SM Energy Q3 profit falls to $93M; oil outlook cut
The $417 million note redemption leaves SM with no maturities until mid-2028.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
8-K
Rhea-AI Filing Summary
SM Energy Company (SM) reported third-quarter 2026 total operating revenues and other income of $2.170 billion, versus $812 million a year earlier, and net income of $93 million, versus $155 million. The quarter included a $477 million non-cash loss from fair-value changes in commodity derivatives. Adjusted net income, a non-GAAP measure, was $465 million, or $1.95 per diluted share; operating cash flow was $1.122 billion and adjusted free cash flow was $397 million.
Production averaged 433.1 MBoe/d, including 230.2 MBbl/d of oil. SM reported approximately $400 million of merger run-rate synergies, above its revised $375 million target, and substantially completed integration of the Civitas merger. It redeemed $417 million of 6.625% Senior Notes due 2027 at par, returned $133 million to stockholders, and reported net debt of $6.0 billion, down from $7.4 billion at March 31, 2026.
For full-year 2026, SM lowered oil guidance by 1% to 220–222 MBbl/d and narrowed total production guidance to 420–422 MBoe/d; capital expenditures are expected to be approximately $2.75 billion. Fourth-quarter production guidance is 435–445 MBoe/d, with capital expenditures of approximately $610 million. Uinta Basin takeaway constraints are expected to be resolved in early 2027.
2 points · 0 major0 major · 1 point
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter total operating revenues and other income were $2.170 billion, versus $812 million.
- Moderate pointOperating cash flow was $1.122 billion, versus $505 million a year earlier.
Negative
- Moderate pointThird-quarter net income was $93 million, versus $155 million a year earlier.
Filing Explained
SM issued 123,715,771 shares for the Civitas merger; shares outstanding rose from 114,630,905 at December 31, 2025, to 235,615,045 at September 30, 2026; issuing additional shares increases total share count and reduces existing holders’ percentage ownership, absent offsetting changes.
8-K Event Classification
2 items: 2.02, 9.01
2 items
Item 2.02
Results of Operations and Financial Condition
Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 9.01
Financial Statements and Exhibits
Exhibits
Financial statements, pro forma financial information, or exhibit attachments filed with this report.
Key Figures
Total operating revenues and other income: $2.170 billion
Net income: $93 million
Adjusted net income: $465 million
+5 more
8 metrics
Total operating revenues and other income
$2.170 billion
Third quarter 2026; $812 million in third quarter 2025
Net income
$93 million
Third quarter 2026; $155 million in third quarter 2025
Adjusted net income
$465 million
Third quarter 2026; non-GAAP measure; $154 million in third quarter 2025
Operating cash flow
$1.122 billion
Third quarter 2026; $505 million in third quarter 2025
Adjusted free cash flow
$397 million
Third quarter 2026; non-GAAP measure; $234 million in third quarter 2025
Net debt
$6.0 billion
Reported for third quarter 2026, down from $7.4 billion at March 31, 2026
Full-year oil production guidance
220–222 MBbl/d
2026 guidance; lowered by 1%
Capital expenditures
Approximately $2.75 billion
Expected for full-year 2026
Key Terms
NPV-10, Adjusted EBITDAX, adjusted free cash flow, net debt
4 terms
NPV-10 financial
"NPV-10 of merger synergies increased to $2.0 billion from $1.8 billion."
Net present value calculated using a 10% discount rate. It is the sum of projected future cash flows (positive and negative) from an asset, project, or business, each converted to today’s dollars by discounting at 10% per year and then added together. The 10% rate is an assumed cost of capital or hurdle rate; the resulting figure depends directly on the timing and size of the projected cash flows and on that fixed 10% assumption. In some industries (notably oil and gas) a closely related term, PV-10, refers to a standardized pre‑tax present value using a 10% discount, so users should check whether values are stated pre‑tax or after‑tax and what specific assumptions underlie the cash‑flow forecasts.
Adjusted EBITDAX financial
"Adjusted EBITDAX (non-GAAP) was $1.3 billion."
Adjusted EBITDAX is a measure of a company’s operating profit that adds back interest, taxes, depreciation, amortization and specific recurring costs (often exploration or similar project expenses), then removes one‑time or unusual items to show recurring cash profitability. Investors use it like a clean yardstick—ignoring financing choices, accounting rules and one‑off events—to compare core performance across periods or peers and assess a business’s ability to generate cash from operations.
adjusted free cash flow financial
"Delivered adjusted free cash flow of $397 million."
Adjusted free cash flow is the amount of money a company generates from its operations after accounting for essential expenses and investments, like maintaining or upgrading equipment. It shows how much cash is truly available to grow the business, pay debts, or return to shareholders, helping investors see the company's financial health more clearly.
net debt financial
"Reduced net debt to $6.0 billion."
Net debt is the total amount a company owes after subtracting the cash and assets it has that can be used to pay off that debt. It shows how much debt is truly a burden, helping investors understand if a company is financially healthy or heavily borrowed. Think of it like calculating how much money you owe after using your savings to pay part of it.
Earnings Snapshot
Total operating revenues and other income: $2.170 billion · Guidance included
Third quarter 2026
Total operating revenues and other income
$2.170 billion
versus $812 million in third quarter 2025
Net income
$93 million
versus $155 million in third quarter 2025
Adjusted net income
$465 million
versus $154 million in third quarter 2025
Operating cash flow
$1.122 billion
versus $505 million in third quarter 2025
Adjusted free cash flow
$397 million
versus $234 million in third quarter 2025
Guidance
Full-year 2026 oil production guidance is 220–222 MBbl/d; total production guidance is 420–422 MBoe/d; capital expenditures are expected to be approximately $2.75 billion. Fourth-quarter production guidance is 435–445 MBoe/d, with capital expenditures of approximately $610 million. Full-year cash tax guidance is approximately $100–$120 million.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How did SM (SM) perform in Q3 2026?
SM Energy reported third-quarter total operating revenues and other income of $2.170 billion and net income of $93 million. Adjusted net income, a non-GAAP measure, was $465 million, or $1.95 per diluted share; the quarter included a $477 million non-cash loss from fair-value changes in commodity derivatives.
What is SM's full-year 2026 production guidance?
SM's full-year 2026 oil production guidance is 220–222 MBbl/d and total production guidance is 420–422 MBoe/d. The company expects approximately $2.75 billion in capital expenditures. Fourth-quarter production guidance is 435–445 MBoe/d, with approximately $610 million in capital expenditures.
What merger synergies did SM report?
SM reported NPV-10 of merger synergies of $2.0 billion, compared with $1.8 billion previously. It actioned approximately $400 million of merger run-rate synergies, twice the original $200 million target and $25 million above the revised $375 million target.
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
| (Zip Code) | ||||||||
| (Address of principal executive offices) | ||||||||
Registrant's telephone number, including area code: (303) 861-8140
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
In accordance with General Instruction B.2. of Form 8-K, the following information, including Exhibit 99.1, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information and exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On November 3, 2026, SM Energy Company (“Company”) issued a press release announcing its financial and operating results for the third quarter of 2026. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated by reference herein. As indicated in the press release, the Company scheduled a webcast and conference call for November 4, 2026, at 8:00 a.m. Mountain time/10:00 a.m. Eastern time. The conference call is publicly accessible via webcast (available live and for replay) and telephone, and the press release includes instructions for accessing the webcast via the Company's website and dial-in information for the call. Availability of the webcast on the Company’s website is at the Company’s discretion and may be discontinued at any time.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description | ||||
99.1 | Press release of SM Energy Company dated November 3, 2026, entitled "SM Energy Reports Third Quarter 2026 Results" | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and included as Exhibit 101) | ||||
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SM ENERGY COMPANY | |||||||||||
| Date: | November 3, 2026 | By: | /s/ ALAN D. BENNETT | ||||||||
Alan D. Bennett | |||||||||||
Vice President - Controller | |||||||||||
| (Principal Accounting Officer) | |||||||||||
 | News Release | |||||||
EXHIBIT 99.1
SM Energy Reports Third Quarter 2026 Results
Operating cash flow of $1.1 billion funds $417 million of debt redemption and $133 million of capital returned to stockholders
DENVER, Nov. 3, 2026 - SM Energy Company (the “Company” or “SM”) (NYSE: SM) today reported financial and operating results for the third quarter 2026. Investor materials, including accompanying slides, can be accessed at www.sm-energy.com/investors. A conference call is scheduled for 8 a.m. MT/10 a.m. ET on November 4, 2026. Participation details are included in this release.
SM continues to execute against its three strategic priorities: Integrate, Execute and Bolster. In the third quarter, the Company substantially completed its Civitas merger (the “Merger”) integration and exceeded targeted run-rate synergies, transitioning the business to continuous improvement.
Third quarter 2026 performance is summarized below:
Integrate –
•Actioned approximately $400 million of Merger run-rate synergies – twice the original $200 million target and $25 million greater than the revised $375 million target. NPV-10 of merger synergies increased to $2.0 billion from $1.8 billion.
Execute –
•Net income was $93 million, or $0.39 per diluted share; adjusted net income1 was $465 million, or $1.95 per diluted share.1
•Generated operating cash flow of $1.1 billion; capital expenditures totaled $711 million, or $747 million before changes in accruals.1
•Delivered adjusted free cash flow1 of $397 million.
•Adjusted EBITDAX1 was $1.3 billion.
•Average net daily production totaled 433 MBoe/d, including 230 MBbl/d of oil.
•Narrowed full-year 2026 capital guidance to approximately $2.75 billion.
Bolster –
•Returned $133 million of capital to stockholders, or approximately 34% of adjusted free cash flow,1 through $81 million in share repurchases (2.3 million shares) and SM’s $0.22 per share quarterly dividend.
•Redeemed all $417 million aggregate principal amount of 6.625% Senior Notes due 2027 at par, resulting in no maturities until mid-2028.
•Reduced net debt1 to $6.0 billion, down from $7.4 billion at March 31, 2026.
1 Adjusted net income and adjusted net income per diluted share; capital expenditures before changes in accruals; adjusted free cash flow; adjusted EBITDAX; and net debt are non-GAAP measures. Refer to “Definitions of Non-GAAP Measures and Metrics as Calculated by the Company” and the accompanying reconciliations later in this release.
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SM Energy President and CEO Beth McDonald said, “We are meaningfully transforming SM Energy – exceeding our merger synergy target, substantially achieving our divestiture target and materially strengthening the balance sheet. In the third quarter, we generated $1.1 billion of operating cash flow, redeemed $417 million of debt and returned $133 million to stockholders. We are modestly lowering full-year oil guidance to 220-222 MBbl/d due to transitory factors, while reiterating our full-year total production outlook. Importantly, despite service-cost inflation, we now expect 2026 capital of approximately $2.75 billion, the midpoint of our prior range, supported by synergy capture and ongoing efficiency gains. We expect the factors leading to our lower oil production outlook to be resolved in early 2027.
“This is a multi-year journey, and our strong and resilient balance sheet is the foundation. We remain on track for low one-times leverage at mid-cycle prices by year-end 2026, strengthening the capacity for durable stockholder returns. With integration substantially complete, our focus is on disciplined execution, continuous improvement and increasing the capital efficiency of the portfolio to compound long-term value for stockholders.”
Third Quarter 2026 Review
•Total production was 433 MBoe/d, including 230 MBbl/d of oil. Oil volumes were impacted by higher-than-planned downtime in the Permian Basin, related to compliance and safety work on assets acquired in the Merger and the temporary shut-in of wells during simultaneous operations, which reduced oil volumes by approximately 2 MBbl/d. We also experienced approximately 4 MBbl/d of takeaway constraints in the Uinta Basin. The Permian factors that affected third-quarter volumes have been addressed, and we expect the Uinta takeaway constraints to be resolved in early 2027.
•Net income was $0.39 per diluted share, which includes a $477 million non-cash loss from changes in the fair value of the Company’s commodity derivative contracts. Income tax expense of $30 million included current tax expense of $37 million, reflecting higher realized oil prices.
•During the third quarter, SM repurchased 2.3 million shares for $81 million and paid a $0.22 per share quarterly dividend, resulting in approximately 34% of adjusted free cash flow1 being returned to stockholders. Year-to-date share repurchases total $165 million.
Guidance
•SM lowered its full-year 2026 oil production guidance by 1% to 220-222 MBbl/d, primarily related to reasons outlined above. For full-year 2026, total production guidance was narrowed to 420-422 MBoe/d. Full-year capital expenditures are expected to be approximately $2.75 billion, or the midpoint of the prior guidance range.
•Fourth quarter 2026 production is expected to be 435-445 MBoe/d, including 229-239 MBbl/d of oil, with capital expenditures of approximately $610 million.
•Included in our oil volume guidance is a continued impact from takeaway constraints in the Uinta Basin.
•Full-year 2026 cash tax guidance is updated to approximately $100-$120 million.
•See the table below for detailed fourth quarter and full-year guidance.
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The following table summarizes SM’s fourth quarter and full-year 2026 operational and financial guidance.
| Production | 4Q 2026 | Full Year 2026 | ||||||
Total Production (MMBoe)1 | 40 – 41 | 153 – 154 | ||||||
Total Production (MBoe/d)1 | 435 – 445 | 420 – 422 | ||||||
Oil Production (MBbl/d)1 | 229 – 239 | 220 – 222 | ||||||
| Capital Program ($MM) | ||||||||
Capital Expenditures2 | ~$610 | ~$2,750 | ||||||
| DC&E | ~$2,400 | |||||||
| Facility, Land, and Other | ~$280 | |||||||
One-Time Capital Costs3 | ~$70 | |||||||
| Net Wells Drilled | ~55 | ~245 | ||||||
| Net Wells Turned-In-Line | ~80 | ~295 | ||||||
Avg. Well Cost ($/lateral ft)4 | ~$710 | |||||||
| Operating Expenses ($/Boe) | ||||||||
| Lease Operating Expense | $6.60 – $6.80 | |||||||
| Transportation | $3.55 – $3.65 | |||||||
Production Taxes (% of oil, gas and NGL revenue) | ~6% | |||||||
Ad Valorem Taxes | ~$0.50 | |||||||
| DD&A | ~$14.50 | |||||||
| General & Administrative ($MM) | ||||||||
Recurring G&A5 | $230 – $250 | |||||||
One-Time Transaction & Integration — Cash6 | ~$160 | |||||||
One-Time Transaction & Integration — Non-Cash6 | ~$20 | |||||||
| Other ($MM) | ||||||||
| Exploration Expense | ~$100 | |||||||
Cash Taxes | $100 – $120 | |||||||
Notes:
1 Full-year 2026 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 (the “Galvan Divestiture”). Fourth quarter 2026 oil guidance includes the continued impact of Uinta takeaway constraints, which are expected to be resolved in early 2027.
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. Full-year 2026 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 Galvan Divestiture.
4 Company-wide average 2026 expected well cost, including well connection/equipment costs.
5 Full-year 2026 recurring G&A guidance includes ~$35 million of stock-based compensation. Recurring G&A in fourth quarter 2026 is expected to be higher quarter over quarter due to year-end items.
6 The majority of one-time transaction and integration costs (both cash and non-cash) were incurred in the first half of 2026.
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Webcast Details
SM plans to host a conference call and webcast at 8 a.m. MT/10 a.m. ET tomorrow, November 4, 2026. The call and accompanying presentation may be accessed at 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 is focused on operational excellence, disciplined capital allocation, and delivering growing returns to stockholders. SM routinely posts important information about the Company on its website. 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, including achievement of low one-times leverage by year-end 2026; the Company’s future return of capital plans and framework; expectations regarding synergy achievement, continuous improvement and capital efficiency following substantial completion of integration; assumptions and projections for the fourth quarter 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 transaction, integration and capital costs; Company average cost per lateral foot; number of net wells to be drilled and turned in line; 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. 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
4
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| SM ENERGY COMPANY | |||||||||||||||||||||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Production Data | |||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended | Percent Change Between | For the Nine Months Ended | Percent Change Between | ||||||||||||||||||||||||||||||||||||||
| September 30, | June 30, | September 30, | 3Q26 & 2Q26 | September 30, | September 30, | YTD 2026 & 2025 | |||||||||||||||||||||||||||||||||||
| 2026 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| Realized sales price (before the effect of net derivative settlements): | |||||||||||||||||||||||||||||||||||||||||
| Oil (per Bbl) | $ | 85.76 | $ | 96.85 | $ | 63.83 | (11) | % | $ | 86.19 | $ | 65.28 | 32 | % | |||||||||||||||||||||||||||
| Gas (per Mcf) | $ | 2.48 | $ | 0.17 | $ | 2.19 | 1,359 | % | $ | 1.43 | $ | 2.54 | (44) | % | |||||||||||||||||||||||||||
| NGLs (per Bbl) | $ | 29.40 | $ | 24.69 | $ | 20.79 | 19 | % | $ | 25.33 | $ | 22.73 | 11 | % | |||||||||||||||||||||||||||
| Equivalent (per Boe) | $ | 54.23 | $ | 53.86 | $ | 41.23 | 1 | % | $ | 51.15 | $ | 43.15 | 19 | % | |||||||||||||||||||||||||||
Realized sales price (including the effect of net derivative settlements):1 | |||||||||||||||||||||||||||||||||||||||||
| Oil (per Bbl) | $ | 73.92 | $ | 80.62 | $ | 65.40 | (8) | % | $ | 75.03 | $ | 66.61 | 13 | % | |||||||||||||||||||||||||||
| Gas (per Mcf) | $ | 2.99 | $ | 1.54 | $ | 2.77 | 94 | % | $ | 2.26 | $ | 2.97 | (24) | % | |||||||||||||||||||||||||||
| NGLs (per Bbl) | $ | 29.45 | $ | 24.83 | $ | 20.79 | 19 | % | $ | 25.44 | $ | 22.42 | 13 | % | |||||||||||||||||||||||||||
| Equivalent (per Boe) | $ | 49.02 | $ | 48.36 | $ | 43.21 | 1 | % | $ | 47.11 | $ | 44.68 | 5 | % | |||||||||||||||||||||||||||
Net production volumes:2,3 | |||||||||||||||||||||||||||||||||||||||||
| Oil (MMBbl) | 21.2 | 20.9 | 10.5 | 1 | % | 59.2 | 30.3 | 95 | % | ||||||||||||||||||||||||||||||||
| Gas (Bcf) | 84.4 | 86.8 | 38.5 | (3) | % | 243.5 | 111.1 | 119 | % | ||||||||||||||||||||||||||||||||
| NGLs (MMBbl) | 4.6 | 4.6 | 2.8 | (1) | % | 13.5 | 7.6 | 77 | % | ||||||||||||||||||||||||||||||||
| Equivalent (MMBoe) | 39.8 | 40.0 | 19.7 | — | % | 113.3 | 56.5 | 101 | % | ||||||||||||||||||||||||||||||||
Average net daily production:2,3 | |||||||||||||||||||||||||||||||||||||||||
| Oil (MBbl per day) | 230.2 | 229.8 | 113.9 | — | % | 216.9 | 111.2 | 95 | % | ||||||||||||||||||||||||||||||||
| Gas (MMcf per day) | 917.0 | 953.7 | 418.2 | (4) | % | 892.0 | 406.9 | 119 | % | ||||||||||||||||||||||||||||||||
| NGLs (MBbl per day) | 50.1 | 51.0 | 30.2 | (2) | % | 49.3 | 27.8 | 77 | % | ||||||||||||||||||||||||||||||||
| Equivalent (MBoe per day) | 433.1 | 439.7 | 213.8 | (2) | % | 414.9 | 206.8 | 101 | % | ||||||||||||||||||||||||||||||||
Per Boe data:2 | |||||||||||||||||||||||||||||||||||||||||
| Lease operating expense | $ | 7.02 | $ | 6.71 | $ | 5.67 | 5 | % | $ | 6.69 | $ | 5.76 | 16 | % | |||||||||||||||||||||||||||
| Transportation costs | $ | 3.53 | $ | 3.57 | $ | 3.77 | (1) | % | $ | 3.58 | $ | 3.94 | (9) | % | |||||||||||||||||||||||||||
| Production taxes | $ | 3.47 | $ | 3.25 | $ | 1.69 | 7 | % | $ | 3.09 | $ | 1.78 | 74 | % | |||||||||||||||||||||||||||
| Ad valorem tax expense | $ | 0.38 | $ | 0.37 | $ | 0.51 | 3 | % | $ | 0.40 | $ | 0.53 | (25) | % | |||||||||||||||||||||||||||
General and administrative4,5 | $ | 1.40 | $ | 1.98 | $ | 2.00 | (29) | % | $ | 2.72 | $ | 2.14 | 27 | % | |||||||||||||||||||||||||||
| Net derivative settlement gain (loss) | $ | (5.20) | $ | (5.50) | $ | 1.98 | 5 | % | $ | (4.04) | $ | 1.53 | (364) | % | |||||||||||||||||||||||||||
| Depletion, depreciation, and amortization | $ | 14.81 | $ | 14.81 | $ | 16.54 | — | % | $ | 14.25 | $ | 15.73 | (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 nine months ended September 30, 2026, include eight months of production from the Civitas assets acquired on January 30, 2026, and four months of production from the Galvan Divestiture on April 30, 2026. | |||||||||||||||||||||||||||||||||||||||||
4 Includes recurring non-cash stock-based compensation expense of $0.26, $0.12, and $0.34 per Boe for the three months ended September 30, 2026, June 30, 2026, and September 30, 2025, respectively, and $0.21 and $0.30 per Boe for the nine months ended September 30, 2026, and 2025, respectively. | |||||||||||||||||||||||||||||||||||||||||
5 Includes one-time costs (consisting of both cash and non-cash items) of $0.11 per Boe and $0.92 per Boe for the three months ended September 30, 2026 and June 30, 2026, respectively, and $1.40 per Boe for the nine months ended September 30, 2026. | |||||||||||||||||||||||||||||||||||||||||
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| SM ENERGY COMPANY | |||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||
| September 30, 2026 | |||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||
| (in millions, except share data) | September 30, | December 31, | |||||||||
| ASSETS | 2026 | 2025 | |||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 442 | $ | 368 | |||||||
| Accounts receivable | 1,175 | 331 | |||||||||
| Derivative assets | 93 | 83 | |||||||||
| Prepaid expenses and other | 107 | 29 | |||||||||
| Total current assets | 1,817 | 811 | |||||||||
| Property and equipment (successful efforts method): | |||||||||||
| Proved oil and gas properties | 23,924 | 16,012 | |||||||||
| Accumulated depletion, depreciation, and amortization | (9,040) | (8,793) | |||||||||
Unproved oil and gas properties, net of valuation allowance of $12 and $12, respectively | 885 | 460 | |||||||||
| Wells in progress | 848 | 458 | |||||||||
Other property and equipment, net of accumulated depreciation of $68 and $63, respectively | 138 | 65 | |||||||||
| Total property and equipment, net | 16,755 | 8,202 | |||||||||
| Noncurrent assets: | |||||||||||
| Derivative assets | 12 | 6 | |||||||||
| Other noncurrent assets | 379 | 234 | |||||||||
| Total noncurrent assets | 391 | 240 | |||||||||
| Total assets | $ | 18,963 | $ | 9,253 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | 2,505 | $ | 690 | |||||||
| Senior Notes, net | — | 419 | |||||||||
| Derivative liabilities | 552 | 2 | |||||||||
| Other current liabilities | 130 | 58 | |||||||||
| Total current liabilities | 3,187 | 1,169 | |||||||||
| Noncurrent liabilities: | |||||||||||
| Revolving credit facility | — | — | |||||||||
| Senior Notes, net | 6,614 | 2,296 | |||||||||
| Asset retirement obligations | 426 | 150 | |||||||||
| Deferred tax liabilities, net | 609 | 724 | |||||||||
| Derivative liabilities | 13 | 2 | |||||||||
| Other noncurrent liabilities | 337 | 102 | |||||||||
| Total noncurrent liabilities | 7,999 | 3,274 | |||||||||
| Stockholders’ equity: | |||||||||||
Common stock, $0.01 par value - authorized: 400,000,000 and 200,000,000 shares, respectively; issued and outstanding: 235,615,045 and 114,630,905 shares, respectively | 2 | 1 | |||||||||
| Additional paid-in capital | 3,813 | 1,517 | |||||||||
| Retained earnings | 3,961 | 3,291 | |||||||||
| Accumulated other comprehensive income | 1 | 1 | |||||||||
| Total stockholders’ equity | 7,777 | 4,810 | |||||||||
| Total liabilities and stockholders’ equity | $ | 18,963 | $ | 9,253 | |||||||
6
| ||||||||
| SM ENERGY COMPANY | |||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||||||||||
| (in millions, except per share data) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating revenues and other income: | |||||||||||||||||||||||
| Oil, gas, and NGL production revenue | $ | 2,160 | $ | 811 | $ | 5,793 | $ | 2,436 | |||||||||||||||
| Gain (loss) on divestiture activity | (2) | — | 260 | — | |||||||||||||||||||
| Other operating income | 12 | 1 | 96 | 13 | |||||||||||||||||||
| Total operating revenues and other income | 2,170 | 812 | 6,149 | 2,449 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Oil, gas, and NGL production expense | 574 | 229 | 1,558 | 678 | |||||||||||||||||||
| Depletion, depreciation, and amortization | 590 | 325 | 1,614 | 888 | |||||||||||||||||||
Exploration1 | 22 | 12 | 69 | 39 | |||||||||||||||||||
General and administrative1,2 | 56 | 39 | 309 | 121 | |||||||||||||||||||
Net derivative (gain) loss3 | 684 | (45) | 1,109 | (107) | |||||||||||||||||||
Other operating expense2 | 8 | 5 | 56 | 12 | |||||||||||||||||||
| Total operating expenses | 1,934 | 565 | 4,715 | 1,631 | |||||||||||||||||||
| Income from operations | 236 | 246 | 1,434 | 818 | |||||||||||||||||||
| Interest expense | (116) | (43) | (340) | (130) | |||||||||||||||||||
| Other non-operating income, net | 3 | 1 | 8 | 1 | |||||||||||||||||||
| Income before income taxes | 123 | 204 | 1,102 | 689 | |||||||||||||||||||
| Income tax expense | (30) | (49) | (273) | (150) | |||||||||||||||||||
| Net income | $ | 93 | $ | 155 | $ | 829 | $ | 539 | |||||||||||||||
| Basic weighted-average common shares outstanding | 237 | 115 | 225 | 115 | |||||||||||||||||||
| Diluted weighted-average common shares outstanding | 239 | 115 | 226 | 115 | |||||||||||||||||||
| Basic net income per common share | $ | 0.39 | $ | 1.35 | $ | 3.67 | $ | 4.70 | |||||||||||||||
| Diluted net income per common share | $ | 0.39 | $ | 1.35 | $ | 3.66 | $ | 4.69 | |||||||||||||||
1 Recurring non-cash stock-based compensation included in: | |||||||||||||||||||||||
| Exploration expense | $ | 2 | $ | 1 | $ | 7 | $ | 4 | |||||||||||||||
| General and administrative expense | 11 | 7 | 23 | 17 | |||||||||||||||||||
| Total non-cash stock-based compensation | $ | 13 | $ | 8 | $ | 30 | $ | 21 | |||||||||||||||
2 Transaction and integration costs included in: | |||||||||||||||||||||||
General and administrative4 | $ | 4 | $ | — | $ | 159 | $ | — | |||||||||||||||
| Other operating expense | 1 | — | 18 | — | |||||||||||||||||||
Total transaction and integration costs | $ | 5 | $ | — | $ | 177 | $ | — | |||||||||||||||
3 The net derivative (gain) loss line item consists of the following: | |||||||||||||||||||||||
| Net derivative settlement (gain) loss | $ | 207 | $ | (39) | $ | 457 | $ | (86) | |||||||||||||||
| Net (gain) loss on fair value changes | 477 | (7) | 652 | (20) | |||||||||||||||||||
| Total net derivative (gain) loss | $ | 684 | $ | (45) | $ | 1,109 | $ | (107) | |||||||||||||||
Note: Per common share amounts, and prior year amounts may not calculate due to rounding.
4 Includes less than $1 million and $20 million of non-cash stock-based compensation associated with the Merger for the three and nine months ended September 30, 2026, respectively.
7
| ||||||||
| SM ENERGY COMPANY | |||||||||||||||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||||||||||||||||||||||
| September 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 (Loss) | 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 and settlement of PSUs, 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 | ||||||||||||||||||||||||
| Net income | — | — | — | 93 | — | 93 | |||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (1) | (1) | |||||||||||||||||||||||||||||
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 | 423,998 | — | (6) | — | — | (6) | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 14 | — | — | 14 | |||||||||||||||||||||||||||||
| Purchase of shares under Stock Repurchase Program | (2,303,327) | — | (83) | — | — | (83) | |||||||||||||||||||||||||||||
| Balances, September 30, 2026 | 235,615,045 | $ | 2 | $ | 3,813 | $ | 3,961 | $ | 1 | $ | 7,777 | ||||||||||||||||||||||||
8
| ||||||||
| SM ENERGY COMPANY | |||||||||||||||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||||||||||||||||||||||
| September 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 | ||||||||||||||||||||||||
| Net income | — | — | — | 155 | — | 155 | |||||||||||||||||||||||||||||
Net cash dividends declared, $0.20 per share | — | — | — | (23) | — | (23) | |||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings | 364,172 | — | (5) | — | — | (5) | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 8 | — | — | 8 | |||||||||||||||||||||||||||||
| Purchase of shares under Stock Repurchase Program | (444,705) | — | (12) | — | — | (12) | |||||||||||||||||||||||||||||
| Balances, September 30, 2025 | 114,554,192 | $ | 1 | $ | 1,508 | $ | 3,205 | $ | (1) | $ | 4,713 | ||||||||||||||||||||||||
_____________________________
Note: Prior year amounts may not calculate due to rounding.
9
| ||||||||
| SM ENERGY COMPANY | |||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||||||||||||||||
| (in millions) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||||
| Net income | $ | 93 | $ | 155 | $ | 829 | $ | 539 | |||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||||||
(Gain) loss on divestiture activity | 2 | — | (260) | — | |||||||||||||||||||
| Depletion, depreciation, and amortization | 590 | 325 | 1,614 | 888 | |||||||||||||||||||
| Stock-based compensation expense | 14 | 8 | 50 | 21 | |||||||||||||||||||
| Net derivative (gain) loss | 684 | (45) | 1,109 | (107) | |||||||||||||||||||
| Net derivative settlement gain (loss) | (207) | 39 | (457) | 86 | |||||||||||||||||||
| Amortization of deferred financing costs and debt premiums, net | (6) | 3 | (16) | 8 | |||||||||||||||||||
Deferred income tax (benefit) expense | (7) | 76 | 224 | 145 | |||||||||||||||||||
Other, net | 20 | (3) | (18) | (7) | |||||||||||||||||||
| Net change in working capital | (61) | (53) | (210) | (15) | |||||||||||||||||||
| Net cash provided by operating activities | 1,122 | 505 | 2,865 | 1,559 | |||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||
| Net proceeds from the sale of oil and gas properties | (8) | — | 889 | — | |||||||||||||||||||
| Capital expenditures | (711) | (398) | (2,020) | (1,222) | |||||||||||||||||||
Acquisition of business, net of cash acquired | — | — | (49) | — | |||||||||||||||||||
Other | (27) | (7) | (51) | (22) | |||||||||||||||||||
| Net cash used in investing activities | (746) | (405) | (1,231) | (1,244) | |||||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||
| Proceeds from revolving credit facility | 379 | 185 | 720 | 1,570 | |||||||||||||||||||
| Repayment of revolving credit facility | (379) | (185) | (720) | (1,638) | |||||||||||||||||||
| Net proceeds from Senior Notes | — | — | 984 | — | |||||||||||||||||||
| Cash paid to repurchase Senior Notes | (417) | — | (2,160) | — | |||||||||||||||||||
| Repurchase of common stock | (79) | (12) | (166) | (13) | |||||||||||||||||||
| Dividends paid | (52) | (23) | (187) | (69) | |||||||||||||||||||
| Other, net | (6) | (5) | (31) | (3) | |||||||||||||||||||
| Net cash used in financing activities | (554) | (40) | (1,560) | (153) | |||||||||||||||||||
| Net change in cash, cash equivalents, and restricted cash | (178) | 60 | 74 | 162 | |||||||||||||||||||
Cash, cash equivalents, and restricted cash at beginning of period | 620 | 102 | 368 | — | |||||||||||||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 442 | $ | 162 | $ | 442 | $ | 162 | |||||||||||||||
10
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| SM ENERGY COMPANY | |||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Condensed Consolidated Statements of Cash Flows (continued) | |||||||||||||||||||||||
| (in millions) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Supplemental schedule of additional cash flow information: | |||||||||||||||||||||||
| Operating activities: Cash paid for interest, net of capitalized interest | $ | (146) | $ | (80) | $ | (331) | $ | (165) | |||||||||||||||
Operating activities: Net cash (paid) received for income taxes | $ | 2 | $ | (1) | $ | (30) | $ | (6) | |||||||||||||||
| Investing activities: Changes in capital expenditure accruals | $ | 36 | $ | (74) | $ | 116 | $ | (70) | |||||||||||||||
_____________________________
Note: Prior year amounts may not calculate due to rounding.
11
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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 third 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.
12
| ||||||||
| SM ENERGY COMPANY | |||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||||||||||
| September 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 September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net income (GAAP) | $ | 93 | $ | 155 | $ | 829 | $ | 539 | |||||||||||||||
| Interest expense | 116 | 43 | 340 | 130 | |||||||||||||||||||
| Income tax expense | 30 | 49 | 273 | 150 | |||||||||||||||||||
| Depletion, depreciation, and amortization | 590 | 325 | 1,614 | 888 | |||||||||||||||||||
Exploration2 | 20 | 10 | 62 | 34 | |||||||||||||||||||
Stock-based compensation expense3 | 13 | 8 | 30 | 21 | |||||||||||||||||||
| Net derivative (gain) loss | 684 | (45) | 1,109 | (107) | |||||||||||||||||||
| Net derivative settlement gain (loss) | (207) | 39 | (457) | 86 | |||||||||||||||||||
| (Gain) loss on divestiture activity | 2 | — | (260) | — | |||||||||||||||||||
Transaction and integration costs4 | 5 | — | 177 | — | |||||||||||||||||||
| Other, net | (5) | 4 | — | 5 | |||||||||||||||||||
| Adjusted EBITDAX (non-GAAP) | 1,341 | 588 | 3,717 | 1,747 | |||||||||||||||||||
| Interest expense | (116) | (43) | (340) | (130) | |||||||||||||||||||
| Income tax expense | (30) | (49) | (273) | (150) | |||||||||||||||||||
Exploration2 | (20) | (10) | (62) | (34) | |||||||||||||||||||
| Amortization of deferred financing costs and debt premiums, net | (6) | 3 | (16) | 8 | |||||||||||||||||||
Transaction and integration costs4 | (5) | — | (157) | — | |||||||||||||||||||
| Deferred income tax expense (benefit) | (7) | 76 | 224 | 145 | |||||||||||||||||||
| Other, net | 26 | (7) | (18) | (12) | |||||||||||||||||||
| Net change in working capital | (61) | (53) | (210) | (15) | |||||||||||||||||||
| Net cash provided by operating activities (GAAP) | $ | 1,122 | $ | 505 | $ | 2,865 | $ | 1,559 | |||||||||||||||
| 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 in the unaudited condensed consolidated statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amounts shown in the unaudited condensed consolidated statements of operations for the component of stock-based compensation expense recorded to exploration expense. | |||||||||||||||||||||||
3 For the three and nine months ended September 30, 2026, the stock-based compensation expense line item in the reconciliation above differs from the amount shown in the unaudited condensed consolidated statements of cash flows because it excludes stock-based compensation expense included within the transaction and integration costs line item above. | |||||||||||||||||||||||
4 Transaction and integration costs include expenses associated with the Merger and post-Merger integration activities. For the three and nine months ended September 30, 2026, these costs consisted of $4 million and $159 million, respectively, of one-time integration costs (including less than $1 million and $20 million, respectively, of stock-based compensation), which were included in general and administrative expense in the unaudited condensed consolidated statements of operations, and $1 million and $18 million, respectively, of one-time transaction costs included in other operating expense in the unaudited condensed consolidated statements of operations. | |||||||||||||||||||||||
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| SM ENERGY COMPANY | |||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
Reconciliation of Net Income to Adjusted Net Income1 | |||||||||||||||||||||||
| (in millions, except per share data) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income (GAAP) | $ | 93 | $ | 155 | $ | 829 | $ | 539 | |||||||||||||||
| Net derivative (gain) loss | 684 | (45) | 1,109 | (107) | |||||||||||||||||||
| Net derivative settlement gain (loss) | (207) | 39 | (457) | 86 | |||||||||||||||||||
| (Gain) loss on divestiture activity | 2 | — | (260) | — | |||||||||||||||||||
Transaction and integration costs2 | 5 | — | 177 | — | |||||||||||||||||||
| Other, net | (1) | 5 | 12 | 6 | |||||||||||||||||||
Tax effect of adjustments3 | (111) | — | (133) | 3 | |||||||||||||||||||
Deferred tax remeasurement – corporate reorganization4 | — | — | 23 | — | |||||||||||||||||||
| Adjusted net income (non-GAAP) | $ | 465 | $ | 154 | $ | 1,300 | $ | 528 | |||||||||||||||
| Diluted net income per common share (GAAP) | $ | 0.39 | $ | 1.35 | $ | 3.66 | $ | 4.69 | |||||||||||||||
| Net derivative (gain) loss | 2.86 | (0.39) | 4.90 | (0.93) | |||||||||||||||||||
| Net derivative settlement gain (loss) | (0.87) | 0.34 | (2.02) | 0.75 | |||||||||||||||||||
(Gain) loss on divestiture activity | 0.01 | — | (1.15) | — | |||||||||||||||||||
Transaction and integration costs2 | 0.02 | — | 0.78 | — | |||||||||||||||||||
| Other, net | — | 0.03 | 0.06 | 0.05 | |||||||||||||||||||
Tax effect of adjustments3 | (0.46) | — | (0.59) | 0.03 | |||||||||||||||||||
Deferred tax remeasurement – corporate reorganization4 | — | — | 0.10 | — | |||||||||||||||||||
| Adjusted net income per diluted common share (non-GAAP) | $ | 1.95 | $ | 1.33 | $ | 5.74 | $ | 4.59 | |||||||||||||||
| Basic weighted-average common shares outstanding | 237 | 115 | 225 | 115 | |||||||||||||||||||
| Diluted weighted-average common shares outstanding | 239 | 115 | 226 | 115 | |||||||||||||||||||
| Note: Per common share amounts, and 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 nine months ended September 30, 2026, these costs consisted of $4 million and $159 million, respectively, of one-time integration costs (including less than $1 million and $20 million, respectively, of stock-based compensation), which were included in general and administrative expense in the unaudited condensed consolidated statements of operations, and $1 million and $18 million, respectively, of one-time transaction costs included in other operating expense in the unaudited condensed consolidated statements of operations. | |||||||||||||||||||||||
3 The tax effect of adjustments was calculated using a tax rate of 22.9% for the three and nine months ended September 30, 2026, and 22.1% for the three and nine months ended September 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. | |||||||||||||||||||||||
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| SM ENERGY COMPANY | ||||||||||||||||||||||||||
| FINANCIAL HIGHLIGHTS (UNAUDITED) | ||||||||||||||||||||||||||
| September 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 September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Net cash provided by operating activities (GAAP) | $ | 1,122 | $ | 505 | $ | 2,865 | $ | 1,559 | ||||||||||||||||||
| Net change in working capital, including change in certain long-term items | 22 | 53 | 155 | 15 | ||||||||||||||||||||||
| Cash flow from operations before net change in working capital, including change in certain long-term items (non-GAAP) | 1,144 | 558 | 3,020 | 1,574 | ||||||||||||||||||||||
| Capital expenditures (GAAP) | 711 | 398 | 2,020 | 1,222 | ||||||||||||||||||||||
| Changes in capital expenditure accruals | 36 | (74) | 116 | (70) | ||||||||||||||||||||||
| Capital expenditures before changes in accruals (non-GAAP) | 747 | 323 | 2,136 | 1,152 | ||||||||||||||||||||||
| Adjusted free cash flow (non-GAAP) | $ | 397 | $ | 234 | $ | 884 | $ | 422 | ||||||||||||||||||
Note: For the three months ended September 30, 2026, adjusted free cash flow includes approximately $5 million of one-time, non-recurring cash costs associated with the Merger integration reported in net cash provided by operating activities. For the nine months ended September 30, 2026, adjusted free cash flow includes approximately $227 million of one-time, non-recurring cash costs associated with the Merger integration and South Texas assets divested, consisting of approximately $157 million reported in net cash provided by operating activities and approximately $70 million in capital expenditures. | ||||||||||||||||||||||||||
1 See “Definitions of Non-GAAP Measures and Metrics as Calculated by the Company” above. | ||||||||||||||||||||||||||
Reconciliation of Total Principal Amount of Debt to Net Debt1 | |||||
| (in millions) | September 30, 2026 | ||||
Principal amount of Senior Notes2 | $ | 6,456 | |||
Revolving credit facility2 | — | ||||
| Total principal amount of debt (GAAP) | 6,456 | ||||
| Less: Cash and cash equivalents | 442 | ||||
| Net Debt (non-GAAP) | $ | 6,014 | |||
1 See “Definitions of Non-GAAP Measures and Metrics as Calculated by the Company” above. | |||||
2 Amounts as of September 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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