SM Sm Energy Company
NYSE
$29.02

SM Energy Reports Second Quarter 2026 Results

Wednesday, August 5, 2026 · 4:15 PM ET PR Newswire

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

DENVER, Aug. 5, 2026 /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, mhays@sm-energy.com
Meghan Dack, Director, Investor Relations, mdack@sm-energy.com 

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.

 

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SOURCE SM Energy Company

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