News Release

DENVER, Feb 24, 2011 (BUSINESS WIRE) --

SM Energy Company (NYSE: SM) today reports financial results for the fourth quarter of 2010 and provides an update on the Company's operating and financial activities. In addition, a new presentation for the fourth quarter earnings and operational update has been posted on the Company's website at sm-energy.com. This presentation will be referenced in the conference call scheduled for 8:00 a.m. Mountain time (10:00 a.m. Eastern time) on February 25, 2011. Information for the earnings call can be found below.

MANAGEMENT COMMENTARY

Tony Best, CEO and President, remarked, "Last year was a transformational year for SM Energy. We entered 2010 with a plan to advance our resource plays in inventory and get them ready for full-scale development. Our focus became centered on oil and liquids rich plays such as the Eagle Ford shale and Bakken/Three Forks and we saw continued success in these programs. For the year, SM Energy replaced nearly 350% of its production organically, while keeping a strong balance sheet. We are well positioned as we enter 2011 and we remain focused on building shareholder value with the continued growth in our key resource plays."

FOURTH QUARTER 2010 RESULTS

SM Energy posted net income for the fourth quarter of 2010 of $37.1 million, or $0.57 per diluted share. This compares to $990 thousand, or $0.02 per diluted share, for the same period in 2009. Adjusted net income for the fourth quarter was $29.7 million, or $0.46 per diluted share, versus $20.1 million, or $0.31 per diluted share, for the fourth quarter of 2009. 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.

Operating cash flow was $176.4 million for the fourth quarter of 2010 compared to $144.2 million for the same period in 2009. Net cash provided by operating activities was $78.7 million for the fourth quarter of 2010 compared with $83.1 million for the same period in 2009.

Adjusted net income and operating cash flow are non-GAAP financial measures - please refer to the respective reconciliation in the accompanying Financial Highlights section at the end of this release.

SM Energy reported average daily production of 344.4 MMCFE/d for the fourth quarter, which was above the guidance range of 305 to 330 MMCFE/d. Production growth was driven by strong results in the Company's Eagle Ford shale and Haynesville shale programs. Sequentially, reported production grew 15% in the fourth quarter of 2010 over the preceding quarter.

Total operating revenues and other income for the fourth quarter of 2010 was $294.1 million compared to $242.0 million for the same period in 2009. In the fourth quarter, the Company's average equivalent price, net of hedging, was $7.98 per MCFE, which is an increase of 4% from the $7.69 per MCFE realized in the comparable period in 2009. Average realized prices, inclusive of hedging activities, for the fourth quarter were $6.00 per Mcf, which was essentially flat from the same quarter in 2009, and $70.30 per barrel, which was an increase of 9% from 2009. SM Energy reports its gas volumes on a "wet gas" basis, meaning that revenue dollars associated with natural gas liquids ("NGLs") are reported within the Company's natural gas revenues.

Lease operating expense ("LOE") in the fourth quarter was $1.06 per MCFE, which is below the Company's guidance of $1.15 to $1.20 per MCFE. This represents a 19% decrease from the $1.31 per MCFE in the comparable period last year. Sequentially, lease operating expense remained flat in the fourth quarter of 2010 from the third quarter.

Transportation expense in the fourth quarter was $0.22 per MCFE, which is within the guidance range of $0.20 to $0.22 per MCFE. The reported per unit expense increased 10% from the comparable period in 2009. Transportation expense also increased 22% from $0.18 per MCFE in the third quarter of 2010. The increase in transportation reflects the growth in production in areas where higher transportation costs exist.

Production taxes for the fourth quarter of 2010 were $0.52 per MCFE, which was essentially flat from the same period a year ago. Sequentially, production taxes increased 33% from the third quarter of 2010. This increase was the result of production tax credits realized in the third quarter of 2010 related to severance tax holidays. The Company's realized production tax rate for the fourth quarter was 6.5%, which was essentially within the provided guidance of 7% of pre-hedge oil and natural gas revenue.

Total general and administrative ("G&A") expense for the fourth quarter of 2010 was $1.00 per MCFE, which is above the guidance range of $0.88 to $0.96 per MCFE. Cash G&A expense was $0.73 per MCFE for the quarter, compared to a guidance range of $0.54 to $0.58 per MCFE. Non-cash G&A for the quarter was $0.16 per MCFE versus a guidance range of $0.18 to $0.20 per MCFE. G&A related to cash payments from the Company's legacy Net Profits Plan ("NPP") program was $0.11 per MCFE in the quarter compared to a guidance range of $0.16 to $0.18 per MCFE. The total G&A expense variance from guidance is largely the result of higher compensation costs related to annual performance-based bonus accruals for 2010. On a sequential basis, G&A expense increased 4% from the third quarter of 2010.

Depletion, depreciation and amortization expense ("DD&A") was $2.99 per MCFE in the fourth quarter of 2010, which was within the Company's guidance range of $2.90 to $3.20 per MCFE. DD&A increased 4%, or $0.11 per MCFE, between the fourth quarters of 2010 and 2009. Sequentially, DD&A in the fourth quarter of 2010 decreased 2% from $3.05 per MCFE in the third quarter. The Company's DD&A rate is impacted by a number of factors, including year-end proved reserves and divestitures.

PROVED RESERVES AND COSTS INCURRED

Below is a roll-forward of the Company's proved reserves from year-end 2009 to year-end 2010.

SM Energy's estimate of proved reserves as of December 31, 2010, was 984.5 BCFE, which is an increase of 27% from 772.2 BCFE at the end of 2009. These reserves are comprised of 57.4 MMBbl of oil and 640.0 Bcf of natural gas, and are 70% proved developed, compared to 82% proved developed at the end of 2009. The before income tax PV-10 value of the Company's estimated proved reserves at December 31, 2010 was $2.3 billion, which was roughly $1.0 billion higher than the prior year. Over 80% of SM Energy's estimated proved reserves by value were audited by an independent reserve engineering firm.

Prices used at year-end to calculate the Company's estimate of proved reserves were $4.38 per MMBTU of natural gas and $79.43 per barrel of oil, using the trailing 12-month arithmetic average of the first of month price. These prices are 13% and 30% higher than the prices used at the end of 2009 for natural gas and oil, respectively.

In 2010, SM Energy realized $2.14 per MCFE in drilling finding costs, excluding revisions, which is an improvement of 38% from $3.44 per MCFE realized in 2009. Drilling reserve replacement, excluding revisions, increased to 349% in 2010 from 100% in 2009.

Finding costs and reserve replacement ratios are non-GAAP financial measures - please refer to the respective definitions in the accompanying Financial Highlights section at the end of this release.

Below is a table detailing the Company's costs incurred in oil and gas producing activities for the year ended December 31, 2010.

FINANCIAL POSITION AND LIQUIDITY

As of December 31, 2010, SM Energy had total long-term debt of $323.7 million. This was comprised of $275.7 million, net of debt discount, related to the Company's 3.50% Senior Convertible Notes and $48.0 million drawn on the long-term credit facility. The Company's debt-to-book capitalization ratio was 21% as of the end of the quarter.

On February 7, 2011, the Company closed the private offering of $350 million of 6.625% Senior Notes due 2019, which are unsecured and were issued at par value. The net proceeds will be used to repay outstanding balances under the credit facility, fund a portion of the Company's 2011 capital program and for general corporate purposes. As a result of the offering, the borrowing base for the long-term credit facility was automatically reduced from $1.1 billion to $1.0 billion; however, the Company's commitment amount under the credit facility of $678 million was not changed. SM Energy's debt-to-book capitalization ratio, pro forma for this offering, would be 34%.

OPERATIONAL UPDATE

Eagle Ford Shale

SM Energy is currently operating two (2) drilling rigs on its operated acreage in South Texas. The Company plans to increase its operated rig count to six (6) drilling rigs by the end of 2011. A third drilling rig is expected to arrive at the beginning of March 2011.

The Company continues to make improvements in its drilling times in the play. During 2010, drilling time per 1,000 ft. of penetration was reduced to 24 hours from 32 hours, a 25% improvement. A number of pilots to test downspacing potential and retained energy fracture stimulations are planned this year, both of which will provide important data regarding the ultimate spacing for the Company's development plans.

SM Energy has previously announced its intention to sell down a portion of its total 250,000 net acre Eagle Ford shale position. The data room for this planned transaction opened earlier this week and the Company expects to have an agreement completed in the second quarter of 2011.

Bakken / Three Forks

Two (2) drilling rigs are currently operating for SM Energy in the Williston Basin with a focus on horizontal development of the Bakken and Three Forks formations. A third operated rig is expected to arrive in April of 2011. The Company has increased its acreage position in the prospective portion of North Dakota to approximately 85,000 net acres, up from the previously reported 81,000 net acres.

Marcellus Shale Divestiture Update

To date, the Company has not received acceptable cash offers for its Marcellus shale position in north central Pennsylvania where it holds the rights to approximately 43,000 net acres. SM Energy continues to negotiate with interested parties.

Performance Guidance

The Company's guidance for the first quarter and the full year of 2011 is as follows:

EARNINGS CALL INFORMATION

The Company has scheduled a teleconference to discuss the fourth quarter results on February 25, 2011 at 8:00 a.m. Mountain time (10:00 a.m. Eastern time). The call participation number is 800-260-8140 and the participant passcode is 21918282. An audio replay of the conference call will be available approximately two hours after the call at 888-286-8010, with the passcode 43039171. International participants can dial 617-614-3672 to take part in the call, using passcode 21918282 and can access a replay of the call at 617-801-6888, using passcode 43039171. Replays can be accessed through March 11, 2011.

The call will be webcast live and can be accessed at SM Energy Company's website at sm-energy.com. An audio recording of the call will be available at that site through March 11, 2011.

INFORMATION ABOUT FORWARD LOOKING STATEMENTS

This release contains forward looking statements within the meaning of the securities laws, including forecasts and projections. The words "will," "believe," "budget," "anticipate," "plan," "intend," "estimate," "forecast," "look," 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 such factors as the volatility and level of oil and natural gas prices, uncertainties inherent in projecting future rates of production from drilling activities and acquisitions, the ability of midstream service providers to purchase or market the Company's production, the availability of debt and equity financing for purchasers of oil and gas properties, the ability of the banks in the Company's credit facility to fund requested borrowings, the ability of hedge counterparties to settle hedges in favor of the Company, the risks associated with the Company's hedging strategy, the uncertain nature of the expected benefits from divestitures or joint ventures of oil and gas properties, the ability to close announced divestitures or joint ventures of oil and gas properties, and other such matters discussed in the "Risk Factors" section of SM Energy's 2010 Annual Report on Form 10-K, which is expected to be filed on or around February 25, 2011. 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 the 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, 2010 may be reconciled to its standardized measure of discounted future net cash flows as of December 31, 2010 by reducing the Company's pre-tax PV-10 value by the discounted future income taxes associated with such reserves, and a reconciliation is provided below.

Reconciliation of standardized measure (GAAP) to PV-10 value (Non-GAAP):

Additionally, the Company believes its use of an independent reserve auditor is a fact of interest to investors and analysts who follow the Company. More information on these items will be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010 to be filed with the Securities and Exchange Commission on February 25, 2011.

ABOUT THE COMPANY

SM Energy Company, formerly named St. Mary Land & Exploration Company, is an independent energy company engaged in the exploration, exploitation, development, acquisition, and production of natural gas, natural gas liquids and crude oil. SM Energy routinely posts important information about the Company on its website. For more information about SM Energy, please visit its website at sm-energy.com.