
General and administrative    $0.09    $0.11 - $0.13   $0.10    $0.10 -
- non-cash ($/MCFE)                                               $0.12
General and administrative    $0.47     $0.58 - $0.66   $0.55     $0.59 -
- Total ($/MCFE)                                                  $0.67
                                                                  
Depreciation, depletion,      $3.37     $3.20 - $3.40   $3.32     3.20 - $3.40
and amortization ($/MCFE)
                                                                  
Non-cash interest expense     $1.1      $1.1            $6.8      $6.8
($MM)
                                                                  
Effective income tax rate                               35.0  %   37.3% -
                                                                  37.8%
% of income tax that is                                 1.2   %   <5%
current
                                                                  


SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
                                                                    
                 For the Three Months              For the Twelve Months
                 Ended December 31,                Ended December 31,
Production       2012        2011        Percent   2012        2011        Percent
Data:                                    Change                            Change
                                                                           
Average
realized sales
price, before
the effects of
derivative
cash
settlements:
Oil (per Bbl)    $ 84.65     $ 87.52     (3   )%   $ 85.45     $ 88.23     (3   )%
Gas (per Mcf)    3.54        3.86        (8   )%   2.98        4.32        (31  )%
NGL (per Bbl)    35.60      54.36      (35  )%   37.61      53.32      (29  )%
Equivalent       $ 7.00      $ 7.73      (9   )%   $ 6.73      $ 7.85      (14  )%
(MCFE)
                                                                           
Average
realized sales
price,
including the
effects of
derivative
cash
settlements:
Oil (per Bbl)    $ 84.76     $ 80.63     5    %    $ 83.52     $ 78.89     6    %
Gas (per Mcf)    3.83        4.36        (12  )%   3.48        4.80        (28  )%
NGL (per Bbl)    37.32      50.37      (26  )%   38.90      47.90      (19  )%
Equivalent       $ 7.21      $ 7.58      (5   )%   $ 6.95      $ 7.58      (8   )%
(MCFE)
                                                                           
Production:
Oil (MMBbls)     2.9         2.5         17   %    10.4        8.1         28   %
Gas (Bcf)        31.9        28.8        11   %    120.0       100.3       20   %
NGL (MMBbls)     1.9        1.3        48   %    6.1        3.5        75   %
BCFE (6:1)       60.7        51.3        18   %    218.9       169.7       29   %
                                                                           
Average daily
production:
Oil (MBbls per   31.3        26.7        17   %    28.3        22.1        28   %
day)
Gas (MMcf per    347.1       313.0       11   %    328.0       274.8       19   %
day)
NGL (MBbls per   20.8       14.1       48   %    16.7       9.6        75   %
day)
MMCFE per day    659.6       557.9       18   %    598.2       465.0       29   %
(6:1)
                                                                           
Per MCFE Data:
Realized price
before the
effects of       $ 7.00      $ 7.73      (9   )%   $ 6.73      $ 7.85      (14  )%
derivative
cash
settlements
Lease
operating        0.79        0.85        (7   )%   0.82        0.88        (7   )%
expense
Transportation   0.71        0.60        18   %    0.63        0.51        24   %
costs
Production       0.33        0.37        (11  )%   0.33        0.32        3    %
taxes
General and      0.47       0.69       (32  )%   0.55       0.70       (21  )%
administrative
Operating
profit, before
the effects of   $ 4.70      $ 5.22      (10  )%   $ 4.40      $ 5.44      (19  )%
derivative
cash
settlements
Derivative
cash             (0.21   )   0.15       (240 )%   (0.22   )   0.27       (181 )%
settlement
(gain) loss
Operating
profit,
including the
effects of       $ 4.91     $ 5.07     (3   )%   $ 4.62     $ 5.17     (11  )%
derivative
cash
settlements
                                                                           
Depletion,
depreciation,
amortization,
and asset        $ 3.37      $ 3.26      3    %    $ 3.32      $ 3.01      10   %
retirement
obligation
liability
accretion
                                                                                


SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012

Consolidated
Statements of                                 
Operations
(in thousands,      For the Three Months Ended   For the Twelve Months Ended
except per share    December 31,                 December 31,
amounts)
                    2012         2011           2012           2011
Operating
revenues and
other income:
Oil, gas, and NGL
production          $ 424,737     $ 396,914      $ 1,473,868     $ 1,332,392
revenue
Realized hedge      1,528         (6,159     )   3,866           (20,707     )
gain (loss)
Gain (loss) on
divestiture         4,228         (24,986    )   (27,018     )   220,676
activity
Marketed gas        10,417        13,630         52,808          69,898
system revenue
Other operating     3,398        143           1,578          1,059       
revenue
Total operating
revenues and        444,308      379,542       1,505,102      1,603,318   
other income
                                                                 
Operating
expenses:
Oil, gas, and NGL
production          111,159       93,204         391,872         290,111
expense
Depletion,
depreciation,
amortization, and
asset retirement    204,267       167,298        727,877         511,103
obligation
liability
accretion
Exploration         24,217        19,950         90,248          53,537
Impairment of       170,400       170,512        208,923         219,037
proved properties
Abandonment and
impairment of       5,046         3,051          16,342          7,367
unproved
properties
General and         28,372        35,568         119,815         118,526
administrative
Change in Net
Profits Plan        (11,562   )   (758       )   (28,904     )   (25,477     )
liability
Unrealized and
realized            (15,590   )   46,786         (55,630     )   (37,086     )
derivative (gain)
loss
Marketed gas        8,297         12,653         47,583          64,249
system expense
Other operating     5,499        11,417        6,993          17,567      
expense
Total operating     530,105      559,681       1,525,119      1,218,934   
expenses
                                                                 
Income (loss)       (85,797   )   (180,139   )   (20,017     )   384,384
from operations
                                                                 
Nonoperating
income (expense):
Interest income     19            84             220             466
Interest expense    (18,368   )   (12,213    )   (63,720     )   (45,849     )
                                                                 
Income (loss)
before income       (104,146  )   (192,268   )   (83,517     )   339,001
taxes
Income tax          37,008       71,557        29,268         (123,585    )
benefit (expense)
                                                                 
Net income (loss)   $ (67,138 )   $ (120,711 )   $ (54,249   )   $ 215,416   
                                                                 
Basic
weighted-average    66,101       64,024        65,138         63,755      
common shares
outstanding
                                                                 
Diluted
weighted-average    66,101       64,024        65,138         67,564      
common shares
outstanding
                                                                 
Basic net income
(loss) per common   $ (1.02   )   $ (1.89    )   $ (0.83     )   $ 3.38      
share
                                                                 
Diluted net
income (loss) per   $ (1.02   )   $ (1.89    )   $ (0.83     )   $ 3.19      
common share
                                                                             

                                               
SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
Consolidated Balance Sheets                                    
(in thousands, except per share amounts)         December 31,    December 31,
ASSETS                                           2012            2011
                                                                 
Current assets:
Cash and cash equivalents                        $ 5,926         $ 119,194
Accounts receivable                              254,805         210,368
Refundable income taxes                          3,364           5,581
Prepaid expenses and other                       30,017          68,026
Derivative asset                                 37,873          55,813
Deferred income taxes                            8,579          4,222       
Total current assets                             340,564        463,204     
                                                                 
Property and equipment (successful efforts
method), at cost:
Land                                             1,845           1,548
Proved oil and gas properties                    5,401,684       4,378,987
Less - accumulated depletion, depreciation,      (2,376,170  )   (1,766,445  )
and amortization
Unproved oil and gas properties                  175,287         120,966
Wells in progress                                273,928         273,428
Materials inventory, at lower of cost or         13,444          16,537
market
Oil and gas properties held for sale net of
accumulated depletion, depreciation and          33,620          246
amortization of $20,676 in 2012 and $10,714 in
2011
Other property and equipment, net of
accumulated depreciation of $22,442 in 2012      153,559        71,369      
and $23,985 in 2011
Total property and equipment, net                3,677,197      3,096,636   
                                                                 
Other noncurrent assets:
Derivative asset                                 16,466          31,062
Restricted cash                                  86,773          124,703
Other noncurrent assets:                         78,529         83,375      
Total other noncurrent assets                    181,768        239,140     
                                                                 
Total Assets                                     $ 4,199,529    $ 3,798,980 
                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses            $ 525,627       $ 456,999
Derivative liability                             8,999           42,806
Other current liabilities                        6,920          6,000       
Total current liabilities                        541,546        505,805     
                                                                 
Noncurrent liabilities:
Long-term credit facility                        340,000         —
3.50% Senior Convertible Notes, net of           —               285,069
unamortized discount of $2,431 in 2011
6.625% Senior Notes due 2019                     350,000         350,000
6.50% Senior Notes due 2021                      350,000         350,000
6.50% Senior Notes due 2023                      400,000         —
Asset retirement obligation                      112,912         87,167
Asset retirement obligation associated with      1,393           1,277
oil and gas properties held for sale
Net Profits Plan liability                       78,827          107,731
Deferred income taxes                            537,383         568,263
Derivative liability                             6,645           12,875
Other noncurrent liabilities                     66,357         67,853      
Total noncurrent liabilities                     2,243,517      1,830,235   
                                                                 
Stockholders' equity:
Common stock, $0.01 par value - authorized:
200,000,000 shares; issued: 66,245,816 shares
in 2012 and 64,145,482 shares in 2011;           662             641
outstanding, net of treasury shares:
66,195,235 shares in 2012 and 64,064,415
shares in 2011
Additional paid-in capital                       233,642         216,966
Treasury stock, at cost: 50,581 shares in 2012   (1,221      )   (1,544      )
and 81,067 shares in 2011
Retained earnings                                1,190,397       1,251,157
Accumulated other comprehensive loss             (9,014      )   (4,280      )
Total stockholders' equity                       1,414,466      1,462,940   
                                                                 
Total Liabilities and Stockholders' Equity       $ 4,199,529    $ 3,798,980 
                                                                             


SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
                                                             
Consolidated
Statements of Cash
Flows
(in thousands)        For the Three Months         For the Twelve Months
                      Ended December 31,           Ended December 31,
                      2012          2011           2012           2011
Cash flows from
operating
activities:
Net income (loss)     $ (67,138 )   $ (120,711 )   $  (54,249 )   $  215,416
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities:
Loss (gain) on
divestiture           (4,228    )   24,986         27,018         (220,676   )
activity
Depletion,
depreciation,
amortization, and     204,267       167,298        727,877        511,103
asset retirement
obligation
liability accretion
Exploratory dry       2,310         228            20,861         277
hole expense
Impairment of         170,400       170,512        208,923        219,037
proved properties
Abandonment and
impairment of         5,046         3,051          16,342         7,367
unproved properties
Stock-based
compensation          8,454         7,274          30,185         26,824
expense
Change in Net
Profits Plan          (11,562   )   (758       )   (28,904    )   (25,477    )
liability
Unrealized
derivative (gain)     (4,129    )   45,263         (11,366    )   (62,757    )
loss
Amortization of
debt discount and     1,077         3,601          6,769          18,299
deferred financing
costs
Deferred income       (36,943   )   (40,462    )   (29,638    )   123,789
taxes
Plugging and          (1,052    )   (2,914     )   (2,856     )   (5,849     )
abandonment
Other                 (379      )   (75        )   527            (6,027     )
Changes in current
assets and
liabilities:
Accounts receivable   (2,707    )   (21,211    )   (21,389    )   (41,998    )
Refundable income     (122      )   (5,581     )   2,217          2,901
taxes
Prepaid expenses      4,719         1,644          (1,484     )   16,376
and other
Accounts payable
and accrued           370           23,485         31,136         (18,073    )
expenses
Excess income tax
benefit from the      —            15,155        —             —          
exercise of stock
awards
Net cash provided
by operating          268,383      270,785       921,969       760,532    
activities
                                                                  
Cash flows from
investing
activities:
Net proceeds from
sale of oil and gas   6,712         39,469         55,375         364,522
properties
Capital               (381,073  )   (551,476   )   (1,507,828 )   (1,633,093 )
expenditures
Acquisition of oil    (169      )   —              (5,773     )   —
and gas properties
Other                 893          4,001         893           3,661      
Net cash used in
investing             (373,637  )   (508,006   )   (1,457,333 )   (1,264,910 )
activities
                                                                  
Cash flows from
financing
activities:
Proceeds from         374,500       206,500        1,609,000      322,000
credit facility
Repayment of credit   (262,500  )   (206,500   )   (1,269,000 )   (370,000   )
facility
Debt issuance costs
related to credit     —             —              —              (8,719     )
facility
Net proceeds from
6.625% Senior Notes   —             —              —              341,122
due 2019
Net proceeds from
6.50% Senior Notes    —             343,120        —              343,120
due 2021
Net proceeds from
6.50% Senior Notes    (85       )   —              392,138        —
due 2023
Repayment of 3.50%
Senior Convertible    —             —              (287,500   )   —
Notes
Proceeds from sale    2,395         1,734          5,816          7,327
of common stock
Dividends paid        (3,303    )   (3,201     )   (6,511     )   (6,382     )
Net share
settlement from       (17       )   (6         )   (21,622    )   (9,973     )
issuance of stock
awards
Excess income tax
benefit from the      —             (15,155    )   —              —
exercise of stock
awards
Other                 6            —             (225       )   —          
Net cash provided
by financing          110,996      326,492       422,096       618,495    
activities
                                                                  
Net change in cash
and cash              5,742         89,271         (113,268   )   114,117
equivalents
Cash and cash
equivalents at        184          29,923        119,194       5,077      
beginning of period
Cash and cash
equivalents at end    $ 5,926      $ 119,194     $  5,926      $  119,194 
of period
                                                                             


SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
                                                              
Adjusted Net
Income
(in thousands,
except per share
data)
                                                                   
Reconciliation of    For the Three Months            For the Twelve Months
net income (GAAP)
to Adjusted net
income               Ended December 31,              Ended December 31,
(Non-GAAP):
                     2012             2011           2012          2011
                                                                   
Actual net income    $  (67,138  )    $ (120,711 )   $ (54,249 )   $ 215,416
(loss) (GAAP)
                                                                   
Adjustments net
of tax: ^(1)
Change in Net
Profits Plan         (7,249      )    (475       )   (18,123   )   (15,974   )
liability
Unrealized
derivative (gain)    (2,589      )    28,380         (7,126    )   (39,349   )
loss
(Gain) loss on
divestiture          (2,651      )    15,666         16,941        (138,364  )
activity
Impairment of        106,841          106,911        130,995       137,336
proved properties
Abandonment and
impairment of        3,164            1,913          10,246        4,619
unproved
properties
DD&A adjustment
for Marcellus        —                9,245          —             9,245
shale
                                                                
Adjusted net
income (Non-GAAP)    $  30,378       $ 40,929      $ 78,684     $ 172,929 
^(2)
                                                                   
Adjusted net
income per           $  0.45         $ 0.60        $ 1.17       $ 2.56    
diluted common
share
                                                                
Adjusted diluted
weighted-average     66,906          67,653        67,240       67,564    
shares
outstanding ^(3)
                                                                   
                                                                   
(1) For the three and twelve-month periods ended December 31, 2012, and
December 31, 2011, adjustments are shown net of tax and are calculated using
an effective tax rate of 37.3%, which approximates the Company's statutory tax
rate adjusted for ordinary permanent differences.

(2) Adjusted net income excludes certain items that the Company believes
affect the comparability of operating results. Items excluded generally are
non-recurring items or are items whose timing and/or amount cannot be
reasonably estimated. These items include non-cash adjustments such as the
change in the Net Profits Plan liability, unrealized derivative (gain) loss,
impairment of proved properties, abandonment and impairment of unproved
properties, and (gain) loss on divestiture activity. The non-GAAP measure of
adjusted net income is presented because management believes it provides
useful additional information to investors for analysis of SM Energy's
fundamental business on a recurring basis. In addition, management believes
that adjusted net income is widely used by professional research analysts and
others in the valuation, comparison, and investment recommendations of
companies in the oil and gas exploration and production industry, and many
investors use the published research of industry research analysts in making
investment decisions. Adjusted net income should not be considered in
isolation or as a substitute for net income, income from operations, cash
provided by operating activities or other income, profitability, cash flow, or
liquidity measures prepared under GAAP. Since adjusted net income excludes
some, but not all, items that affect net income and may vary among companies,
the adjusted net income amounts presented may not be comparable to similarly
titled measures of other companies.

(3) Adjusted net income per adjusted diluted share is calculated by assuming
the Company had net income in the period and therefore includes potentially
dilutive securities related to unvested restricted stock units, in-the-money
outstanding options to purchase the Company’s common stock, contingent
Performance Share Units, contingent Performance Share Awards, and 3.50% Senior
Convertible Notes. On a GAAP basis, these items are not treated as dilutive
securities in periods where the Company reports a GAAP loss.



SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
                                                              
EBITDAX (4)
(in thousands)
                                                                   
Reconciliation
of net income
(loss) (GAAP)
to EBITDAX
(non-GAAP) to      For the Three Months            For the Twelve Months
net cash
provided by
operating
activities
(GAAP):
                   Ended December 31,              Ended December 31,
                   2012             2011           2012            2011
Net income         $  (67,138  )    $ (120,711 )   $ (54,249   )   $ 215,416
(loss) (GAAP)
Interest           18,368           12,213         63,720          45,849
expense
Interest income    (19         )    (84        )   (220        )   (466      )
Income tax
(benefit)          (37,008     )    (71,557    )   (29,268     )   123,585
expense
Depletion,
depreciation,
amortization,
and asset          204,267          167,298        727,877         511,103
retirement
obligation
liability
accretion
Exploration        15,778           13,189         81,809          46,776
Impairment of
proved             170,400          170,512        208,923         219,037
properties
Abandonment and
impairment of      5,046            3,051          16,342          7,367
unproved
properties
Stock-based
compensation       8,454            7,274          30,185          26,824
expense
Unrealized
derivative         (4,129      )    45,263         (11,366     )   (62,757   )
(gain) loss
Change in Net
Profits Plan       (11,562     )    (758       )   (28,904     )   (25,477   )
liability
(Gain) loss on
divestiture        (4,228      )    24,986        27,018         (220,676  )
activity
EBITDAX            $  298,229      $ 250,676     $ 1,031,867    $ 886,581 
(Non-GAAP)
Interest           (18,368     )    (12,213    )   (63,720     )   (45,849   )
expense
Interest income    19               84             220             466
Income tax
(benefit)          37,008           71,557         29,268          (123,585  )
expense
Exploration        (15,778     )    (13,189    )   (81,809     )   (46,776   )
Exploratory dry    2,310            228            20,861          277
hole expense
Amortization of
debt discount      1,077            3,601          6,769           18,299
and deferred
financing costs
Deferred income    (36,943     )    (40,462    )   (29,638     )   123,789
taxes
Plugging and       (1,052      )    (2,914     )   (2,856      )   (5,849    )
abandonment
Other              (379        )    (75        )   527             (6,027    )
Changes in
current assets     2,260           13,492        10,480         (40,794   )
and liabilities
Net cash
provided by
operating          $  268,383      $ 270,785     $ 921,969      $ 760,532 
activities
(GAAP)
                                                                   
Note: Stock-based compensation expense is a component of exploration expense
and general and administrative expense on the accompanying statements of
operations. Therefore, the exploration line items shown in the reconciliation
above will vary from the amount shown on the accompanying statements of
operations for the component of stock-based compensation expense recorded to
exploration.
                                                                   
(4) EBITDAX represents income (loss) before interest expense, interest income,
income taxes, depreciation, depletion, amortization and accretion, exploration
expense, property impairments, non-cash stock compensation expense, unrealized
derivative gains and losses, change in the Net Profit Plan liability, and
gains and losses on divestitures. EBITDAX excludes certain items that the
Company believes affect the comparability of operating results and can exclude
items that are generally one-time or whose timing and/or amount cannot be
reasonably estimated. EBITDAX is a non-GAAP measure that is presented because
the Company believes that it provides useful additional information to
investors, as a performance measure, for analysis of the Company's ability to
internally generate funds for exploration, development, acquisitions, and to
service debt. The Company is also subject to financial covenants under its
credit facility based on its debt to EBITDAX ratio. In addition, EBITDAX is
widely used by professional research analysts and others in the valuation,
comparison, and investment recommendations of companies in the oil and gas
exploration and production industry, and many investors use the published
research of industry research analysts in making investment decisions. EBITDAX
should not be considered in isolation or as a substitute for net income
(loss), income (loss) from operations, net cash provided by (used in)
operating activities, profitability, or liquidity measures prepared under
GAAP. Because EBITDAX excludes some, but not all items that affect net income
(loss) and may vary among companies, the EBITDAX amounts presented may not be
comparable to similar metrics of other companies.


                                                  
SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
                                                       
Information on Proved Reserves and Costs Incurred
                                                       
Costs incurred in oil and gas producing
activities:
(in thousands)                                         For the Year Ended
                                                       December 31,
                                                       2012
Development costs ^(5)                                 $       1,346,216
Exploration costs                                      220,921
Acquisitions:
Proved properties                                      5,773
Unproved properties                                    114,971
Total, including asset retirement obligation ^(6)      $       1,687,881
(7)
                                                       
^(5) Includes facility costs of $62.2 million.
^(6) Includes capitalized interest of $12.1 million.
^(7) Includes amounts relating to estimated asset retirement obligations of
$30.6 million.


                                                                     
Proved oil
and gas
reserve
quantities:
              For the Year Ended
              December 31, 2012
              Oil or                                          Proved        Proved
              Condensate   Gas        NGL       Equivalents   Developed     Undeveloped
              (MMBbl)      (Bcf)      (MMBbl)   (BCFE)        (BCFE)        (BCFE)
Total
proved
reserves
Beginning     71.7         664.0      27.5      1,259.2       844.0         415.2
of year
Revisions
of previous   (4.5    )    (123.3 )   (2.4  )   (164.6    )   (53.6     )   (111.0    )
estimates
Discoveries
and           17.1         297.4      30.6      583.7         305.6         278.1
extensions
                                                                                      
Infill
reserves in
an existing   19.2         125.1      12.7      316.5         44.9          271.6
proved
field
Purchases
of minerals   0.1          1.2        —         1.6           1.6           —
in place
Sales of      (1.0    )    (11.0  )   —         (16.9     )   (13.7     )   (3.2      )
reserves
Production    (10.4   )    (120.0 )   (6.1  )   (218.9    )   (218.9    )   —
Conversions                                  —            89.2         (89.2     )
End of year   92.2        833.4     62.3     1,760.6      999.1        761.5     
                                                                            
PV-10 value
(in                                             $ 3,849.1     $ 2,982.6     $  866.5
millions)
                                                                            
Proved
developed
reserves
Beginning     50.3         451.2      15.2      844.0
of year
End of year   58.8         483.2      27.2      999.1
                                                                            


SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
                                                               
Regional proved
oil and gas
reserve
quantities:
                                                                   
                     South Texas &                       Mid-
                     Gulf Coast      Rockies   Permian   Continent   Total
Year-end 2011
proved reserves
Oil (MMBbls)         14.6            43.7      12.4      1.0         71.7
Gas (Bcf)            243.0           41.5      31.7      347.9       664.0
NGL (MMBbls)         25.5           —        0.2      1.9        27.5    
Total (BCFE)         483.6           303.4     107.0     365.2       1,259.2
% Proved developed   54        %     71    %   86    %   75     %    67      %
                                                                     
Year-end 2012
proved reserves
Oil (MMBbls)         30.9            49.2      11.2      0.9         92.2
Gas (Bcf)            530.7           42.7      26.6      233.4       833.4
NGL (MMBbls)         60.5           —        0.2      1.6        62.3    
Total (BCFE)         1,079.2         337.9     94.8      248.6       1,760.6
% Proved developed   43        %     65    %   93    %   89     %    57      %
                                                                     
*Totals may not sum due to rounding.



SM ENERGY COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2012
                                     
Finding and Development Costs and Reserve Replacement Ratios: ^(8)
                                                  
Finding and Development Costs in $
per MCFE
Drilling, excluding revisions                     $1.74
All-in                                            $2.29
                                                  
Reserve Replacement Ratios
Drilling, excluding revisions                     411              %
All-in                                            337              %
                                                  
(8) Finding and development costs and reserve replacement ratios are common
metrics used by professional research analysts and others in the valuation,
comparison, and investment recommendations of companies in the oil and gas
exploration and production industry. The metrics are easily calculated from
information provided in the sections "Costs incurred in oil and gas producing
activities" and "Proved oil and gas reserve quantities" above. Finding and
development costs provide some information as to the cost of adding proved
reserves from various activities. Reserve replacement provides information
related to how successful a company is at growing its proved reserve base.
Consistent with industry practice, future capital costs to develop proved
undeveloped reserves are not included in "Costs incurred in oil and gas
producing activities." The Company uses the reserve replacement ratio as an
indicator of the Company’s ability to replenish annual production volumes and
grow its reserves. It should be noted that the reserve replacement ratio is a
statistical indicator that has limitations. The ratio is limited because it
typically varies widely based on the extent and timing of new discoveries and
property acquisitions. Its predictive and comparative value is also limited
for the same reasons. In addition, since the ratio does not embed the cost or
timing of future production of new reserves, it cannot be used as a measure of
value creation.
                                                  
Finding and Development Costs Definitions:

> Drilling, excluding revisions - numerator defined as the sum of development
costs and exploration costs and facility costs divided by a denominator
defined as the sum of discoveries and extensions and infill reserves in an
existing proved field. To consider the impact of divestitures on this metric,
further include sales of reserves in denominator.

> All-in - numerator defined as total costs incurred, including asset
retirement obligation divided by a denominator defined as the sum of
discoveries and extensions, infill reserves in an existing proved field,
purchases of minerals in place, and revisions. To consider the impact of
divestitures on this metric, further include sales of reserves in denominator.
                                                  
Reserve Replacement Ratio Definitions:

> Drilling, excluding revisions - numerator defined as the sum of discoveries
and extensions and infill reserves in an existing proved field divided by
production. To consider the impact of divestitures on this metric, further
include sales of reserves in denominator.

> All-in - numerator defined as the sum of discoveries and extensions, infill
reserves in an existing proved field, purchases of minerals in place, and
revisions divided by production. To consider the impact of divestitures on
this metric, further include sales of reserves in denominator.

Contact:

SM Energy Company
James R. Edwards, 303-837-2444
 
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