SM Energy Company (SM) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the 2020 Annual Meeting of Stockholders for SM Energy Company. Before we get started, I'd like to go over a few items so you know how to participate in today's meeting. [Operator Instructions] You may send your questions at any time during the presentation. We will collect these for the Q&A session at the end of today's stockholders meeting, during which, the Chairman of the Board, Mr. Bill Sullivan; and the President and Chief Executive Officer, Mr. Jay Ottoson, will be available to respond. Today's meeting is being recorded. And now I'd like to introduce the Chairman of SM Energy Company's Board of Directors, Mr. Bill Sullivan.

Thank you, Tracy. Good afternoon, ladies and gentlemen. My name is Bill Sullivan, and I am Chairman of the Board of Directors of SM Energy Company. Since it has now passed 3:30 p.m., I will call this Annual Meeting of Stockholders to order. On behalf of my fellow Directors and the officers of the company, it is my pleasure to welcome you to the 2020 Annual Meeting of Stockholders. I would like to begin by saying that in light of the challenges presented by the COVID-19 pandemic, we want to extend well wishes to all of our stakeholders attending today. The schedule for the meeting is as follows. I will introduce the other members of the company's Board of Directors, the host speakers during the meeting and representatives of the company's independent registered public accounting firm. I will then introduce the proposals to be voted on at this meeting and the results of stockholder voting. Following which, the formal meeting will be adjourned, and we'll have an opportunity for a brief question-and-answer session. Any questions will be handled in the manner presented by the moderator at the beginning of this meeting and subject to the rules of conduct that have been made available and applied to this meeting. At this time, I would like to identify our Director nominees. The company's directors standing for election, in addition to myself, are Carla J. Bailo; Larry W. Bickle; Stephen R. Brand; Javan D. Ottoson; Ramiro G. Peru; Julio M. Quintana; Rose M. Robeson; and Loren M. Leiker. Also president -- present for today's virtual meeting are all of the company's senior officers. Expected to speak during the meeting are Javan Ottoson, our President and Chief Executive Officer; David Copeland, our Executive Vice President and General Counsel and Corporate Secretary; Andrew Fisk, Associate General Counsel and Assistant Corporate Secretary; and Charlotte Brown of Alliance Advisors, the inspection of elections for this meeting. Also attending today are Kyle Green and [ Callie Kreider ] of Ernst & Young LLP, the company's independent registered public accounting firm since 2013. As Chairman of this Annual Meeting of Stockholders and in accordance with the bylaws of the company, I hereby appoint Charlotte Brown of Alliance Advisors to act as inspector of elections. David Copeland, Executive Vice President, General Counsel and Corporate Secretary of the company, will take the minutes of the meeting. The company's Board of Directors fixed the meeting date for today, May 27, 2020, at 3:30 p.m., and set the record date for the meeting as of the close of business on April 6, 2020. A list of stockholders for the company as of the record date has been compiled by the company's transfer agent, Computershare Trust Company NA. This list is available and open to examination by stockholders by contacting the Corporate Secretary. This list gives each stockholder's address and shareholdings as they appear on the company's books. According to this list, there were 112,988,682 shares of common stock outstanding on the record date, with no shares held in treasury by the company. Also available for inspection, by contacting the Corporate Secretary, is a copy of the notice of the Annual Stockholders' Meeting dated April 17, 2020, and the sworn affidavit of Alliance Advisors showing the proper mailing of each holder of common stock entitled to receive notice of the Annual Stockholders' Meeting, the proxy statement and the proxy card. A copy of the notice of Annual Stockholders' Meeting and the affidavit of mailing will be filed with the minutes of this meeting. Ms. Brown has compiled a list of all the shares represented at this meeting, either in person or by proxy, and has compared this list with the transfer agent's certified list. Ms. Brown, will you please give your report?

Mr. Chairman, representation of 33.3% of the outstanding shares constitutes a quorum. We have 88.79% of the outstanding stock represented at this meeting, either in person or by proxy, so we have a quorum today.

Thank you, Ms. Brown. So a quorum has been established. The minutes of the Annual Meeting of Stockholders held on May 29, 2019, are available for inspection by any stockholder by contacting the company's Corporate Secretary. I suggest that if it is agreeable, a formal reading of these minutes be waived.

Mr. Chairman, I move that formal reading of the minutes of the May 29, 2019 Annual Meeting of Stockholders be waived and that the minutes be approved.

I second the motion.

You have all heard the motion and the second. If all in favor, would please say aye.

Aye.

If any oppose, please say no. [Voting]

The motion is carried. The next order of business is the election of Directors. All Directors are elected annually and 9 Directors are to be elected to serve for the next year and until their respective successors shall have been elected and qualified. The following individuals have been nominated and have agreed to serve as Directors of the company for a 1-year term, expiring at the next Annual Meeting of Stockholders in 2021 and until their respective successors shall be elected and qualified: Carla J. Bailo; Stephen R. Brand; Javan D. Ottoson; Julio M. Quintana; Larry W. Bickle; Loren M. Leiker; Ramiro G. Peru; Rose M. Robeson; and myself, William D. Sullivan. The company's stockholders were also asked to hold an advisory vote regarding the compensation of our named executive officers; to ratify the appointment by the Audit Committee of the Board of Directors of Ernst & Young LLP as the company's independent registered public accounting firm for 2020; and to approve an amendment to our restated certificate of incorporation to authorize a reverse stock split of our outstanding shares of common stock at a reverse stock split ratio ranging between 1 for 5 and 1 for 20 and a proportionate reduction in the number of authorized shares of our common stock, with an exact ratio as may be determined by our Board of Directors in its sole discretion at a later date. Most of the company's stockholders have previously voted by proxy. Any stockholder that has not yet voted may do so during this meeting using the voting links available on your screen. I declare the polls now open for voting on the proposals properly brought before the meeting. And I will pause for a moment if anybody would like to vote. [Voting]

Having provided adequate time for voting, I will now declare the polls closed. Ms. Brown, would you report on the stockholder voting results, please?

Mr. Chairman, each of the Directors nominated has been elected by an affirmative vote, no less than 67,792,588 shares, which is 85.80% of the shares represented at this meeting and 60% of the total outstanding stock entitled to vote. The appointment by the Audit Committee of the Board of Directors of Ernst & Young LLP as the company's independent registered public accounting firm for 2020 has been ratified by an affirmative vote, no less than 98,389,911 shares, which is 98.7% of the shares represented at this meeting and 87.8% of the total outstanding stock entitled to vote. The advisory vote regarding the compensation of the company's named executive officers has been approved by an affirmative vote no less than 68,081,837 shares, which is 86.15% of the shares represented at this meeting and 60.26% of the total outstanding stock entitled to vote. The proposal to approve an amendment of the company's reinstated certificate of incorporation to authorize a reverse stock split of the company's outstanding shares of common stock has been approved by an affirmative vote, no less than 91,978,560 shares, which is 81.41% of the company's total outstanding stock. This is a preliminary report and the formal -- and the final approval amount will be filed with the SEC on the company's Form 8-K to be announced -- to announce the voting results.

Thank you, Ms. Brown. So I declare that all 9 of the Director nominees have been elected by our stockholders to the Board of Directors of the company for a 1-year term expiring at the Annual Meeting of Stockholders in 2021 and until their respective successors shall be elected and qualified; that the appointment by the Audit Committee of the Board of Directors of Ernst & Young LLP as the company's independent registered public accounting firm for 2020 has been ratified by our stockholders; that the advisory vote regarding the compensation of the company's named executive officers has been approved by our stockholders; and that the proposal to amend our restated certificate of incorporation to authorize a reverse stock split of our outstanding shares of common stock at a reverse stock split ratio ranging between 1 for 5 and 1 for 20 and a proportionate reduction in the number of authorized shares of our common stock, with an exact ratio as may be determined by our Board in its sole discretion at a later day has been approved by our stockholders. There being no further business, I would entertain a motion to adjourn this meeting.

Mr. Chairman, I move that the meeting be adjourned.

I second the motion.

All those in favor, please say aye.

Aye.

Any opposed, please say no. Motion to adjourn is carried, and I hereby declare this meeting adjourned. As previously mentioned, Mr. Ottoson and I will now entertain questions from our stockholders or a person serving as a proxy for a stockholder. Please reference the rules of conduct available for this meeting, and we'll follow those rules. As a reminder, you can submit questions through the question chat pane in the control panel. At this time, we'll pause a moment to allow for submission of any questions. Having paused for a moment and seeing that no questions have arisen, at this point, we will conclude the SM Energy Company 2020 Annual Meeting of Stockholders. Thank you to all the stockholders for attending today's meeting and enjoy the rest of your day. Thank you.