David W. Copeland - SM Energy Co. Javan D. Ottoson - SM Energy Co. A. Wade Pursell - SM Energy Co. Herbert S. Vogel - SM Energy Co.

Thank you for joining us by telephone and online for SM Energy Company's First Quarter 2018 Financial and Operating Results Discussion. Before we start, I'd like to advise you that we will be making forward-looking statements during this call about our plans, expectations and assumptions regarding our future performance. These statements involve risks that may cause our actual results to differ materially from the results expressed or implied in our forward-looking statements. For a discussion of these risks, you should refer to the cautionary information about forward-looking statements in our press release from yesterday afternoon, the presentation posted to our website for this call, the Risk Factors section of our Form 10-K that was filed earlier this year, and our Form 10-Q filed for this quarter. We will also discuss certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliation of those measures to the most directly comparable GAAP measures and other information about these non-GAAP metrics are described in our press release for this call. Company officials on the call are Jay Ottoson, President and Chief Executive Officer; Wade Pursell, Executive Vice President and Chief Financial Officer; Herb Vogel, Executive Vice President-Operations; and Jennifer Samuels, Vice President-Investor Relations. I'll now turn the call over to Jay.

Thank you, David. Good afternoon to all of you and thank you for joining us. Our operational execution in the first quarter of 2018 was excellent. As you can see on slide 4, we have made good progress on all our major objectives for the year. Our sizable increase in cash flow and success in reducing net debt are particular highlights, and we continue to deliver outstanding well results. We pre-released many of the important numbers for the quarter to you, so today's discussion will be brief. Wade will summarize our results and financial position and discuss our guidance for the remainder of the year, Herb will then cover new well results and other operations items, and then I will close. Wade?

Thanks, Jay. Yes, we've made good progress on targeted objectives for the year, meaning we are off to a great start on our two-year plan and on track to be net cash flow positive in the second half of 2019. We are achieving this through high-margin production growth, capital efficiency and well performance, and by continuing to core up the portfolio. Looking at slide 5, you can see some favorable metrics from the first quarter that demonstrate our success to-date. An important metric, cash flow growth, was up 30% over the fourth quarter. This was driven by big increases in the operating margin in Midland Basin production. The operating margin was $23.10 per Boe, up about 30% from last quarter and up 68% year-over-year. Midland Basin production was up 18% sequentially and 100% year-over-year. Oil accounted for 42% of our total production mix. Oil plus liquids accounted for 59% of our production mix. We've completed or nearly completed about $800 million in asset sales year-to-date. As of June, we expect all producing assets to be located in our Midland Basin or Eagle Ford programs. Importantly, as a result, pro forma for the second quarter divestiture closings, we have reduced net debt to around $2 billion. So, as you can see, we have made a step change reduction in net debt year to date. Speaking of that, let's move to slide 6 and look at the balance sheet and liquidity in a little more detail. We just completed the scheduled April redetermination process for our credit facility and the borrowing base was increased by more than 50% to $1.4 billion based on year-end reserves. Lender commitments total $1 billion and this facility remains undrawn. Liquidity is $1.6 billion, including our $643 million cash balance at quarter-end. Net debt to trailing 12-month…

Thanks, Wade. I will echo Jay's remarks that it was an excellent first quarter. Operationally, results continue to highlight outstanding rock quality, and excellent planning and operational execution by our employees and service industry partners. The first quarter sets the foundation for meeting our production growth, margin growth and therefore cash flow growth objectives. Importantly, we are performing on track or better in executing our plan. Let's review first quarter achievements, starting with the RockStar well results shown in slide 9. During the quarter, 19 wells reached their peak 30-day IP rates, all shown in the slide. Results were outstanding. The 30-day peak IP average of all 19 wells was 1,440 Boe per day per well, and this included wells drilled in three intervals, Wolfcamp A and B and Lower Spraberry. As shown on the map in the slide, these new completions were spread across much of our acreage position. Note that all of these new wells were either fully or half bounded by wells within the same interval or an interval above or below. All of the Wolfcamp A and Lower Spraberry wells on the Guitar North, Lumbergh, Berlinda Ann, and Whitaker pads were spaced at 420 feet between wells within the same interval, equivalent to 12 wells per section. Wolfcamp B wells were located to enable 660-foot spacing, equivalent to eight wells per section between wells in the same interval. However, they are closer in plan view to the Wolfcamp A wells stratigraphically above than they are to each other. We really like the production performance in the Berlinda Ann-Whitaker area, and as a result, recently acquired about 760 acres directly to the north. Moving farther east, take a look at the Fezzik wells which are spaced 660 feet apart. A year ago, there was quite a bit…

Well, thanks, Herb. I think it's clear we had a very good first quarter and that we are on track or ahead of schedule with all of our objectives for the year. We look forward to taking your questions tomorrow and thank you for your time and attention.