SM Energy Co

(1)As of December 31, 2023.

Our 2023 operations were concentrated in the Midland Basin and South Texas, as described below. The following table summarizes estimated net proved reserves, net production volumes, and costs incurred for the year ended December 31, 2023, for these areas:

(2)Asset costs incurred do not sum to total costs incurred primarily due to corporate charges incurred on exploration activities and costs related to exploration efforts outside of our core areas of operation that are excluded from this table. For total costs incurred, please refer to Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report.

Total estimated net proved reserves at December 31, 2023, increased 13 percent from December 31, 2022. Total net equivalent production increased five percent for the year ended December 31, 2023, compared with 2022. Costs incurred for the year ended December 31, 2023, increased 28 percent compared with 2022, primarily as a result of increases in capital activity related to the development of both our Midland Basin and South Texas assets, acquisitions of proved and unproved properties and leasing activity in the Midland Basin, and inflation.

Midland Basin. Our Midland Basin assets, located in the Permian Basin in West Texas, are comprised of approximately 110,000 net acres, and include our RockStar assets in Howard and Martin counties, our Sweetie Peck assets in Upton and Midland counties, and our Klondike assets, which we acquired in 2023, in Dawson and northern Martin counties (“Midland Basin”). In 2023, drilling and completion activities were focused within our RockStar and Sweetie Peck assets, and we began drilling on our newly acquired Klondike acreage. Our current Midland Basin position provides substantial future development opportunities within multiple oil-rich intervals, including the Spraberry and Wolfcamp formations. We expect our 2024 capital activity in the Midland Basin to be focused on highly economic oil development projects.

In 2023, costs incurred were $768.1 million, and we averaged three drilling rigs and one completion crew. We drilled 54 gross (37 net) wells, completed 64 gross (54 net) wells, and acquired additional working interests in five net wells during the year ended December 31, 2023. As of December 31, 2023, 39 gross (29 net) wells had been drilled but not completed in our operated Midland Basin program. Net equivalent production for the year ended December 31, 2023, was 27.5 MMBOE, a seven percent decrease from 29.7 MMBOE for the year ended December 31, 2022. Estimated net proved reserves increased four percent to 268.5 MMBOE at December 31, 2023, from 257.4 MMBOE at December 31, 2022. Positive revisions of previous estimates primarily consisted of 43.4 MMBOE of infill and 21.3 MMBOE resulting from changes to decline curve estimates based on reservoir engineering analysis, partially offset by negative revisions of 18.2 MMBOE related to well performance and production of 27.5 MMBOE.

South Texas. Our South Texas assets are comprised of approximately 155,000 net acres located in Dimmit and Webb counties, Texas (“South Texas”). In 2023, our operations in South Texas were focused on production from the Austin Chalk formation and the Eagle Ford shale formation, and further development of the Austin Chalk formation. Our overlapping acreage position in the Maverick Basin in South Texas covers a significant portion of the western Eagle Ford shale and Austin Chalk formations (“Maverick Basin”) and includes acreage across the oil, gas-condensate, and dry gas windows with gas composition amenable to processing for NGL extraction. We expect our 2024 capital activity in South Texas to be focused primarily on developing the Austin Chalk formation.

In 2023, costs incurred were $423.5 million, and we averaged two drilling rigs and one completion crew. We drilled 46 gross (46 net) wells and completed 38 gross (37 net) wells, and as of December 31, 2023, 37 gross (37 net) wells had been drilled but not completed in our operated South Texas program. Net equivalent production for the year ended December 31, 2023, was 28.0 MMBOE, a 20 percent increase from 23.2 MMBOE for the year ended December 31, 2022. Estimated net proved reserves increased 20 percent to 336.4 MMBOE at December 31, 2023, from 280.0 MMBOE at December 31, 2022. Positive revisions of previous estimates consisted of 70.4 MMBOE of infill and 44.0 MMBOE of performance revisions resulting from changes to decline curve estimates based on reservoir engineering analysis. Additions of 30.1 MMBOE were the result of continued success in our development of the Austin Chalk formation. These increases were partially offset by production of 28.0 MMBOE, negative price revisions of 24.5 MMBOE, and negative revisions of 9.9 MMBOE related to well performance. As a result of revising our development plan, partially in response to decreased benchmark gas prices and certain lease obligations, we removed 25.8 MMBOE of net proved undeveloped reserves that were no longer in our five-year development plan. These net proved undeveloped reserves primarily related to our Eagle Ford assets and were replaced with certain infill revisions to net proved undeveloped reserves associated with different locations that were added to our five-year development plan. Additionally, infill revisions replaced converted net proved undeveloped reserves.

Office Space. As of December 31, 2023, we leased and owned office space as summarized in the table below: