Track market-moving stories before they get noisy

SM Energy (SM - Free Report) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.

Over the past month, shares of this independent oil and gas company have returned +18.3%, compared to the Zacks S&P 500 composite's -1.2% change. During this period, the Zacks Oil and Gas - Exploration and Production - United States industry, which SM Energy falls in, has gained 8.2%. The key question now is: What could be the stock's future direction?

Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.

Earnings Estimate RevisionsRather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

SM Energy is expected to post earnings of $2.03 per share for the current quarter, representing a year-over-year change of +52.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +20.3%.

For the current fiscal year, the consensus earnings estimate of $8.15 points to a change of +50.4% from the prior year. Over the last 30 days, this estimate has changed +8.9%.

For the next fiscal year, the consensus earnings estimate of $9.45 indicates a change of +15.9% from what SM Energy is expected to report a year ago. Over the past month, the estimate has changed +14.8%.

With an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #2 (Buy) for SM Energy.

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue GrowthEven though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.

In the case of SM Energy, the consensus sales estimate of $1.97 billion for the current quarter points to a year-over-year change of +142.6%. The $7.6 billion and $8.05 billion estimates for the current and next fiscal years indicate changes of +141.1% and +5.9%, respectively.

Last Reported Results and Surprise HistorySM Energy reported revenues of $2.5 billion in the last reported quarter, representing a year-over-year change of +215.3%. EPS of $2.19 for the same period compares with $1.5 a year ago.

Compared to the Zacks Consensus Estimate of $2.01 billion, the reported revenues represent a surprise of +24.54%. The EPS surprise was +13.47%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates two times over this period.

ValuationNo investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

SM Energy is graded A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom LineThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about SM Energy. However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.

In the latest close session, SM Energy (SM - Free Report) was down 1.31% at $33.11. This move lagged the S&P 500's daily loss of 0.17%. Meanwhile, the Dow experienced a drop of 0.26%, and the technology-dominated Nasdaq saw a decrease of 0.09%.

The stock of independent oil and gas company has fallen by 9.76% in the past month, lagging the Oils-Energy sector's gain of 0.04% and the S&P 500's loss of 0.24%.

The upcoming earnings release of SM Energy will be of great interest to investors. The company is forecasted to report an EPS of $1.81, showcasing a 36.09% upward movement from the corresponding quarter of the prior year. Simultaneously, our latest consensus estimate expects the revenue to be $1.89 billion, showing a 132.36% escalation compared to the year-ago quarter.

For the full year, the Zacks Consensus Estimates are projecting earnings of $7.49 per share and revenue of $7.38 billion, which would represent changes of +38.19% and +133.85%, respectively, from the prior year.

Investors should also take note of any recent adjustments to analyst estimates for SM Energy. These latest adjustments often mirror the shifting dynamics of short-term business patterns. With this in mind, we can consider positive estimate revisions a sign of optimism about the business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate has moved 0.42% higher within the past month. SM Energy presently features a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that SM Energy has a Forward P/E ratio of 4.48 right now. For comparison, its industry has an average Forward P/E of 8.99, which means SM Energy is trading at a discount to the group.

The Oil and Gas - Exploration and Production - United States industry is part of the Oils-Energy sector. This group has a Zacks Industry Rank of 161, putting it in the bottom 35% of all 250+ industries.

The Zacks Industry Rank assesses the strength of our separate industry groups by calculating the average Zacks Rank of the individual stocks contained within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to use Zacks.com to monitor all these stock-influencing metrics, and more, throughout the forthcoming trading sessions.

Key Takeaways SM Energy fell 11.2% in a week even as Q2 earnings and revenues beat consensus estimates.SM Energy raised second-half 2026 production guidance while keeping capital spending at $2.65-$2.85B.SM Energy cut net debt by about $1.1B, but leverage, drilling inventory and lower 2026 EPS remain risks. SM Energy Company (SM - Free Report) shares fell 11.2% in the past week, raising a key question for investors. Has the decline created a better entry point, or do the company's operating and financial risks still justify caution?

Recent results offer support for the opportunity case, but leverage, capital intensity, drilling inventory and softer 2026 earnings estimates keep the picture mixed. The weekly move alone does not resolve that trade-off.

SM's Q2 Beat Complicates the Weekly Sell-OffSecond-quarter adjusted earnings of $2.19 per share beat the Zacks Consensus Estimate of $1.93 by 13.5%. Total revenues of $2.50 billion topped the consensus mark by 24.5% and rose 215.3% year over year.

Those results provide a fundamental counterweight to the share decline. They do not establish what caused the latest sell-off, but they show why investors should assess the pullback alongside operating performance rather than price action alone.

SM Energy Raises Production Despite Lower ActivitySM raised second-half 2026 production guidance to 435,000-440,000 barrels of oil equivalent per day, including about 238,000 barrels of oil per day. Full-year capital guidance remains $2.65-$2.85 billion.

The higher production outlook comes with a 2026 plan averaging 11 rigs, down from 15 previously. Lower activity leaves less operating cushion, making execution and capital efficiency important to sustaining the higher production run rate.

SM's Deleveraging Offers a Counterweight to RiskNet debt fell by roughly $1.1 billion sequentially in the second quarter to about $6.25 billion. SM also generated $467 million of adjusted free cash flow, supporting continued balance-sheet repair.

About $900 million of net proceeds from the South Texas asset sale helped redeem $819 million of notes due in 2026. SM subsequently called the remaining $417 million of 2027 notes for redemption, leaving no senior-note maturities until mid-2028.

SM Energy Still Faces Leverage and Inventory LimitsSM's debt-to-capital ratio remains 45.87%, compared with 20.10% for the industry. Its drilling inventory is estimated at roughly eight years of development opportunities, a shorter runway than some peers.

The Zacks Consensus Estimate for 2026 earnings also fell 2% over the past four weeks to $6.95 per share. Combined with the sizable capital program, that revision argues against assuming the weekly decline is automatically overdone.

SM's Valuation Leaves Room for ReassessmentSM trades at 1.0X forward 12-month sales, below its five-year median of 1.5X and the Zacks sub-industry's 3.6X. That discount could leave room for reassessment if deleveraging and execution continue, but valuation alone does not remove balance-sheet or inventory risk.

EOG Resources, Inc. (EOG - Free Report) , another U.S. exploration-and-production peer, offers a reference point for comparing valuation and financial flexibility across the group. Matador Resources Company (MTDR - Free Report) provides another peer comparison when investors weigh SM's discount against alternative producers in the same industry.

SM’s 2027 Estimates Test Rally Durability

The Zacks Consensus Estimate calls FOR SM Energy to post earnings of $7.94 cents per share in 2027, higher than an increase of $7.10 in 2026.

Image Source: Zacks Investment Research

SM's Mixed Signals Favor a Measured ViewThe dip looks more like a reason to reassess SM than a stand-alone buy signal. Better-than-expected second-quarter results, higher production guidance and faster debt reduction offset meaningful leverage, capital-spending and inventory constraints.

SM currently carries a Zacks Rank #3 (Hold). Its Value Score of A, Growth Score of A and VGM Score of A point to favorable underlying characteristics, but Style Scores are designed to complement the Zacks Rank. That combination supports a measured stance rather than treating the weekly decline itself as a buying signal.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SM Energy (SM - Free Report) came out with quarterly earnings of $2.19 per share, beating the Zacks Consensus Estimate of $1.93 per share. This compares to earnings of $1.5 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of +13.47%. A quarter ago, it was expected that this independent oil and gas company would post earnings of $1.29 per share when it actually produced earnings of $1.55, delivering a surprise of +20.16%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

SM Energy, which belongs to the Zacks Oil and Gas - Exploration and Production - United States industry, posted revenues of $2.5 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 24.54%. This compares to year-ago revenues of $792.94 million. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

SM Energy shares have added about 66% since the beginning of the year versus the S&P 500's gain of 13%.

What's Next for SM Energy?While SM Energy has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for SM Energy was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.68 on $1.92 billion in revenues for the coming quarter and $6.95 on $7.28 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Oil and Gas - Exploration and Production - United States is currently in the bottom 13% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Venture Global (VG - Free Report) , has yet to report results for the quarter ended June 2026. The results are expected to be released on August 11.

This exporter of liquid natural gas is expected to post quarterly earnings of $0.49 per share in its upcoming report, which represents a year-over-year change of +250%. The consensus EPS estimate for the quarter has been revised 4.6% higher over the last 30 days to the current level.

Venture Global's revenues are expected to be $4.5 billion, up 45.2% from the year-ago quarter.

Raises second-half production outlook and maintains full-year capital guidance
Delivers record operating cash flow, reduces debt, and returns capital to stockholders

, /PRNewswire/ -- SM Energy Company (the "Company" or "SM") (NYSE: SM) today reported financial and operating results for the second quarter 2026. Investor materials, including accompanying slides, can be accessed at https:// sm-energy.com/investors. A conference call is scheduled for 8 a.m. MT/10 a.m. ET on August 6, 2026. Participation details are included in this release.

SM continues to advance the integration of its Civitas merger (the "Merger") and deliver strong progress against three strategic priorities: Integrate, Execute and Bolster. Second quarter 2026 performance on each of these priorities is summarized below.

Integrate –

Progressed Merger-related synergies, with 95% of the target, or $355 million, actioned to date; full run-rate synergies expected to be actioned by year-end 2026. Lowered full-year 2026 recurring G&A guidance by $50 million at the midpoint, reflecting accelerated integration and full capture of Merger-related G&A synergies. Execute –

Net income was $4.46 per diluted share; adjusted net income1 was $2.19 per diluted share. Generated operating cash flow of $1.1 billion, or $1.2 billion before net change in working capital, including certain long-term items.1 Capital expenditures totaled $754 million, or $717 million before changes in accruals.1 Delivered adjusted free cash flow1 of $467 million, after $42 million of one-time integration, transaction, and capital costs. Adjusted EBITDAX1 was $1.4 billion. Average net daily production totaled approximately 440 MBoe/d, including approximately 230 MBbl/d of oil. Increased second-half 2026 production guidance to 435–440 MBoe/d, including approximately 238 MBbl/d of oil. Maintained full-year 2026 capital guidance of $2.65–$2.85 billion. Bolster –

Returned $137 million of capital to stockholders, or approximately 30% of adjusted free cash flow,1 through $84 million in share repurchases (2.6 million shares) and SM's $0.22 per share quarterly dividend. Closed the $950 million sale of certain South Texas assets (the "South Texas Divestiture") on April 30, 2026, substantially achieving SM's $1.0 billion-plus asset-sales target; net proceeds of approximately $900 million were used to redeem all $819 million aggregate principal amount of the 6.75% and 5.0% Senior Notes due 2026 (collectively, "2026 Senior Notes"), contributing to a $1.1 billion sequential reduction in net debt.1 Subsequent to quarter-end, issued a notice of full redemption of all remaining $417 million aggregate principal amount of the 6.625% Senior Notes due 2027 ("2027 Senior Notes") at par using cash on hand, retiring all Senior Notes due through mid-2028. 1Adjusted net income per diluted share; operating cash flow before net change in working capital, including certain long-term items; capital expenditures, before changes in accruals; adjusted free cash flow; adjusted EBITDAX; and net debt are non-GAAP measures. Indicates a non-GAAP measure or metric. Refer to "Definitions of Non-GAAP Measures and Metrics As Calculated By the Company" and the accompanying reconciliations later in this release.

"Our team delivered strong results in the second quarter, generating significant free cash flow on the strength of our scaled portfolio," stated President and CEO Beth McDonald. "In our first full quarter as a combined company, we moved with urgency, actioning 95% of our targeted run-rate synergies, while further strengthening our balance sheet and returning $137 million to stockholders through dividends and share repurchases. With strong performance year-to-date, we today raised second-half 2026 production expectations, reaffirmed full-year capital expectations and reduced our full-year G&A guidance. Our team is focused on disciplined execution – turning scale and asset quality into growing, durable returns for stockholders."

Second Quarter 2026 Review

Production of approximately 440 MBoe/d, including approximately 230 MBbl/d of oil, with an average realized price of $53.86 per Boe, before hedges. Second-quarter volumes include approximately 12 MBoe/d from the recently divested South Texas assets, or one month of production prior to the April 30, 2026 sale. Recognized an estimated $262 million gain on the South Texas Divestiture. Year-to-date transaction and integration costs are $172 million compared to full-year guidance of $180 million; the substantial majority of one-time costs have now been incurred.  Other operating income included an approximate $70 million severance tax refund. Guidance

SM raised its second-half production outlook to 435–440 MBoe/d, including approximately 238 MBbl/d of oil, from 430 MBoe/d, and narrowed its full-year production guidance to 418–423 MBoe/d (223–225 MBbl/d of oil). SM reaffirmed its full-year capital guidance. See the table below for detailed third quarter and full-year guidance. The following table summarizes SM's third quarter and full-year 2026 operational and financial guidance.

Production

3Q 2026

Full Year 2026

Total Production (MMBoe)1

39.5 – 40.5

152.5 – 154.5

Total Production (MBoe/d)1

430 – 440

418 – 423

Oil Production (MBbl/d)1

230 – 240

223 – 225

Capital Program ($MM)

Capital Expenditures2

$740 – $790

$2,650 – $2,850

DC&E

$2,300 – $2,500

Facility, Land, and Other

~$280

One-Time Capital Costs3

~$70

Net Wells Drilled

~55

~245

Net Wells Turned-In-Line

~85

~295

Avg. Well Cost ($/lateral ft)4

~$710

Operating Expenses ($/Boe)

Lease Operating Expense

$6.50 – $6.80

Transportation

$3.60 – $3.75

Production Taxes (% of oil, gas and NGL revenue)

~6%

Ad Valorem Taxes

~$0.50

DD&A

$14.00 – $15.00

General & Administrative ($MM)

Recurring G&A5

$230 – $250

One-Time Integration & Transaction — Cash6

~$160

One-Time Integration & Transaction — Non-Cash6

~$20

Other ($MM)

Exploration Expense

~$100

Cash Taxes:

$75–$80/Bbl (WTI)

$20 – $30

$80–$85/Bbl (WTI)

$30 – $50

Notes:

1 FY26 production guidance includes 11 months of Civitas contribution following the January 30, 2026, Merger close, the conversion of certain acquired volumes to two-stream reporting, and four months of production from certain South Texas assets divested on April 30, 2026.

2 Indicates a non-GAAP measure or metric. Refer to "Definitions of Non-GAAP Measures and Metrics As Calculated By the Company" and the accompanying reconciliations later in this release. FY26 capital expenditures before changes in accruals include ~$50 million of expected synergies.

3 Includes one-time, non-recurring capital costs related to Merger integration and the South Texas Divestiture.

4 Company-wide average 2026 expected well cost and includes well connection/equipment costs.

5 FY26 recurring G&A guidance includes ~$35 million of stock-based compensation.

6 The majority of one-time integration and transaction costs (both cash and non-cash) were incurred in 1H26.

Webcast Details

SM plans to host a conference call and webcast at 8 a.m. MT (10 a.m. ET) tomorrow, August 6, 2026. The call and accompanying presentation may be accessed at https://www.sm-energy.com/investors. Participants can also dial into the conference call at (877) 407-6050 or +1 (201) 689-8022 for international participants.

About SM Energy Company

SM is a premier, scaled operator of top-tier oil and gas assets across four leading U.S. shale basins: the Permian Basin, DJ Basin, South Texas, and Uinta Basin. SM routinely posts important information about the Company on its website. SM is focused on operational excellence, disciplined capital allocation, and delivering growing returns to stockholders. For more information, visit www.sm-energy.com.

Forward Looking Statements

This release contains forward-looking statements within the meaning of securities laws. The words "anticipate," "deliver," "demonstrate," "establish," "estimate," "expects," "goal," "generate," "guidance," "maintain," "objectives," "optimize," "plan," "priority," "target," and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this release include, among other things, the Company's 2026 plans and strategic objectives; the Company's intention to redeem in full its 2027 Senior Notes; future return of capital plans; expectations regarding increased scale; integration objectives and synergy targets, including the expected timing and magnitude; plans to achieve the Company's $1.0 billion-plus divestiture target; assumptions and projections for the third quarter, second half, and full year 2026 regarding guidance for total production and oil production; the Company's capital plan, including total capital expenditures; drilling, completion and equipment costs; facility, land and other costs; one-time capital costs; Company average cost per lateral foot; certain operating expenses, including lease operating expense, transportation, production and ad valorem taxes; DD&A; general and administrative expense; and certain other costs, including exploration expense and cash taxes. These statements involve known and unknown risks, which may cause the Company's actual results to differ materially from results expressed or implied by the forward-looking statements. Future results may be impacted by the risks discussed in the Risk Factors section of the Company's most recent Annual Report on Form 10-K, as such risk factors may be updated from time to time in the Company's other periodic reports filed with the Securities and Exchange Commission, specifically the 2025 Form 10-K. The forward-looking statements contained herein speak as of the date of this release. Although the Company may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so, except as required by securities laws.

Investor Relations

Megan Hays, Vice President, Investor Relations, [email protected]
Meghan Dack, Director, Investor Relations, [email protected] 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Production Data

For the Three Months

Ended

Percent Change

 Between

For the Six Months
Ended

Percent
Change
Between

June 30,

March 31,

June 30,

2Q26

& 1Q26

June 30,

June 30,

YTD 2026
& 2025

2026

2026

2025

2026

2025

Realized sales price (before the effect of net derivative settlements):

Oil (per Bbl)

$    96.85

$    73.69

$    62.04

31 %

$    86.43

$    66.04

31 %

Gas (per Mcf)

$     0.17

$     1.72

$     2.15

(90) %

$     0.88

$     2.73

(68) %

NGLs (per Bbl)

$    24.69

$    21.58

$    21.91

14 %

$    23.21

$    23.85

(3) %

Equivalent (per Boe)

$    53.86

$    44.22

$    41.27

22 %

$    49.48

$    44.17

12 %

Realized sales price (including the effect of net derivative settlements):1

Oil (per Bbl)

$    80.62

$    69.56

$    64.05

16 %

$    75.64

$    67.25

12 %

Gas (per Mcf)

$     1.54

$     2.27

$     2.67

(32) %

$     1.87

$     3.08

(39) %

NGLs (per Bbl)

$    24.83

$    21.75

$    21.91

14 %

$    23.36

$    23.37

— %

Equivalent (per Boe)

$    48.36

$    43.32

$    43.36

12 %

$    46.07

$    45.47

1 %

Net production volumes:2,3

Oil (MMBbl)

20.9

17.1

10.5

22 %

38.0

19.9

92 %

Gas (Bcf)

86.8

72.4

36.2

20 %

159.2

72.6

119 %

NGLs (MMBbl)

4.6

4.2

2.5

10 %

8.9

4.8

84 %

Equivalent (MMBoe)

40.0

33.4

19.0

20 %

73.4

36.8

100 %

Average net daily production:2,3

Oil (MBbl per day)

229.8

190.3

115.7

21 %

210.2

109.7

92 %

Gas (MMcf per day)

953.7

804.1

398.3

19 %

879.3

401.2

119 %

NGLs (MBbl per day)

51.0

46.9

26.9

9 %

48.9

26.6

84 %

Equivalent (MBoe per day)

439.7

371.2

209.1

18 %

405.7

203.2

100 %

Per Boe data:

Lease operating expense

$     6.71

$     6.25

$     5.52

7 %

$     6.50

$     5.81

12 %

Transportation costs

$     3.57

$     3.65

$     4.13

(2) %

$     3.61

$     4.03

(10) %

Production taxes

$     3.25

$     2.43

$     1.59

34 %

$     2.88

$     1.82

58 %

Ad valorem tax expense

$     0.37

$     0.47

$     0.54

(21) %

$     0.41

$     0.54

(24) %

General and administrative4,5

$     1.98

$     5.20

$     2.21

(62) %

$     3.44

$     2.21

56 %

Net derivative settlement gain (loss)

$    (5.50)

$    (0.90)

$     2.09

(511) %

$    (3.41)

$     1.29

(364) %

Depletion, depreciation, and amortization

$    14.81

$    12.91

$    15.40

15 %

$    13.95

$    15.30

(9) %

1 Indicates a non-GAAP metric calculated as the average realized price after the effects of net commodity derivative settlements. The Company believes this metric is useful to management and the investment community to understand the effects of net commodity derivative settlements on average realized price.

2 Amounts and percentage changes may not calculate due to rounding.

3 The results for the three months ended March 31, 2026, include only two months of production from the Civitas assets acquired on January 30, 2026. The results for the three months ended June 30, 2026, include only one month of production from the South Texas assets divested on April 30, 2026. The results for the six months ended June 30, 2026, include five months of production from the acquired Civitas assets and four months of production from the divested South Texas assets.

4 Includes recurring non-cash stock-based compensation expense of $0.12, $0.26, and $0.24 per Boe for the three months ended June 30, 2026, March 31, 2026, and June 30, 2025, respectively, and $0.18 and $0.28 per Boe for the six months ended June 30, 2026, and 2025, respectively.

5 Includes one-time costs (consisting of both cash and non-cash items) of $0.92 per Boe and $3.52 per Boe for the three months ended June 30, 2026, and March 31, 2026, respectively, and $2.10 per Boe for the six months ended June 30, 2026, respectively.

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Condensed Consolidated Balance Sheets

(in millions, except share data)

June 30,

December 31,

ASSETS

2026

2025

Current assets:

Cash and cash equivalents

$             620

$             368

Accounts receivable

989

331

Derivative assets

145

83

Prepaid expenses and other

146

29

Total current assets

1,900

811

Property and equipment (successful efforts method):

Proved oil and gas properties

23,214

16,012

Accumulated depletion, depreciation, and amortization

(8,466)

(8,793)

Unproved oil and gas properties, net of valuation allowance of $12 and $12, respectively

860

460

Wells in progress

809

458

Other property and equipment, net of accumulated depreciation of $67 and $63, respectively

131

65

Total property and equipment, net

16,548

8,202

Noncurrent assets:

Derivative assets

56

6

Other noncurrent assets

354

234

Total noncurrent assets

410

240

Total assets

$          18,858

$           9,253

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses

$           2,367

$             690

Senior Notes, net

416

419

Derivative liabilities

184

2

Other current liabilities

122

58

Total current liabilities

3,089

1,169

Noncurrent liabilities:

Revolving credit facility

—

—

Senior Notes, net

6,620

2,296

Asset retirement obligations

430

150

Deferred tax liabilities, net

630

724

Derivative liabilities

1

2

Other noncurrent liabilities

275

102

Total noncurrent liabilities

7,956

3,274

Stockholders' equity:

Common stock, $0.01 par value - authorized: 400,000,000 and 200,000,000 shares, respectively; issued and outstanding: 237,494,374 and 114,630,905 shares, respectively

2

1

Additional paid-in capital

3,888

1,517

Retained earnings

3,921

3,291

Accumulated other comprehensive income

2

1

Total stockholders' equity

7,813

4,810

Total liabilities and stockholders' equity

$          18,858

$           9,253

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Condensed Consolidated Statements of Operations

(in millions, except per share data)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2026

2025

2026

2025

Operating revenues and other income:

Oil, gas, and NGL production revenue

$         2,156

$           785

$         3,633

$         1,625

Gain on divestiture activity

262

—

262

—

Other operating income

82

8

84

13

Total operating revenues and other income

2,500

793

3,979

1,637

Operating expenses:

Oil, gas, and NGL production expense

556

224

984

449

Depletion, depreciation, and amortization

592

293

1,024

563

Exploration1

21

15

47

27

General and administrative1,2

79

42

253

81

Net derivative (gain) loss3

(272)

(78)

425

(61)

Other operating expense2

28

2

48

7

Total operating expenses

1,004

498

2,781

1,066

Income from operations

1,496

295

1,198

571

Interest expense

(111)

(43)

(224)

(87)

Other non-operating income, net

4

—

5

—

Income before income taxes

1,389

253

979

485

Income tax expense

(318)

(51)

(243)

(101)

Net income

$         1,071

$           202

$           736

$           384

Basic weighted-average common shares outstanding

239

115

219

115

Diluted weighted-average common shares outstanding

240

115

220

115

Basic net income per common share

$           4.48

$           1.76

$           3.35

$           3.35

Diluted net income per common share

$           4.46

$           1.76

$           3.34

$           3.34

1 Recurring non-cash stock-based compensation included in:

Exploration expense

$              3

$              1

$              5

$              3

General and administrative expense

4

5

12

10

Total non-cash stock-based compensation

$              7

$              6

$             17

$             13

2 Transaction and integration costs included in:

General and administrative (includes $5 million and $20 million, respectively, of non-cash stock-based compensation associated with the Merger)

$             37

$             —

$           155

$             —

Other operating expenses

—

—

17

—

Total transaction and integration costs

$             37

$             —

$           172

$             —

3 The net derivative (gain) loss line item consists of the following:

Net derivative settlement (gain) loss

$           220

$            (40)

$           250

$            (47)

Net (gain) loss on fair value changes

(492)

(39)

175

(14)

Total net derivative (gain) loss

$          (272)

$            (78)

$           425

$            (61)

Note: Prior year amounts may not calculate due to rounding.

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Condensed Consolidated Statements of Stockholders' Equity

(in millions, except share data and dividends per share)

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income

Total
Stockholders'
Equity

Common Stock

Shares

Amount

Balances, December 31, 2025

114,630,905

$           1

$       1,517

$       3,291

$               1

$        4,810

Net loss

—

—

—

(335)

—

(335)

Net cash dividends declared, $0.22 per share

—

—

—

(53)

—

(53)

Issuance of common stock upon vesting of RSUs, and settlement of PSUs, net of shares used for tax withholdings

235,422

—

(17)

—

—

(17)

Stock-based compensation expense

1,114,479

—

25

—

—

25

Replacement equity awards issued in connection with the Merger

—

—

29

—

—

29

Issuance of common stock in connection with the Merger

123,715,771

1

2,408

—

—

2,409

Balances, March 31, 2026

239,696,577

$           2

$       3,962

$       2,903

$               1

$        6,868

Net income

—

—

—

1,071

—

1,071

Other comprehensive income

—

—

—

—

1

1

Net cash dividends declared, $0.22 per share

—

—

—

(53)

—

(53)

Issuance of common stock under Employee Stock Purchase Plan

147,743

—

2

—

—

2

Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings

216,257

—

(3)

—

—

(3)

Stock-based compensation expense

77,303

—

11

—

—

11

Purchase of shares under Stock Repurchase Program

(2,643,506)

—

(84)

—

—

(84)

Balances, June 30, 2026

237,494,374

$           2

$       3,888

$       3,921

$               2

$        7,813

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Condensed Consolidated Statements of Stockholders' Equity (Continued)

(in millions, except share data and dividends per share)

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Loss

Total
Stockholders'
Equity

Common Stock

Retained
Earnings

Shares

Amount

Balances, December 31, 2024

114,461,934

$           1

$       1,502

$       2,735

$              (1)

$        4,237

Net income

—

—

—

182

—

182

Net cash dividends declared, $0.20 per share

—

—

—

(23)

—

(23)

Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings

284

—

—

—

—

—

Stock-based compensation expense

—

—

7

—

—

7

Balances, March 31, 2025

114,462,218

$           1

$       1,509

$       2,895

$              (1)

$        4,404

Net income

—

—

—

202

—

202

Net cash dividends declared, $0.20 per share

—

—

—

(23)

—

(23)

Issuance of common stock under Employee Stock Purchase Plan

90,314

—

2

—

—

2

Stock-based compensation expense

82,193

—

6

—

—

6

Balances, June 30, 2025

114,634,725

$           1

$       1,517

$       3,074

$              (1)

$        4,590

Note: Prior year amounts may not calculate due to rounding.

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Condensed Consolidated Statements of Cash Flows

(in millions)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2026

2025

2026

2025

Cash flows from operating activities:

Net income

$        1,071

$          202

$          736

$          384

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on divestiture activity

(262)

—

(262)

—

Depletion, depreciation, and amortization

592

293

1,024

563

Stock-based compensation expense

11

6

36

13

Net derivative (gain) loss

(272)

(78)

425

(61)

Net derivative settlement gain (loss)

(220)

40

(250)

47

Amortization of deferred financing costs and debt premiums, net

(5)

3

(10)

5

Deferred income tax expense

316

43

231

69

Other, net

(10)

(6)

(38)

(4)

Net change in working capital

(118)

69

(149)

38

Net cash provided by operating activities

1,103

571

1,743

1,054

Cash flows from investing activities:

Net proceeds from the sale of oil and gas properties

897

—

897

—

Capital expenditures

(754)

(410)

(1,309)

(824)

Acquisition of business, net of cash acquired

—

—

(49)

—

Other

—

—

(24)

(15)

Net cash provided by (used in) investing activities

143

(410)

(485)

(839)

Cash flows from financing activities:

Proceeds from revolving credit facility

326

528

341

1,385

Repayment of revolving credit facility

(326)

(566)

(341)

(1,453)

Net proceeds from Senior Notes

(1)

—

984

—

Cash paid to repurchase Senior Notes

(935)

—

(1,743)

—

Repurchase of common stock

(87)

(1)

(87)

(1)

Dividends paid

(53)

(23)

(135)

(46)

Other, net

1

2

(25)

2

Net cash used in financing activities

(1,075)

(59)

(1,006)

(113)

Net change in cash, cash equivalents, and restricted cash

171

102

252

102

Cash, cash equivalents, and restricted cash at beginning of period

449

—

368

—

Cash, cash equivalents, and restricted cash at end of period

$          620

$          102

$          620

$          102

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Condensed Consolidated Statements of Cash Flows (continued)

(in millions)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2026

2025

2026

2025

Supplemental schedule of additional cash flow information:

Operating activities: Cash paid for interest, net of capitalized interest

$          (90)

$            (3)

$         (185)

$          (85)

Operating activities: Net cash paid for income taxes

$          (33)

$            (5)

$          (32)

$            (5)

Investing activities: Changes in capital expenditure accruals

$          (37)

$          (22)

$           80

$             5

Note: Prior year amounts may not calculate due to rounding.

DEFINITIONS OF NON-GAAP MEASURES AND METRICS AS CALCULATED BY THE COMPANY

To supplement the presentation of its financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides certain non-GAAP measures and metrics, which are used by management and the investment community to assess the Company's financial condition, results of operations, and cash flows, as well as compare performance from period to period and across the Company's peer group. The Company believes these measures and metrics are widely used by the investment community, including investors, research analysts and others, to evaluate and compare recurring financial results among upstream oil and gas companies in making investment decisions or recommendations. These measures and metrics, as presented, may have differing calculations among companies and investment professionals and may not be directly comparable to the same measures and metrics provided by others. A non-GAAP measure should not be considered in isolation or as a substitute for the most directly comparable GAAP measure or any other measure of a company's financial or operating performance presented in accordance with GAAP. Reconciliations of the Company's non-GAAP measures to the most directly comparable GAAP measures are presented below. These measures may not be comparable to similarly titled measures of other companies.

Adjusted EBITDAX: Adjusted EBITDAX represents net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, and amortization expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, non-recurring or one-time costs including transaction and integration costs associated with the Merger, and certain other items.  Adjusted EBITDAX excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated.  Adjusted EBITDAX is a non-GAAP measure that the Company believes provides useful additional information to investors and analysts, as a performance measure, for analysis of the Company's ability to internally generate funds for exploration, development, acquisitions, and to service debt. The Company is also subject to financial covenants under the Company's Credit Agreement, a material source of liquidity for the Company, based on Adjusted EBITDAX ratios. Please reference the Company's second quarter 2026 Form 10-Q and the most recent Annual Report on Form 10-K for discussion of the Credit Agreement and its covenants.

Adjusted free cash flow: Adjusted free cash flow is calculated as net cash provided by operating activities before net change in working capital, including change in certain long-term items, less capital expenditures before changes in accruals. The Company uses this measure to represent the cash generated from operations, in excess of capital expenditures, that is available to fund discretionary uses such as debt reduction, stockholder returns, or expanding the business.

Adjusted net income and Adjusted net income per diluted common share: Adjusted net income and Adjusted net income per diluted common share exclude certain items that the Company believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. These items include non-cash and other adjustments, such as derivative gains and losses net of settlements, impairments, gains and losses on divestitures, gains and losses on extinguishment of debt, non-recurring or one-time costs including transaction and integration costs associated with the Merger, and accruals for non-recurring matters. The Company uses these measures to evaluate the comparability of the Company's ongoing operational results and trends and believes these measures provide useful information to investors for analysis of the Company's fundamental business on a recurring basis.

Net debt: Net debt is calculated as the total principal amount of outstanding senior notes plus amounts drawn on the revolving credit facility less cash and cash equivalents (also referred to as total funded debt). The Company uses net debt as a measure of financial position and believes this measure provides useful additional information to investors to evaluate the Company's capital structure and financial leverage.

Capital expenditures: The Company's operating plan guidance uses the term "capital expenditures," which is defined to be before changes in accruals (excludes working capital), and is a non-GAAP measure. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, the Company is unable to provide a reconciliation of forward-looking non-GAAP capital expenditures because components of the calculations are inherently unpredictable, such as changes to, and the timing of, capital accruals, unknown future events, and estimating certain future GAAP measures. The inability to project certain components of the calculation could significantly affect the accuracy of a reconciliation.

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Adjusted EBITDAX Reconciliation1

Reconciliation of net income (GAAP) and net cash provided by operating activities (GAAP) to Adjusted EBITDAX (non-GAAP):

For the Three Months Ended
June 30,

For the Six Months Ended

June 30,

(in millions)

2026

2025

2026

2025

Net income (GAAP)

$         1,071

$            202

$            736

$            384

Interest expense

111

43

224

87

Income tax expense

318

51

243

101

Depletion, depreciation, and amortization

592

293

1,024

563

Exploration2

18

14

42

24

Stock-based compensation expense

7

6

17

13

Net derivative (gain) loss

(272)

(78)

425

(61)

Net derivative settlement gain (loss)

(220)

40

(250)

47

Gain on divestiture activity

(262)

—

(262)

—

Transaction and integration costs3

37

—

172

—

Other, net

6

—

5

1

Adjusted EBITDAX (non-GAAP)

$         1,406

$            570

$         2,376

$         1,158

Interest expense

(111)

(43)

(224)

(87)

Income tax expense

(318)

(51)

(243)

(101)

Exploration2

(18)

(14)

(42)

(24)

Amortization of deferred financing costs and debt premiums, net

(5)

3

(10)

5

Transaction and integration costs3

(32)

—

(152)

—

Deferred income tax expense

316

43

231

69

Other, net

(17)

(6)

(44)

(5)

Net change in working capital

(118)

69

(149)

38

Net cash provided by operating activities (GAAP)

$         1,103

$            571

$         1,743

$         1,054

Note: Prior year amounts may not calculate due to rounding.

1 See "Definitions of Non-GAAP Measures and Metrics as Calculated by the Company" above.

2 Stock-based compensation expense is a component of the exploration expense and general and administrative expense line items on the unaudited condensed consolidated statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amounts shown on the unaudited condensed consolidated statements of operations for the component of stock-based compensation expense recorded to exploration expense.

3 Transaction and integration costs include expenses associated with the Merger and post-Merger integration activities.  For the three and six months ended June 30, 2026, these costs consisted of $37 million and $155 million, respectively, of one-time integration costs, (including $5 million and $20 million, respectively, of stock-based compensation), which were included in general and administrative expense in the accompanying statements of operations, and less than $1 million and $17 million, respectively, of one-time transaction costs included in other operating expense in the accompanying statements of operations.

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Reconciliation of Net Income to Adjusted Net Income1

(in millions, except per share data)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2026

2025

2026

2025

Net income (GAAP)

$         1,071

$           202

$           736

$           384

Net derivative (gain) loss

(272)

(78)

425

(61)

Net derivative settlement gain (loss)

(220)

40

(250)

47

Gain on divestiture activity

(262)

—

(262)

—

Transaction and integration costs2

37

—

172

—

Other, net

10

—

13

1

Tax effect of adjustments3

162

8

(22)

3

Deferred tax remeasurement – corporate reorganization4

—

—

23

—

Adjusted net income (non-GAAP)

$           526

$           172

$           835

$           374

Diluted net income per common share (GAAP)

$          4.46

$          1.76

$          3.34

$          3.34

Net derivative (gain) loss

(1.13)

(0.68)

1.93

(0.53)

Net derivative settlement gain (loss)

(0.92)

0.35

(1.14)

0.41

Gain on divestiture activity

(1.09)

—

(1.19)

—

Transaction and integration costs2

0.15

—

0.78

—

Other, net

0.04

—

0.07

0.01

Tax effect of adjustments3

0.68

0.07

(0.10)

0.03

Deferred tax remeasurement – corporate reorganization4

—

—

0.10

—

Adjusted net income per diluted common share (non-GAAP)

$          2.19

$          1.50

$          3.79

$          3.26

Basic weighted-average common shares outstanding

239

115

219

115

Diluted weighted-average common shares outstanding

240

115

220

115

Note: Prior year amounts may not calculate due to rounding.

1 See "Definitions of Non-GAAP Measures and Metrics as Calculated by the Company" above.

2 Transaction and integration costs include expenses associated with the Merger and post-merger integration activities.  For the three and six months ended June 30, 2026, these costs consisted of $37 million and $155 million, respectively, of one-time integration costs, (including $5 million and $20 million, respectively, of stock-based compensation), which were included in general and administrative expense in the accompanying statements of operations, and less than $1 million and $17 million, respectively, of one-time transaction costs included in other operating expense in the accompanying statements of operations.

3 The tax effect of adjustments was calculated using a tax rate of 22.9% for the three and six months ended June 30, 2026, and 22.1% for the three and six months ended June 30, 2025. These rates approximate the Company's statutory tax rates for the respective periods, as adjusted for ordinary permanent differences.

4 Reflects a non-recurring remeasurement of net deferred tax balances resulting from a change in state income tax apportionment due to a corporate reorganization and the Merger.

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2026

Reconciliation of Net Cash Provided by Operating Activities and Capital Expenditures to Adjusted Free Cash Flow1

(in millions)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2026

2025

2026

2025

Net cash provided by operating activities (GAAP)

$        1,103

$          571

$        1,743

$        1,054

Net change in working capital, including change in certain long-term items

81

(69)

133

(38)

Cash flow from operations before net change in working capital, including change in certain long-term items (non-GAAP)

1,184

502

1,876

1,016

Capital expenditures (GAAP)

754

410

1,309

824

Changes in capital expenditure accruals

(37)

(22)

80

5

Capital expenditures before changes in accruals (non-GAAP)

717

388

1,389

829

Adjusted free cash flow (non-GAAP)

$          467

$          114

$          487

$          188

1 See "Definitions of Non-GAAP Measures and Metrics as Calculated by the Company" above.

Note:  For the three months ended June 30, 2026, adjusted free cash flow includes approximately $42 million of one-time, non-recurring cash costs associated with the Merger integration and the South Texas assets divested, consisting of approximately $32 million reported in net cash provided by operating activities and approximately $10 million in capital expenditures. For the six months ended June 30, 2026, adjusted free cash flow includes approximately $222 million of one-time, non-recurring cash costs, consisting of approximately $152 million reported in net cash provided by operating activities and approximately $70 million in capital expenditures.

Reconciliation of Total Principal Amount of Debt to Net Debt1

(in millions)

June 30, 2026

Principal amount of Senior Notes2

$                         6,873

Revolving credit facility2

—

Total principal amount of debt (GAAP)

6,873

Less: Cash and cash equivalents

620

Net Debt (non-GAAP)

$                         6,253

1 See "Definitions of Non-GAAP Measures and Metrics as Calculated by the Company" above.

2 Amounts as of June 30, 2026, are from Note 6 - Long-Term Debt in Part I, Item 1 of the Company's Form 10-Q.

SOURCE SM Energy Company