SM Energy — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net income was $93 million ($0.39 per diluted share); adjusted net income was $465 million ($1.95 per diluted share).
• Operating cash flow generated was $1.1 billion.
• Capital expenditures totaled $711 million ($747 million before changes in accruals).
• Adjusted free cash flow was $397 million.
• Adjusted EBITDAX was $1.3 billion.
• Net debt reduced to $6.0 billion from $7.4 billion at March 31, 2026.
• Total operating revenues were $2.17 billion for the three months ended September 30, 2026, compared to $812 million in the same period in 2025.
• Net derivative loss was $684 million for the quarter, including a $477 million non-cash loss from fair value changes.

Guidance and Future Outlook:

• Full-year 2026 oil production guidance lowered by 1% to 220-222 MBbl/d; total production guidance narrowed to 420-422 MBoe/d.
• Full-year 2026 capital expenditures guidance narrowed to approximately $2.75 billion (midpoint of prior range).
• Fourth quarter 2026 production expected to be 435-445 MBoe/d, including 229-239 MBbl/d of oil, with capital expenditures of approximately $610 million.
• Full-year 2026 cash tax guidance updated to approximately $100-$120 million.
• Factors impacting oil production volumes are expected to be resolved in early 2027.
• Company expects to achieve low one-times leverage by year-end 2026 at mid-cycle prices.

Business Segments and Product Lines:

• Average net daily production totaled 433 MBoe/d, including 230 MBbl/d of oil.
• Substantially completed integration of the Civitas merger, exceeding targeted run-rate synergies of $400 million (twice the original $200 million target).
• NPV-10 of merger synergies increased to $2.0 billion from $1.8 billion.
• Oil volumes were impacted by higher-than-planned downtime in the Permian Basin (compliance and safety work) and takeaway constraints in the Uinta Basin.

Market and Competitive Landscape:

• Realized oil sales price (before derivatives) was $85.76 per Bbl for the quarter, compared to $63.83 in the same period in 2025.
• Realized gas sales price (before derivatives) was $2.48 per Mcf for the quarter, compared to $2.19 in the same period in 2025.
• Realized NGL sales price (before derivatives) was $29.40 per Bbl for the quarter, compared to $20.79 in the same period in 2025.

Risks and Challenges:

• Service-cost inflation noted as a factor in the operating environment.
• Permian Basin assets experienced downtime related to compliance and safety work on acquired assets.
• Uinta Basin faces takeaway constraints expected to resolve in early 2027.
• Forward-looking statements involve risks that could cause actual results to differ materially, including market conditions and operational execution.

Management Commentary and Tone:

• President and CEO Beth McDonald stated the company is "meaningfully transforming SM Energy," exceeding synergy targets and strengthening the balance sheet.
• Management emphasized a focus on disciplined execution, continuous improvement, and increasing capital efficiency to compound long-term value.
• The tone reflects confidence in the balance sheet as the foundation for a multi-year journey toward durable stockholder returns.

Other Key Points:

• Redeemed all $417 million aggregate principal amount of 6.625% Senior Notes due 2027 at par, resulting in no maturities until mid-2028.
• Returned $133 million of capital to stockholders (34% of adjusted free cash flow) via $81 million in share repurchases (2.3 million shares) and a $0.22 per share quarterly dividend.
• Year-to-date share repurchases totaled $165 million.
• Divestiture activity included a gain of $260 million for the nine months ended September 30, 2026.
• Issued 123,715,771 shares of common stock in connection with the Civitas merger.
• Transaction and integration costs for the nine months ended September 30, 2026, totaled $177 million ($159 million cash, $18 million non-cash).