SM ENERGY COMPANY

Attention: Corporate Secretary
1775 Sherman Street, Suite 1200
Denver, CO 80203

June 1, 2020

To the beneficial owners (or persons who intend to become beneficial owners prior to the expiration date of the offers), or representatives acting on behalf of beneficial owners (or on behalf of persons who intend to become beneficial owners prior to the expiration date of the offers), of the following securities of SM Energy Company (the “Offeror”):

ISSUE CUSIP/ISIN
6.125% Senior Notes due 2022 (the “2022 Notes”) 78454LAK6 / US78454LAK61
5.000% Senior Notes due 2024 (the “2024 Notes”) 78454LAH3 / US78454LAH33
5.625% Senior Notes due 2025 (the “2025 Notes”) 78454LAL4 / US78454LAL45
6.750% Senior Notes due 2026 (the “2026 Notes”) 78454LAN0 / US78454LAN01
6.625% Senior Notes due 2027 (the “2027 Notes”) 78454LAP5 / US78454LAP58

The Offeror is considering making a proposal to holders of the above listed securities and are asking beneficial owners of the 2021 Notes, 2022 Notes, 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes (collectively, the “Old Notes”) to state whether they are
(i) persons who are “U.S. persons” as defined in Rule 902 under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and “qualified institutional buyers” as defined in Rule 144A under the Securities Act or
(ii) persons who are outside the United States and are not “U.S. persons” as defined in Rule 902 under the Securities Act and if resident in Canada, (x) an “accredited investor” as defined in National Instrument 45-106 – Prospectus Exemptions or section 73.3(1) of the Securities Act (Ontario), as applicable, that either could acquire new notes for its own account or could be deemed to be acquiring new notes as principal by applicable law, (y) a “permitted client” as defined in National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations, and (z) a resident of the province of Alberta, British Columbia, Manitoba, Ontario, Québec, Saskatchewan, Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador (each beneficial owner that satisfies the requirements of either (i) or (ii), an “Eligible Holder”). The definitions of “qualified institutional buyer” and “U.S. person” are set forth in Annexes A and B hereto, respectively. The definitions of “accredited investor” as defined in each of National Instrument 45-106 – Prospectus Exemptions and the Securities Act (Ontario) and the definition of “permitted client” as defined in National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations are set forth in Annex C hereto. Additional eligibility criteria may apply to holders located in certain other jurisdictions.

If you are a beneficial owner of the Old Notes that is an Eligible Holder, or a representative acting on behalf of such a beneficial owner, and wish to review detailed information relating to our proposal, please complete the Eligibility Letter on the next page and submit it or return it to D.F. King & Co., Inc. (the “Information Agent”) at the address set forth in the Eligibility Letter. Holders that are U.S. persons and not qualified institutional buyers will not be able to receive the offer documents.

I am an "Eligible Holder"

I am not an "Eligible Holder"

This letter is neither an offer nor a solicitation of an offer with respect to the Old Notes and this letter does not create any obligations whatsoever on the part of the Offeror or any other person to make any offer to the recipient hereof or on the part of the recipient to participate if such an offer is made.

Responses must be received no later than 11:59 p.m., New York City time, on June 12, 2020.

You may direct any questions about the eligibility process to D.F. King & Co., Inc., Attn: Andrew Beck, at 48 Wall Street, 22nd Floor, New York, New York 10005, telephone number: Bankers and Brokers call (212) 269-5550; All Others Call (866) 620-2536.

Very truly yours,

SM ENERGY COMPANY

ANNEX A

“Qualified Institutional Buyer” means:

      (1)    Any of the following entities, acting for its own account or the accounts of other qualified institutional buyers, that in the aggregate owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with the entity:

(a)      Any insurance company as defined in Section 2(a)(13) of the U.S. Securities Act of 1933, as amended (the “Securities Act”);

(b)       Any investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”) or any business development company as defined in Section 2(a)(48) of the Investment Company Act;

(c)       Any small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;

(d)      Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees;

(e)       Any employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974;

(f)       Any trust fund whose trustee is a bank or trust company and whose participants are exclusively plans of the types identified in subparagraph (1)(D) or (E) above, except trust funds that include as participants individual retirement accounts or H.R. 10 plans;

(g)      Any business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (the “Investment Advisers Act”);

(h)      Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation (other than a bank as defined in Section 3(a)(2) of the Securities Act or a savings and loan association or other institution referenced in Section 3(a)(5)(A) of the Securities Act or a foreign bank or savings and loan association or equivalent institution), partnership, or Massachusetts or similar business trust; and

(i)        Any investment adviser registered under the Investment Advisers Act.

(2)       Any dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (the “Exchange Act”), acting for its own account or the accounts of other qualified institutional buyers, that in the aggregate owns and invests on a discretionary basis at least $10 million of securities of issuers that are not affiliated with the dealer, provided, that securities constituting the whole or a part of an unsold allotment to or subscription by a dealer as a participant in a public offering shall not be deemed to be owned by such dealer;

(3)       Any dealer registered pursuant to Section 15 of the Exchange Act acting in a riskless principal transaction on behalf of a qualified institutional buyer;

(4)       Any investment company registered under the Investment Company Act, acting for its own account or for the accounts of other qualified institutional buyers, that is part of a family of investment companies which own in the aggregate at least $100 million in securities of issuers, other than issuers that are affiliated with the investment company or are part of such family of investment companies.  Family of investment companies” means any two or more investment companies registered under the Investment Company Act, except for a unit investment trust whose assets consist solely of shares of one or more registered investment companies, that have the same investment adviser (or, in the case of unit investment trusts, the same depositor), provided that:

(i)      Each series of a series company (as defined in Rule 18f-2 under the Investment Company Act) shall be deemed to be a separate investment company; and

(ii)       Investment companies shall be deemed to have the same adviser (or depositor) if their advisers (or depositors) are majority-owned subsidiaries of the same parent, or if one investment company's adviser (or depositor) is a majority-owned subsidiary of the other investment company's adviser (or depositor);

(5)       Any entity, all of the equity owners of which are qualified institutional buyers, acting for its own account or the accounts of other qualified institutional buyers; and

(6)       Any bank as defined in Section 3(a)(2) of the Securities Act, any savings and loan association or other institution as referenced in Section 3(a)(5)(A) of the Securities Act, or any foreign bank or savings and loan association or equivalent institution, acting for its own account or the accounts of other qualified institutional buyers, that in the aggregate owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with it and that has an audited net worth of at least $25 million as demonstrated in its latest annual financial statements, as of a date not more than 16 months preceding the date of sale under the rule in the case of a U.S. bank or savings and loan association, and not more than 18 months preceding such date of sale for a foreign bank or savings and loan association or equivalent institution.

       For purposes of the foregoing definition:

(1)       In determining the aggregate amount of securities owned and invested on a discretionary basis by an entity, the following instruments and interests shall be excluded: bank deposit notes and certificates of deposit; loan participations; repurchase agreements; securities owned but subject to a repurchase agreement; and currency, interest rate and commodity swaps.

(2)       The aggregate value of securities owned and invested on a discretionary basis by an entity shall be the cost of such securities, except where the entity reports its securities holdings in its financial statements on the basis of their market value, and no current information with respect to the cost of those securities has been published.  In the latter event, the securities may be valued at market for purposes of this section.

(3)       In determining the aggregate amount of securities owned by an entity and invested on a discretionary basis, securities owned by subsidiaries of the entity that are consolidated with the entity in its financial statements prepared in accordance with generally accepted accounting principles may be included if the investments of such subsidiaries are managed under the direction of the entity, except that, unless the entity is a reporting company under Section 13 or 15(d) of the Exchange Act, securities owned by such subsidiaries may not be included if the entity itself is a majority-owned subsidiary that would be included in the consolidated financial statements of another enterprise.

(4)       Riskless principal transaction” means a transaction in which a dealer buys a security from any person and makes a simultaneous offsetting sale of such security to a qualified institutional buyer, including another dealer acting as riskless principal for a qualified institutional buyer.

ANNEX B

“U.S. person” means:

(1)       Any natural person resident in the United States;

(2)       Any partnership or corporation organized or incorporated under the laws of the United States;

(3)       Any estate of which any executor or administrator is a U.S. person;

(4)      Any trust of which any trustee is a U.S. person;

(5)       Any agency or branch of a foreign entity located in the United States;

(6)       Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;

(7)      Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and

(8)       Any partnership or corporation if:

(a)        Organized or incorporated under the laws of any foreign jurisdiction; and

(b)       Formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts.

The following are not “U.S. persons”:

(1)       Any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States;

(2)       Any estate of which any professional fiduciary acting as executor or administrator is a U.S. person if:

(a) An executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and

(b) The estate is governed by foreign law;

(3)       Any trust of which any professional fiduciary acting as trustee is a U.S. person, if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person;

(4)       An employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country;

(5)       Any agency or branch of a U.S. person located outside the United States if:

(a)        The agency or branch operates for valid business reasons; and

(b)        The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and

(6)        The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans.

For purposes of this Annex B, “United States” means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia.

“Non-U.S. qualified offeree” means:

(1)       any legal entity in a Relevant Member State which is a qualified investor as defined in the Prospectus Directive;

(2)       legal entities in any Relevant Member State fewer in number than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive;

(3)       any other legal entity in a Relevant Member State that in any other circumstances falls within Article 3(2) of the Prospectus Directive; and

(4)       any entity outside the United States and the European Economic Area to whom the offers related to the New Notes may be made in compliance with any applicable laws and regulations

For the purposes of this paragraph, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU and the expression “Relevant Member State” means each Member State of the European Economic Area which has implemented the Prospectus Directive, with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State.

For purposes of the Exchange Offers, the following are deemed not to be “non-U.S. qualified offerees:”

(1)       any holder to whom the New Notes have been publicly offered, sold or advertised, directly or indirectly, in or from Switzerland;

(2)       any holder that is an Italian resident or person located in the Republic of Italy;

(3)       any holder in France, other than (i) persons providing investment services relating to portfolio management for the account of third parties and/or
(ii) qualified investors (investisseurs qualifiés) acting for their own account, all as defined in, and in accordance with, Articles L.411-1, L. 411 2 and D. 411-1 to D.411-3 of the Code monétaire et financier;

(4)       any holder in Germany that is not a qualified investor, as defined in the German Securities Prospectus Act (Wertpapierprospektgesetz);

(5)       any holder in the United Kingdom, unless such holder is either
(i) an investment professional within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Financial Promotion Order”) or
(ii) a high net worth entity as defined in the Financial Promotion Order or
(iii) another person to whom the offer may lawfully be communicated falling within Article 49(2)(a) to (e) of the Financial Promotion Order or Article 43 of the Financial Promotion Order;

(6)       any holder in Ireland that is not a “qualified investor”, as defined in the Irish Prospectus (Directive 2003/71/EC) Regulations 2005;

(7)       any holder in Norway that is not also registered as a professional investor (“profesjonell investor”) with the Oslo Stock Exchange;

(8)       any holder in Hong Kong that is not a “professional investor” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder;

(9)       any holder in Singapore that is not an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore.

ANNEX C

“Accredited Investor” as defined under National Instrument 45-106 – Prospectus Exemptions means:

(a)    except in Ontario, a Canadian financial institution, or a Schedule III bank,

(b)   except in Ontario, the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada),

(c)    except in Ontario, a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary,

(d)   except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,

(e)    an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d),

(e.1) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),

(f)     except in Ontario, the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada,

(g)    except in Ontario, a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec,

(h)    except in Ontario, any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government,

(i)      except in Ontario, a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction of Canada,

(j)     an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds C$1,000,000,

(j.1) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds C$5,000,000,

(k)    an individual whose net income before taxes exceeded C$200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded C$300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year,

(l)      an individual who, either alone or with a spouse, has net assets of at least C$5,000,000,

(m)  a person, other than an individual or investment fund, that has net assets of at least C$5,000,000 as shown on its most recently prepared financial statements,

(n)    an investment fund that distributes or has distributed its securities only to: (i) a person that is or was an accredited investor at the time of the distribution, (ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 (Minimum amount investment), or 2.19 (Additional investment in investment funds), or (iii) a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 (Investment fund reinvestment),

(o)   an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt,

(p)   a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be,

(q)   a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction,

(r)     a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded,

(s)    an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function,

(t)     a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors,

(u)    an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser,

(v)    a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor; or

(w)  a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse.

accredited investor” as defined in Section 73.3(1) of the Securities Act (Ontario) means:

(a)  a financial institution described in paragraph 1, 2 or 3 of subsection 73.1(1),

(b)  the Business Development Bank of Canada,

(c)  a subsidiary of any person or company referred to in clause (a) or (b), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary,

(d)  a person or company registered under the securities legislation of a province or territory of Canada as an adviser or dealer, except as otherwise prescribed by the regulations,

(e)   the Government of Canada, the government of a province or territory of Canada, or any Crown corporation, agency or wholly owned entity of the Government of Canada or of the government of a province or territory of Canada,

(f)   a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’Île de Montréal or an intermunicipal management board in Quebec,

(g)  any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government,

(h)  a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a province or territory of Canada,

(i)    a person or company that is recognized or designated by the Commission as an accredited investor,

(j)   such other persons or companies as may be prescribed by the regulations.

permitted client” as defined under National Instrument 31-103 - Registration Requirements, Exemptions And Ongoing Registrant Obligations means:

(a)    a Canadian financial institution or a Schedule III bank;

(b)    the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);

(c)    a subsidiary of any person or company referred to in paragraph (a) or (b), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of the subsidiary,

(d)   a person or company registered under the securities legislation of a jurisdiction of Canada as an adviser, investment dealer, mutual fund dealer or exempt market dealer;

(e)    a pension fund that is regulated by either the federal Office of the Superintendent of Financial Institutions or a pension commission or similar regulatory authority of a jurisdiction of Canada or a wholly-owned subsidiary of such a pension fund;

(f)     an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (e);

(g)    the Government of Canada or a jurisdiction of Canada, or any Crown corporation, agency or wholly-owned entity of the Government of Canada or a jurisdiction of Canada;

(h)    any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;

(i)      a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;

(j)     a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a managed account managed by the trust company or trust corporation, as the case may be;

(k)   a person or company acting on behalf of a managed account managed by the person or company, if the person or company is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction;

(l)      an investment fund if one or both of the following apply: (i) the fund is managed by a person or company registered as an investment fund manager under the securities legislation of a jurisdiction of Canada; (ii) the fund is advised by a person or company authorized to act as an adviser under the securities legislation of a jurisdiction of Canada;

(m)   in respect of a dealer, a registered charity under the Income Tax Act (Canada) that obtains advice on the securities to be traded from an eligibility adviser, as defined in section 1.1 of National Instrument 45-106 - Prospectus Exemptions, or an adviser registered under the securities legislation of the jurisdiction of the registered charity;

(n)    in respect of an adviser, a registered charity under the Income Tax Act (Canada) that is advised by an eligibility adviser, as defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions, or an adviser registered under the securities legislation of the jurisdiction of the registered charity;

(o)   an individual who beneficially owns financial assets, as defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions, having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds C$5 million;

(p)   a person or company that is entirely owned by an individual or individuals referred to in paragraph (o), who holds the beneficial ownership interest in the person or company directly or through a trust, the trustee of which is a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction;

(q)   a person or company, other than an individual or an investment fund, that has net assets of at least C$25 million as shown on its most recently prepared financial statements;

(r)     a person or company that distributes securities of its own issue in Canada only to persons or companies referred to in paragraphs (a) to (q).