SM 10-K & 10-Q changes, risk factors and insider trading
SM Energy Co · NYSE · Crude Petroleum & Natural Gas · CIK 893538 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Related to the Civitas Merger”
New heading “Risks Related to Commodity Prices and Global Macroeconomics”
New heading “Risks Related to Oil and Gas Operations and the Industry”
New heading “Risks Related to Litigation and Government Regulations”
New heading “Risks Related to Debt, Liquidity, and Access to Capital”
New heading “Risks Related to Corporate Governance and Ownership of Public Equity Securities”
New heading “Risks Related to the Civitas Merger”
New heading “We may be unable to successfully integrate Civitas’ business into our business or achieve the anticipated benefits of the Merger, which may have a material adverse effect on our business, financial condition or results of operations.”
New heading “We have incurred additional costs in connection with the Merger, which will continue during a portion of 2026.”
New heading “Securities class action and derivative lawsuits may be brought against us in connection with the Merger, which could result in substantial costs.”
New heading “The market price for our common stock may be affected by factors different from those that historically have affected SM Energy common stock or Civitas common stock.”
New heading “Our ability to utilize certain tax attributes may be limited as a result of the Civitas Merger.”
New heading “The historical business relationships of SM Energy and Civitas may be subject to disruption due to uncertainty associated with the Merger, which could have a material adverse effect on our results of operations, cash flows and financial position.”
New heading “The synergies and other benefits attributable to the Merger may vary from expectations.”
New heading “The proposed divestiture of certain of our South Texas assets may not be completed on the anticipated terms or at all, which could adversely affect our ability to execute our publicly stated deleveraging objectives.”
New heading “The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our undeveloped reserves may not be ultimately developed or produced.”
New heading “In the future, we may be subject to claims, litigation, administrative proceedings and regulatory actions that may not be resolved in our favor.”
New heading “Senate Bill 181’s requirement, which applies to our Colorado operations, that we own or control more than 45 percent of the working or mineral interest in order to statutorily pool our applicable interest may make it much more difficult for us to develop such interests, which could have a material adverse effect on our business, financial condition, and results of operations.”
Removed heading “Integration of assets acquired in the recent Uinta Basin Acquisition with our existing business will be a complex and time-consuming process. A failure to successfully integrate the acquired assets with our existing business in a timely manner may have a material adverse effect on our business, financial condition, or results of operations.”
Removed heading “We have incurred additional costs in connection with the Uinta Basin Acquisition, which may continue in 2025.”
Removed heading “Securities class action and derivative lawsuits may be brought against us in connection with the Uinta Basin Acquisition, which could result in substantial costs.”
Largest changes
“In the future, we may be subject to claims, litigation, administrative proceedings and regulatory actions. The outcome of these matters may be difficult to assess or quantify, and there cannot be any assurance that such matters will be resolved in our favor. If we are unable to resolve such matters favorably, we or our directors, officers or employees may become involved in legal proceedings that could result in an onerous or unfavorable decision, including fines, sanctions, monetary damages or the inability to engage in certain operations or transactions. …”see in full comparison
“Securities class action and derivative lawsuits may be brought against us in connection with the Uinta Basin Acquisition, which could result in substantial costs.”see in full comparison
“Securities class action and derivative lawsuits may be brought against us in connection with the Merger, which could result in substantial costs.”see in full comparison
“Risks Related to Litigation and Government Regulations”see in full comparison
“In the future, we may be subject to claims, litigation, administrative proceedings and regulatory actions that may not be resolved in our favor.”see in full comparison
“The IRA imposes fees on emissions of GHGs, including methane, that exceed applicable thresholds. Our GHG emissions in 2024 did not exceed the thresholds set forth by the IRA; however, there is no assurance that we will be able to meet our goals or that we will not exceed the thresholds set forth by the IRA in the future. …”see in full comparison
Full comparison: every changed paragraph (150)
In addition to the other information included in this report, the following risk factors discussed below should be carefully considered when evaluating an investment in SM Energy. For the purposes of this section, “we,” “our,” “us,” “Company” and “SM Energy” refer to the post-Merger company following the Civitas Merger. Our risk factors are summarized as follows:
Risks Related to the Civitas Merger
•We may be unable to successfully integrate Civitas’ business into our business or achieve the anticipated benefits of the Merger, which may have a material adverse effect on our business, financial condition or results of operations.
•We have incurred additional costs in connection with the Merger, which will continue during a portion of 2026.
•Securities class action and derivative lawsuits may be brought against us in connection with the Merger, which could result in substantial costs.
•The market price for our common stock may be affected by factors different from those that historically have affected SM Energy common stock or Civitas common stock.
•Our ability to utilize certain tax attributes may be limited as a result of the Civitas Merger.
•The historical business relationships of SM Energy and Civitas may be subject to disruption due to uncertainty associated with the Merger, which could have a material adverse effect on our results of operations, cash flows and financial position.
•The synergies and other benefits attributable to the Merger may vary from expectations.
Risks Related to Commodity Prices and Global Macroeconomics
•Oil, gas, and NGL prices are volatile, and declines in prices may adversely affect our profitability, financial condition, cash flows, access to capital, and ability to grow.
•Future oil, gas, and NGL price declines or unsuccessful exploration efforts may result in write-downs of our asset carrying values.
•Weakness in economic conditions, inflation, or uncertainty in financial markets may have material adverse impacts on our business that we cannot predict.
•Global geopolitical tensions may create heightened volatility in oil, gas, and NGL prices and could adversely affect our business, financial condition and results of operations.
Risks Related to Oil and Gas Operations and the Industry
•The proposed divestiture of certain of our South Texas assets may not be completed on the anticipated terms or at all, which could adversely affect our ability to execute our publicly stated deleveraging objectives.
•The loss of personnel could adversely affect our business.
•Our increasing dependence on digital technologies puts us at risk for a cyber incident that could result in information theft, data corruption, operational disruptions or financial loss.
•We are incorporating artificial intelligence technologies into our processes and these technologies may present business, compliance, and reputational risks.
•Competition in our industry is intense, and many of our competitors have greater financial, technical, and human resources than we do.
•Our ability to sell oil, gas, and NGLs, and/or receive market prices for our production, may be adversely affected by constraints on gathering systems, processing facilities, pipelines, rail systems, and other transportation systems owned or operated by third-parties or by other interruptions beyond our control, which could obstruct, limit, or eliminate our access to oil, gas, and NGL markets.
•We have entered into firm transportation contracts that require us to pay fixed sums of money to our counterparties regardless of the quantities actually transported under these contracts. If we are unable to deliver the necessary quantities of oil, gas, NGL, or produced water to our counterparties, our results of operations, financial position, and liquidity could be adversely affected.
•We have limited control over the activities on properties we do not operate.
•We rely on third-party service providers to conduct drilling and completion and other related operations.
•The inability of customers or co-owners of assets to meet their obligations may adversely affect our financial results.
•Many of our properties are in areas that may have been partially depleted or drained by offset wells and certain of our wells or future locations may be adversely affected by actions other operators may take when drilling, completing, or operating wells that they own.
•Oil and gas drilling, completion, and production activities are subject to numerous risks, including the risk that no commercially producible oil, gas, or NGLs will be found.
•The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our undeveloped reserves may not be ultimately developed or produced.
•Our ability to produce oil, gas, and NGLs economically and in commercial quantities could be impaired if we are unable to acquire adequate supplies of water for our drilling and/or completions operations or are unable to dispose of or recycle the water we produce at a reasonable cost and in accordance with applicable environmental rules and regulations.
•If we are unable to replace reserves and increase our reserve life index, we will not be able to sustain production.
•The results of our operations are subject to drilling and completion technique risks, and results may not meet our expectations for reserves or production. As a result, we may incur material write-downs, and the value of our undeveloped acreage could decline if drilling and completion results are unsuccessful.
•The actual quantities and present value of our proved oil, gas, and NGL reserves may be less than we have estimated, and the cost to develop our reserves may be more than we have estimated.
•Our disposition activities may be subject to factors beyond our control, and in certain cases we may retain unforeseen liabilities for certain matters.
•Title to the properties in which we have an interest may be impaired by title defects.
•Our business could be negatively impacted by security threats, including cybersecurity threats, terrorism, armed conflict, and other disruptions.
•We are subject to operating and environmental risks and hazards that could result in substantial losses or liabilities that may not be fully insured.
•The impact of seasonal and extreme weather conditions and lease stipulations adversely affect our ability to conduct drilling activities in some of the areas where we operate.
Risks Related to Litigation and Government Regulations
•In the future, we may be subject to claims, litigation, administrative proceedings and regulatory actions that may not be resolved in our favor.
•Our operations are subject to complex laws and regulations, including environmental regulations, which result in substantial costs and other risks.
•Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.
•Federal and state regulatory initiatives relating to air quality and greenhouse gas emissions could result in increased costs and additional operating restrictions or delays.
•Legislative and regulatory initiatives and litigation related to global warming and climate change could have an adverse effect on our operations and the demand for oil, gas, and NGLs, and could result in significant litigation, capital, and related expenses.
•Requirements to reduce gas flaring could have an adverse effect on our operations.
•Senate Bill 181’s requirement, which applies to our Colorado operations, that we own or control more than 45 percent of the working or mineral interest in order to statutorily pool our applicable interest may make it much more difficult for us to develop such interests, which could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Debt, Liquidity, and Access to Capital
•Commodity price declines could result in a decrease in the amount available to us under our Credit Agreement.
•Negative public perception and investor sentiment regarding our business and the oil and gas industry as a whole could adversely affect our business, operations, and our ability to attract capital.
•Substantial capital is required to develop and replace our reserves.
•Downgrades in our credit ratings by various credit rating agencies could impact our access to capital and have a material adverse effect on our business and financial condition.
•Our commodity derivative contract activities may result in financial losses or may limit the prices we receive for oil, gas, and NGL sales.
•The amount of our debt may limit our ability to obtain financing for acquisitions, make us more vulnerable to adverse economic conditions, and make it more difficult for us to make payments on our debt.
•The agreements governing our debt arrangements contain various covenants that limit our discretion in the operation of our business, could prohibit us from engaging in transactions we believe to be beneficial, and could lead to the accelerated repayment of our debt.
Risks Related to Corporate Governance and Ownership of Public Equity Securities
•Our certificate of incorporation and by-laws have provisions that discourage corporate takeovers and could prevent stockholders from receiving a takeover premium on their investment, which could adversely affect the price of our common stock.
•The price of our common stock may fluctuate significantly, which may result in losses for investors.
•We may not always pay dividends on our common stock or repurchase common stock under our Stock Repurchase Program.
Risks Related to the Civitas Merger
We may be unable to successfully integrate Civitas’ business into our business or achieve the anticipated benefits of the Merger, which may have a material adverse effect on our business, financial condition or results of operations.
The success of the Merger depends in part on whether we can complete the integration of the Civitas assets that we have not previously operated into our existing business in an efficient and effective manner, and there can be no assurance that we will be able to successfully integrate or otherwise realize the anticipated benefits of the Merger. The integration process may result in the disruption of ongoing business and there could be potential unknown liabilities and unforeseen expenses associated with the Merger that were not discovered in the course of performing due diligence. Integration may also require significant time and focus from management following the Merger that may disrupt our business and results of operations. Potential risks or difficulties include, among others:
Management's Discussion & Analysis (MD&A)
New heading “Merger with Civitas”
New heading “South Texas Asset Divestiture”
New heading “Market Trends and Uncertainties”
Removed heading “Interest income”
Removed heading “Loss on extinguishment of debt”
Largest changes
“As global commodities, the prices for oil, gas, and NGLs are affected by real or perceived geopolitical risks in various regions of the world, as well as the relative strength of the United States dollar compared to other currencies. …”see in full comparison
“Enactment of changes to federal income tax laws, including changes in the corporate tax rate, could have a material effect on our current tax expense, tax receivable, and deferred tax liabilities. Effective for tax years beginning after December 31, 2022, the IRA provides for a 15 percent corporate alternative minimum tax (“CAMT”) on corporations with average adjusted financial statement income over $1.0 billion for any three-year period preceding the tax year. …”see in full comparison
see in full comparisonWe are affected byAs globalcommoditycommodities, the prices of oil, gas, and NGLs, as well as broader financialmarkets thatmarkets, remain subject to heightenedlevels ofuncertainty and volatility.KeyMarket conditions are influenced by factorscontributingincludingtorealmarketorfluctuationsperceivedincludegeopoliticalongoing oil production curtailment agreements among OPEC+, fluctuations in oil and gas demand from China,risks, War and Geopolitical Instability,UnitedOPEC+Statesproduction decisions, fluctuations in global supply and demand (including demand from China), U.S. Federal Reserve monetary policy, movements in the strength of the U.S. dollar, shipping channel constraints and disruptions, tariffs or trade restrictions, and changes in global oil inventory in storage. These factors havedrivenresulted in commodity price volatility, contributed to instances of supply chaindisruptionsdisruptions, inflation, andfluctuations ininterestrates,rate fluctuations, and could have further industry-specific impacts that may require us to adjust our business plan.FutureTheimpactstiming and magnitude ofthesefutureand other events on commodity and financial marketseffects are inherently unpredictable.Despite continuing uncertainty, we expect to maximize the value of our high-quality asset base and sustain strong operational performance and financial stability. We remain focused on generating cash flows to enable us to return capital to stockholders and reduce our debt.
“Historically, tariffs have led to increased costs for products exchanged in international trade, and have heightened global political tensions. Recent U.S. government policies, including new and higher tariffs on imported goods, have increased economic uncertainty. These tariffs, along with retaliatory tariffs from other countries, could lead to reduced trade resulting from increased costs for imported goods and decreased demand for U.S. exports, as well as reduced investment and technological exchange between major economies. …”see in full comparison
Full comparison: every changed paragraph (121)
The following discussion includes forward-looking statements. Refer to the Cautionary Information about Forward-Looking Statements section of this report for important information about these types of statements. For discussion related to changes in financial condition and results of operations for the year ended December 31, 2024, compared with the year ended December 31, 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025.
Merger with Civitas
On November 2, 2025, we entered into the Merger Agreement with Civitas. On January 27, 2026, our stockholders voted in favor of both proposals necessary to complete the Civitas Merger, which included approval of (i) the issuance of shares of SM Energy common stock to Civitas stockholders as contemplated by the Merger Agreement, and (ii) an amendment of our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 200 million shares to 400 million shares.
On January 30, 2026, we completed the Civitas Merger in accordance with the terms of the Merger Agreement. Civitas was an independent exploration and production company focused on the acquisition, development, and production of crude oil and associated liquids-rich natural gas in the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico. We believe that the Merger will create a premier portfolio across the highest-return U.S. shale basins, driving significant free cash flow, enhancing stockholder value, and enabling the realization of significant operational and cost efficiencies.
Under the terms of the Merger Agreement, subject to certain exceptions, each share of Civitas common stock was converted into the right to receive 1.45 shares of SM Energy common stock, with cash paid in lieu of fractional shares. On January 30, 2026, we issued approximately 124 million shares to holders of Civitas common stock, representing 52 percent of the outstanding shares of SM Energy’s common stock upon the closing of the Merger. Based on the closing price of SM Energy common stock on January 30, 2026, the total stock consideration was valued at $2.4 billion.
Refer to Note 17 – Mergers, Acquisitions, and Divestitures in Part II, Item 8 of this report for additional discussion.
South Texas Asset Divestiture
On February 17, 2026, we entered into the PSA with Caturus to sell certain of our South Texas assets for a Purchase Price of $950 million, subject to certain customary purchase price adjustments set forth in the PSA. This Transaction is expected to advance our deleveraging goals and position us to substantially achieve our commitment to complete at least $1.0 billion of divestitures within one year following the closing of the Civitas Merger. Refer to Note 17 – Mergers, Acquisitions, and Divestitures in Part II, Item 8 for additional discussion and the definitions of Purchase Price and Transaction.
Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. We are a premier operator of top-tier assets in the Midland Basin, South Texas, and the Uinta Basin, utilizing state-of-the-art digital technology, data analytics, and AI in our operations, and continually seeking innovative ideas to help us optimize capital efficiency and well performance, while reducing our impact on shared natural resources and operating in an efficient, safe, and responsible manner.
Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. Our long-term vision and strategy is to sustainably grow value for all of our stakeholders as a premier operator of top-tier assets by maintaining and optimizing our high-quality asset portfolio, generating cash flows, and maintaining a strong balance sheet. Our team executes this strategy by prioritizing safety, technological innovation, and stewardship of natural resources, all of which are integral to our corporate culture. Our near-term goals include focusing on operational execution and successfully integrating the Uinta Basin assets; generating cash flows that enable us to continue returning value to stockholders through fixed dividend payments, debt repayments, and our Stock Repurchase Program; and expanding our portfolio of top-tier economic drilling inventory through acquisition and exploration.
OurFollowing the closing of the Civitas Merger, our asset portfolio is comprisedconsists of high-quality assets in the Midland Basin and Delaware Basin, both of Westwhich Texas,are part of the larger Permian Basin of Texas and New Mexico, the Maverick Basin of South Texas, and the Uinta Basin of northeasternnortheast Utah, whichand wethe DJ Basin of northeast Colorado. We believe our assets are capable of generating strong returns in the current macroeconomic environment and provide resilience to commodity price risk and volatility. WeThrough disciplined capital spending, strategic acquisitions and divestitures, and continued development and optimization, we seek to maximize returns and increase the value of our top-tier assetsasset throughbase disciplinedwhile capitalmaintaining spending,financial strategic acquisitions, including the Uinta Basin Acquisition,flexibility and continued development and optimization of our existing assets. We believe that our high-quality assets facilitate a sustainable approach to prioritizinglong-term operationalvalue execution, maintaining a strong balance sheet, generating cash flows, returning capital to stockholders, and maintaining financial flexibility. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and for the definition of the Uinta Basin Acquisition.creation.
Our long-term vision and strategy are focused on sustainably growing value for all of our stakeholders by deploying our technical excellence and exceptional execution to improve and optimize our high-quality asset portfolio, generate cash flows, and maintain a disciplined, strong balance sheet. Our team executes our strategy by prioritizing safety, technological innovation, and stewardship of natural resources, which are foundational to our corporate culture. Our near-term strategic focus is the successful integration of Civitas following the closing of the Merger on January 30, 2026. Integration is centered on maintaining safe operations, delivering consistent operational execution, and continuing to generate cash flows that enable us to return value to stockholders through fixed dividend payments, debt reduction, and share repurchases. Refer to Outlook for discussion of our 2026 capital program.
We are committed to exceptional safety, health, and environmental stewardship; supporting the professional development of a diverse and thriving team of employees; building and maintaining partnerships with our stakeholders by investing in and connecting with the communities where we live and work; and transparency in reporting our progress in these areas. The Environmental, SocialGovernance and GovernanceSustainability Committee of our Board of Directors oversees, among other things, the effectiveness of our ESGsustainability policies, programs and initiatives, monitors and responds to emerging trends, issues, and associated risks, and, together with management, reports to our Board of Directors regarding such matters. Further demonstrating our commitment to sustainable operations and environmental stewardship, compensation for our executives and eligible employees under certain aspects of our long-term incentive plan, and compensation for all employees under our short-term incentive planplans is calculated based on,on inCompany-wide part, certain Company-wide, performance-basedperformance metrics that include key financial, operational, environmental, health, and safety measures. Refer to our Definitive Proxy Statement on Schedule 14A for the 20252026 annual meeting of stockholders to be filed within 120 days from December 31, 2024,2025, for additional discussion of our compensation programs.program.
Market Trends and Uncertainties
We are affected byAs global commoditycommodities, the prices of oil, gas, and NGLs, as well as broader financial markets thatmarkets, remain subject to heightened levels of uncertainty and volatility. KeyMarket conditions are influenced by factors contributingincluding toreal marketor fluctuationsperceived includegeopolitical ongoing oil production curtailment agreements among OPEC+, fluctuations in oil and gas demand from China,risks, War and Geopolitical Instability, UnitedOPEC+ Statesproduction decisions, fluctuations in global supply and demand (including demand from China), U.S. Federal Reserve monetary policy, movements in the strength of the U.S. dollar, shipping channel constraints and disruptions, tariffs or trade restrictions, and changes in global oil inventory in storage. These factors have drivenresulted in commodity price volatility, contributed to instances of supply chain disruptionsdisruptions, inflation, and fluctuations in interest rates,rate fluctuations, and could have further industry-specific impacts that may require us to adjust our business plan. FutureThe impactstiming and magnitude of thesefuture and other events on commodity and financial marketseffects are inherently unpredictable. Despite continuing uncertainty, we expect to maximize the value of our high-quality asset base and sustain strong operational performance and financial stability. We remain focused on generating cash flows to enable us to return capital to stockholders and reduce our debt.
Historically, tariffs have led to increased costs for products exchanged in international trade, and have heightened global political tensions. Recent U.S. government policies, including new and higher tariffs on imported goods, have increased economic uncertainty. These tariffs, along with retaliatory tariffs from other countries, could lead to reduced trade resulting from increased costs for imported goods and decreased demand for U.S. exports, as well as reduced investment and technological exchange between major economies. These outcomes could negatively impact global economic conditions, financial market stability, and commodity prices. Volatility in political, trade, regulatory, and economic conditions could have a material adverse effect on our financial condition or results of operations. We are unable to reasonably estimate the period of time that these market conditions will exist or the extent to which they will impact our business, results of operations, and financial condition.
Continuing volatility in political, trade, regulatory and economic conditions could impact supply and demand fundamentals, and any related declines in oil, gas, and NGL prices could lead to proved and unproved property impairments in the future. Future impairments of proved and unproved properties are difficult to predict, especially in a volatile price environment.
We expect our total 20252026 capital program to be approximately $1.3$2.65 billion to $2.85 billion, excluding acquisitions, which we expect to fund with cash flows from operations, with any remaining cash needs being funded by borrowings under our revolving credit facility. We plan to focus our 20252026 capital program on highly economic oil development projects in our Midland Basin, South Texas, Uinta Basin, and UintaDJ Basin assets. Refer to Outlook in Part I, Items 1 and 2 of this report for additional discussion.
•We expanded our operations into Utah uponcompleted the completionintegration of the Uinta Basin Acquisitionassets duringinto theour fourth quarter of 2024.portfolio. Refer to Note 17 – AcquisitionsMergers, Acquisitions, and Divestitures in Part II, Item 8 of this report for additional discussion and the definition of the Uinta Basin Acquisition.
•We issued a combined $1.5 billion of aggregate principal amount of our 2029 Senior Notes and 2032 Senior Notes and redeemed the remaining $349.1 million aggregate principal amount outstanding of our 2025 Senior Notes. Refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion.
•Our Board of Directors approved an increase to our fixed dividend to $0.80 per share annually, to be paid in quarterly increments of $0.20 per share, which commenced in the fourth quarter of 2024. We paid a net cash dividend of $0.74 per share, an increase from $0.60 per share paid during 2023. Refer to Note 3 – Equity in Part II, Item 8 of this report for additional discussion.
•During the first half of 2024, we repurchased and subsequently retired 1.8 million shares of our common stock at a cost of $84.0 million, excluding excise taxes, commissions, and fees. In June 2024, our Board of Directors re-authorized our existing Stock Repurchase Program, and as of December 31, 2024, $500.0 million remained available under the Stock Repurchase Program for repurchases of our common stock through December 31, 2027. Refer to Note 3 – Equity in Part II, Item 8 of this report for additional discussion.
Financial and Operational Results. Average net daily equivalent production for the year ended December 31, 2024, increased 12 percent to 170.5 MBOE, compared with 152.0 MBOE for 2023, as a result of strong well performance, an increased number of completions, and production from our Uinta Basin assets during the fourth quarter of 2024. The increase primarily consisted of increases of seven percent and six percent from our Midland Basin and South Texas assets, respectively, and 9.1 MBOE of production from our Uinta Basin assets.
Realized prices for oil and gas decreased two percent and 27 percent, respectively, for the year ended December 31, 2024, compared with 2023, as a result of decreases in oil and gas benchmark commodity prices. Realized price for NGLs remained flat for the year ended December 31, 2024, compared with 2023. Total realized price per BOE remained flat for the year ended December 31, 2024, compared with 2023, primarily driven by a 24 percent increase in oil production, offset by decreases in oil and gas benchmark commodity prices. Oil, gas, and NGL production revenue increased 13 percent to $2.7 billion for the year ended December 31, 2024, compared with $2.4 billion for 2023, primarily as a result of the timing of well completions, strong well performance, and production from our Uinta Basin assets during the fourth quarter of 2024. Oil, gas, and NGL production expense of $10.21 per BOE for the year ended December 31, 2024, remained flat, compared with 2023.
We recorded net derivative gains of $50.0 million and $68.2 million for the years ended December 31, 2024, and 2023, respectively. These amounts include net derivative settlement gains of $68.7 million and $26.9 million for the years ended December 31, 2024, and 2023, respectively.
Operational activities during the year ended December 31, 2024, resulted in the following:
•Net cash provided by operating activities of $1.8 billion, compared with $1.6 billion for 2023.
•Net income of $770.3 million, or $6.67 per diluted share, compared with net income of $817.9 million, or $6.86 per diluted share for 2023.
•Net equivalent production of 75.5 MMBOE drove net income of $648 million, net cash provided by operating activities of $2.0 billion, and Adjusted EBITDAX, a non-GAAP financial measure, of $2.0$2.3 billion, compared with $1.7 billion for 2023.billion. Refer to Non-GAAP Financial Measures below for additional discussion, including our definition of adjusted EBITDAX and reconciliations to net income and net cash provided by operating activities.
•Strong operating cash flow enabled us to reduce debt through $69 million in net repayments on our revolving credit facility, increase cash on hand to $368 million, and return capital to stockholders. We repurchased and subsequently retired 444,705 shares of our common stock at a cost of $12 million, excluding excise taxes, commissions, and fees, and paid $92 million in dividends.
Financial and Operational Results. Oil, gas, and NGL production revenue increased 17 percent to $3.1 billion for the year ended December 31, 2025, compared with $2.7 billion for 2024. This increase was primarily driven by a 21 percent increase in average net daily equivalent production to 206.8 MBOE, reflecting a full year of production from our Uinta Basin assets and continued strong well performance, partially offset by a three percent decrease in total realized price per BOE due to lower oil and NGL benchmark commodity prices. Oil, gas, and NGL production expense on a per BOE basis increased 15 percent to $11.72 per BOE for the year ended December 31, 2025, compared with 2024.
We recorded net derivative gains of $178 million and $50 million for the years ended December 31, 2025, and 2024, respectively. These amounts include net derivative settlement gains of $132 million and $69 million for the years ended December 31, 2025, and 2024, respectively.
Operational activities during the year ended December 31, 2025, resulted in the following:
•Net cash provided by operating activities of $2.0 billion, compared with $1.8 billion for 2024.
•Net income of $648 million, or $5.64 per diluted share, compared with net income of $770 million, or $6.67 per diluted share for 2024.
•Adjusted EBITDAX, a non-GAAP financial measure, of $2.3 billion, compared with $2.0 billion for 2024. Refer to Non-GAAP Financial Measures below for additional discussion, including our definition of adjusted EBITDAX and reconciliations to net income and net cash provided by operating activities.
•A 12 percent increase in total estimatedEstimated net proved reserves decreased slightly to 673.0 MMBOE as of December 31, 2024,2025 from 678.3 MMBOE as of December 31, 2023,2024. to 678.3 MMBOE,As of which,December 6231, 2025, 60 percent of our net proved reserves were liquids (oil and NGLs), and 6061 percent were proved developed reserves. The increasedecrease primarily consisted of the acquisition of 103.2 MMBOE of estimated net proved reserves in the Uinta Basin and revisions of previous estimates of 74.7 MMBOE related to infill75.5 reservesMMBOE produced in both our South Texas and Midland Basin programs, partially offset by 62.4 MMBOE of production during 2024 and2025, the removal of 30.540.7 MMBOE of certain net proved undeveloped reserves cases that are no longer expected to be developed within the five-year period from initial booking,booking asresulting afrom resulttesting and delineation efforts, and 15.5 MMBOE of thenet reallocationperformance and price revisions. The decreases were mostly offset by revisions of capitalprevious estimates of 87.0 MMBOE related to includeinfill reserves, primarily related to our South Texas assets, and additions from extensions and discoveries of 39.7 MMBOE, primarily related to our Uinta Basin assets. Our proved reserve life index remaineddecreased flatto at8.9 years as of December 31, 2025, compared with 10.9 years as of December 31, 2024, and 2023.2024. Refer to Reserves in Part I, Items 1 and 2 of this report for additional discussion. The standardized measure of discounted future net cash flows was $6.0 billion as of December 31, 2025, compared with $7.3 billion as of December 31, 2024,2024. comparedThe withyear-over-year $6.3 billion asdecrease of December18 31, 2023, whichpercent was an increase of 16 percent year-over-year primarily drivendue by the Uinta Basin Acquisition, partially offset byto decreases in oil and gasNGL benchmark commodity prices during 2024.2025. Refer to Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report for additional discussion.
Operational Activities. During 2024,2025, successful operational execution drove strong well performance and capital efficiency across our asset portfolio. Our continued success in both our Midland BasinBasin, South Texas, and SouthUinta TexasBasin programs is attributable to our top-tier assets and technical teams, and our commitment to geoscience, technology, and innovation. During the fourth quarter of 2024, we began integrating our Uinta Basin assets where we focused on delineation and development.
In our Midland Basin program, we averaged fourthree drilling rigs and one completion crew during 2024.2025. Average net daily equivalent production volumes increased year-over-year by seventhree percent to 80.582.8 MBOE. Costs incurred during 20242025 totaled $720.9$548 million, or 2138 percent, of our total 20242025 costs incurred. Drilling and completion activities focused on developing formations within our RockStar,RockStar and Sweetie Peck, and KlondikePeck assets.
In our South Texas program, we averaged twoone drilling rigsrig and one completion crew during 2024.2025. Average net daily equivalent production volumes increaseddecreased year-over-year by sixone percent to 81.080.3 MBOE. Costs incurred during 20242025 totaled $478.3$361 million, or 1425 percent, of our total 20242025 costs incurred. Drilling and completion activities were primarily focused on delineating and developing the Austin Chalk formation.
In our Uinta Basin program, we averaged three drilling rigs and one completion crew during the fourth quarter of 2024.2025. Average net daily equivalent production volumes totaledincreased to 43.7 MBOE for the full year 2025, compared to 36.1 MBOE for the fourth quarter of 2024, or 9.1 MBOE if calculated over the full year 2024. Costs incurred during 20242025 totaled $2.3$481 billion,million, or 6533 percent, of our total 20242025 costs incurred, of which, over $2.1 billion related to acquisition costs.incurred. Drilling and completion activities primarily focused on delineating and developing the Lower Green River and Wasatch formations.
(1) As of December 31, 2023, and 2024, the drilled but not completed well count included nine gross (nine net) wells that were not included in our five-year development plan, eight of which were in the Eagle Ford shale. As of December 31, 2025, the drilled but not completed well count included two gross (two net) wells that were not included in our five year development plan, each of which are in the Eagle Ford shale.
(2) The South Texas adjustments relate to previously drilled wells that we no longer intend to complete.
(3) The Uinta Basin adjustment relates to the acquisition of additional working interest in existing drilled but not completed wells.
(2) We acquired these drilled but not completed wells as part of the Uinta Basin Acquisition on October 1, 2024. All drilling and completion activity presented in the table above for the Uinta Basin occurred during the fourth quarter of 2024. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and the definition of the Uinta Basin Acquisition.
Net equivalent production increased 1221 percent for the year ended December 31, 2024,2025, compared with 2023,2024. comprisedThe increase was a result of increasesa of seventhree percent and six percentincrease from our Midland Basin and South Texas assets, respectively,a andfull 3.3 MMBOEyear of production during the fourth quarter of 2024 from our Uinta Basin assets.assets, and continued strong well performance. Refer to Overview of Selected Production and Financial Information, Including Trends and Comparison of Financial Results and Trends Between 20242025 and 2023 and Between 2023 and 20222024 below for additional discussion of production.
The following table summarizes commodity price data, as well as the effect of net derivative settlements, for the years ended December 31, 2024, 2023,2025, and 20222024:
(1) Our realized prices at local sales points may be affected by infrastructure capacity in the areas of our operations and beyond.
(12) Effective January 1, 2023, averageAverage OPIS price per barrel of NGL, historical or strip, assumes a composite barrel product mix of 42% Ethane, 28% Propane, 6% Isobutane, 11% Normal Butane, and 13% Natural Gasoline. For periods prior to 2023, average OPIS price per barrel of NGL, historical or strip, assumed a composite barrelThis product mix of 37% Ethane, 32% Propane, 6% Isobutane, 11% Normal Butane, and 14% Natural Gasoline. These product mixes representrepresents the industry standard composite barrel for the respective periods presented and dodoes not necessarily represent our product mix for NGL production. Realized prices reflect our actual product mix.
As global commodities, the prices for oil, gas, and NGLs are affected by real or perceived geopolitical risks in various regions of the world, as well as the relative strength of the United States dollar compared to other currencies. Given the uncertainty surrounding global financial markets, production output from OPEC+, global shipping channel constraints and disruptions, fluctuations in oil and gas demand from China, War and Geopolitical Instability, changes in global oil inventory in storage, tariffs or trade restrictions, and the potential impacts of these issues on global commodity markets, we expect benchmark prices for oil, gas, and NGLs to remain volatile for the foreseeable future, and we cannot reasonably predict the timing or likelihood of any future impacts that may result, which could include inflation, supply chain disruptions, fluctuations in interest rates, and industry-specific impacts. Our realized prices at local sales points may also be affected by infrastructure capacity in the areas of our operations and beyond.
The following table summarizes 12-month strip prices for NYMEX WTI oil, NYMEX Henry Hub gas, and OPIS NGLs as of JanuaryFebruary 31,2, 2025,2026, and December 31, 20242025:
(2) Net derivative settlements for the years ended December 31, 2024, 2023,2025, and 2022,2024, are included within the net derivative (gain) loss line item in the accompanying consolidated statements of operations (“accompanying statements of operations”).
The Civitas Merger, which closed on January 30, 2026, is expected to materially affect our future operating and financial results. The addition of Civitas’ assets and operations is expected to increase production volumes and revenues and to impact oil, gas, and NGL production expense, general and administrative expense, and other expense categories. The magnitude and timing of these impacts will depend, in part, on integration activities, operating performance, commodity prices, and other factors and may not be directly comparable to the Company’s historical results. Unless otherwise noted, the discussion below reflects the results of our legacy operations and historical trends prior to the Merger.
Average net daily equivalent production for the year ended December 31, 2024,2025, increased 1221 percent compared with 2023,2024, asresulting from a resultfull year of an increased number of completions, strong well performance, and production from our Uinta Basin assetsassets, duringand thecontinued fourthstrong quarterwell of 2024.performance. Oil production as a percentage of total production increased to 53 percent in 2025 from 47 percent in 20242024, resulting from 43 percent in 2023, as a resultfull year of increased oil production from both our Midland Basin and South Texas assets, in addition to oil production from our Uinta Basin assets.assets, which averaged 87 percent oil production in 2025. In 2025,2026, we expect an increase in total production volumes anddue oilto asthe a percentageintegration of totalassets productionfrom tothe eachCivitas increase compared with 2024.Merger. Refer to Comparison of Financial Results and Trends Between 20242025 and 2023 and Between 2023 and 20222024 below for additional discussion.
Our realized price on a per BOE basis remaineddecreased flatthree percent for the year ended December 31, 2024,2025, compared with 2023,2024, primarily because a 24 percent increase in oil production was offset byof decreases in oil andbenchmark commodity prices partially offset by the increase in gas benchmark commodity prices. For the years ended December 31, 2024,2025, and 2023,2024, we recognized net gains on the settlement of our commodity derivative contracts of $1.10$1.75 per BOE and $0.49$1.10 per BOE, respectively.
LOE on a per BOE basis remainedincreased flat12 percent for the year ended December 31, 2024, compared with 2023, as increases in labor costs and certain other operating costs were offset by an increase in total net equivalent production and a decrease in workover expense due to the timing of activity. For 2025, we expect LOE on a per BOE basis to increase, compared with 2024, asdriven by the increased percentage of oil in our product mix continues to shift towards more oiltotal production withmix, ourwhich Uintahas Basinhigher assets,lifting costs per BOE, and as a result of expected increases in certain operating costs associated with our Midland Basin assets.costs. We anticipate volatility in LOE on a per BOE basis asresulting a result offrom changes in total production, timing of workover projects, changes in service provider costs, and industry activity, all of which affect total LOE.
Transportation costs on a per BOE basis increased nine44 percent for the year ended December 31, 2024,2025, compared with 2023.2024. This increase was primarily due to a six percent increase in NGL production from our South Texas assets and 3.315.9 MMBOE of full year production from our Uinta Basin assets, both of which incur higher transportation costs thanon a per BOE basis compared to our Midland Basin and South Texas assets. In general, we expect total transportation costs to fluctuate relative to changes in oil production from our Uinta Basin assets and gas and NGL production from our South Texas assets and oil production from our Uinta Basin assets, where we incur a majority of our transportation costs. For 2025,2026, we expect transportation costs on a per BOE basis to increase,remain relatively flat compared with 2024, as a result of the addition of our Uinta Basin assets.2025.
Production tax expense on a per BOE basis for the year ended December 31, 2024,2025, decreased twonine percent compared with 2023,2024, primarily asresulting a result offrom a decrease in the realized price of gas. Our overall production tax rate was 4.3 percentoil, and 4.4full percentyear operations for the years ended December 31, 2024, and 2023, respectively. We expect that our Uinta Basin assets willwhich incur a lower production tax rate compared to our Midland Basin and South Texas assets. Our overall production tax rate was 4.1 percent and 4.3 percent for the years ended December 31, 2025, and 2024, respectively. We generally expect production tax expense to correlate with oil, gas, and NGL production revenue on a per BOE and absolute basis. Product mix, the location of production, and incentives to encourage oil and gas development can also impact the amount of production tax expense that we recognize.
Ad valorem tax expense on a per BOE basis decreased 1618 percent for the year ended December 31, 2024,2025, compared with 2023,2024, asprimarily adue resultto ofincreased net equivalent production and changes to the assessed values of our producing properties due to decreased commodity price assumptions used in the current year valuation, and increased net equivalent production.properties. We anticipate volatility in ad valorem tax expense on a per BOE and absolute basis as the valuation of our producing properties changes, which is generally driven by fluctuations in commodity prices, and can be impacted by changes in tax laws.changes.
Depletion, depreciation, and amortization (“DD&A”) expense on a per BOE basis increased four23 percent for the year ended December 31, 2024,2025, compared with 2023,2024, due to increased production from our Uinta Basin assets, which caused a shift in the production mix totowards our Uintahigher Basin assets. Ourrate Midland Basin and Uinta Basin assets have higher DD&A rates than our South Texas assets. For 2025,2026, we expect DD&A expense per BOE and on an absolute basis to increase,increase compared with 2024,2025, primarily asreflecting aanticipated result of expected increasedhigher production resultingvolumes from the addition ofand our Uintaexpanded Basinasset assets, and a shift in our production mix.base. Our DD&A rateexpense fluctuateson a per BOE and absolute basis may fluctuate as a result of changes in our production mix, changes in our total estimated proved reserve volumes, changes in capital allocation, impairments, acquisition and divestiture activity, and carrying cost funding and sharing arrangements with third parties.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risk factors as previously disclosed in our 2025 Form 10-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Selected Production and Financial Information”
New heading “Gain on divestiture activity”
New heading “Other operating income”
Largest changes
“The timing and magnitude of future effects of the factors discussed above are inherently unpredictable and could have a material adverse effect on our business, financial condition, and results of operations to an extent we are unable to reasonably estimate. Declines in oil, gas, and NGL prices are difficult to predict in a volatile price environment and could lead to impairments of proved and unproved properties.”see in full comparison
“Continuing volatility in political, trade, regulatory and economic conditions could impact supply and demand fundamentals, and any related declines in oil, gas, and NGL prices could lead to impairments of proved and unproved properties in the future. Future impairments of proved and unproved properties are difficult to predict, especially in a volatile price environment.”see in full comparison
Comparison of Financial Results and Trends Between the Three Months Endedsee in full comparisonMarchJune31,30, 2026, andDecember 31, 2025, and Between the Three Months EndedMarch 31, 2026, and Between the Six Months Ended June 30, 2026, and 2025
Full comparison: every changed paragraph (131)
The following discussion includes forward-looking statements. Refer to the Cautionary Information about Forward-Looking Statements section of this report for important information about these types of statements. Throughout the following discussion, we explain changes between the three months ended MarchJune 31,30, 2026, and the three months ended DecemberMarch 31, 20252026 (“sequential quarterly” or “sequentially”), and the year-to-date (“YTD”) change between the threesix months ended MarchJune 31,30, 2026, and the threesix months ended MarchJune 31,30, 2025 (“YTD 2026-over-YTD 2025”).
On November 2, 2025, we entered into the Merger Agreement with Civitas. On January 27, 2026, our stockholders voted in favor of both proposals necessary to complete the Civitas Merger, which included approval of (i) the issuance of shares of SM Energy common stock to Civitas stockholders as contemplated by the Merger Agreement, and (ii) an amendment of our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 200 million shares to 400 million shares.
On January 30, 2026, we completed the Civitas Merger in accordance with the terms of the Merger Agreement. Civitas was an independent exploration and production company focused on the acquisition, development, and production of crude oil and associated liquids-rich natural gas in the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico. We believe that the Merger creates a premier portfolio across the highest-return U.S. shale basins, enabling the realization of operational efficiencies and cost synergies and providing opportunities for increased free cash flow to drive long-term differentiated stockholder value.
Under the terms of the Merger Agreement, subject to certain exceptions, each share of Civitas common stock was converted into the right to receive 1.45 shares of SM Energy common stock, with cash paid in lieu of fractional shares. On January 30, 2026, we issued 124 million shares to holders of Civitas common stock, representing 52 percent of the outstanding shares of SM Energy’s common stock upon the closing of the Merger. Based on the closing price of SM Energy common stock on January 30, 2026, the total stock consideration was valued at $2.4 billion.
On April 30, 2026, we completed the South Texas Divestiture and received net cash proceeds of approximately $900 million, after preliminary purchase price adjustments and estimated selling costs. The final purchase price remains subject to customary post-closing adjustments. The South Texas Divestiture meaningfully advances our key priority of selling more than $1.0 billion in assets within one year of the completion of the Civitas Merger, which will enable us to reduce debt and strengthen our capital structure. See Note 2 - Mergers, Acquisitions, and Divestitures in Part I, Item 1 of this report for additional discussion.
During and subsequent to the first quarter of 2026, we made meaningful progress toward strengthening our debt structure and addressing near-term maturities of certain of our Senior Notes. We issued our 2034 Senior Notes and used the majority of the net proceeds to repurchase $894 million in aggregate principal amount of our higher-coupon Civitas 2028 Senior Notes. Concurrent with the completion of the South Texas Divestiture, we announced our intent to use the net cash proceeds to fully redeem our Civitas 2026 Senior Notes and 2026 Senior Notes at par, with planned redemption dates of May 11, 2026, and June 1, 2026, respectively. Our semi-annual borrowing base redetermination was completed subsequent to quarter end, reaffirming our borrowing base and aggregate lender commitments at their existing levels. As of March 31, 2026, we had no outstanding borrowings under our revolving credit facility.
Our purpose. Our purpose is to improve communities withby providing affordable, reliable energy. We are a premier operator of top-tier assets, utilizing state-of-the-art digital technology, data analytics, and AIartificial intelligence in our operations, and continually seekingpursuing innovative ideas to help us optimize capital efficiency and well performance, while reducing our impact on shared natural resources and operating in an efficient, safe, and responsible manner.
Responsible operations and governance. We are committed to exceptional safety, health, and environmental stewardship; supporting the professional development of a diverse and thriving team of employees; building and maintaining partnerships with our stakeholders by investing in and connecting with the communities where we live and work; and transparency in reporting our progress in these areas. The GovernanceOperations and SustainabilityEHS Committee of our Board of Directors oversees, among other things, the effectiveness of our sustainability policies, programs and initiatives, monitors and responds to emerging trends, issues, and associated risks, and, together with management, reports to our Board of Directors regarding such matters. Further demonstrating our commitment to sustainable operations and environmental stewardship, compensation for our executives and employees under certain aspects of our compensation plans is calculated based on Company-wide performance metrics that include key financial, operational, environmental, health, and safety measures.
On November 2, 2025, we entered into the Merger Agreement with Civitas. On January 27, 2026, our stockholders voted in favor of both proposals necessary to complete the Merger, which included approval of (i) the issuance of shares of SM Energy common stock to Civitas stockholders as contemplated by the Merger Agreement, and (ii) an amendment of our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 200 million shares to 400 million shares.
On January 30, 2026, we completed the Merger in accordance with the terms of the Merger Agreement. Civitas was an independent exploration and production company focused on the acquisition, development, and production of crude oil and associated liquids-rich natural gas in the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico. We believe that the Merger enhances our premier portfolio across high-return U.S. shale basins, enabling the realization of operational efficiencies and cost synergies and providing opportunities for increased free cash flow to drive long-term differentiated stockholder value.
Under the terms of the Merger Agreement, subject to certain exceptions, each share of Civitas common stock was converted into the right to receive 1.45 shares of SM Energy common stock, with cash paid in lieu of fractional shares. On January 30, 2026, we issued 124 million shares to holders of Civitas common stock, representing 52 percent of the shares of SM Energy’s common stock outstanding immediately following the closing of the Merger. Based on the closing price of SM Energy common stock on January 30, 2026, the total stock consideration was valued at $2.4 billion.
On April 30, 2026, we completed the South Texas Divestiture and received net cash proceeds of $896 million. The final purchase price remains subject to customary post-closing adjustments. The South Texas Divestiture substantially achieved our target of selling more than $1.0 billion in assets within one year of the completion of the Merger, which has enabled us to reduce debt and strengthen our capital structure. See Note 2 - Mergers, Acquisitions, and Divestitures in Part I, Item 1 of this report for additional discussion.
During the six months ended June 30, 2026, and into the subsequent period, we made meaningful progress toward strengthening our debt structure and addressing near-term maturities of certain of our Senior Notes. We issued our 2034 Senior Notes and used the majority of the net proceeds to repurchase $894 million in aggregate principal amount of our higher-coupon 2028 Civitas Senior Notes. After the completion of the South Texas Divestiture, we used the net cash proceeds to fully redeem our 2026 Civitas Senior Notes and our 2026 Senior Notes at par, on May 11, 2026, and June 1, 2026, respectively. Subsequent to June 30, 2026, on August 5, 2026, we instructed the trustee under the 2027 Senior Notes to issue a notice of full redemption of the $417 million aggregate principal amount outstanding, plus accrued and unpaid interest, and intend to complete such redemption on September 4, 2026. Our semi-annual borrowing base redetermination was completed in April 2026, reaffirming our borrowing base and aggregate lender commitments at their existing levels. As of June 30, 2026, we had no outstanding borrowings under our revolving credit facility.
Our oil-weighted, liquids-rich asset base spans four operating areas within the United States. Across all areas, gas composition is amenable to processing for NGL extraction, and each area provides future development and exploration opportunities within multiple proven formations.
Our Permian Basin assets comprise approximately 233,000 net acres located in the Midland Basin and Delaware Basin of West Texas and New Mexico (collectively referred to as the “Permian Basin”) with future development and exploration opportunities in the Spraberry, Wolfcamp, and Woodford formations in the Midland Basin; and the Avalon, Bone Spring, and Wolfcamp formations in the Delaware Basin.
Our DJ Basin assets comprise approximately 301,000 net acres located primarily in northeastern Colorado (“DJ Basin”) with future development and exploration opportunities in the Niobrara and Codell formations.
Following the completion of the South Texas Divestiture, our South Texas assets comprise approximately 95,000 net acres located in Dimmit and Webb counties, Texas (“South Texas”) with future development and exploration opportunities across our overlapping acreage position covering a portion of the western Eagle Ford shale and Austin Chalk formations.
Our Uinta Basin assets comprise approximately 99,000 net acres in northeastern Utah (“Uinta Basin”), including acreage in Utah previously reported as other non-core acreage that has been reclassified to the Uinta Basin, with future development and exploration opportunities in the Lower Green River and Wasatch formations.
During the firstsix quartermonths ofended June 30, 2026, benchmark oil prices reached their highest levels since 2022, reflecting strong global demand and ongoing supply-side constraints resulting from recent geopolitical developments in the Middle East. Despite the resulting price volatility, we dohave not anticipatemade material changes to our 2026 development plan and wedo remainnot focusedcurrently onanticipate ourmaking keymaterial prioritieschanges for the remainder of post-Merger integration, maximizing free cash flow, and bolstering our balance sheet.2026.
While benchmarkBenchmark gas prices increasedhave sequentially,been volatile throughout 2026, and our realized gas prices duringhave the three months ended March 31, 2026, werebeen negatively impacted by basis differentials in both the Permian Basin and the DJ Basin. In the Permian Basin, gas gathering and takeaway capacity constraints contributed to wideningsignificant basis differentials duringat the Waha hub throughout the first quarterand second quarters of 20262026, with differentials widening in April and May before narrowing in June. In June, additional pipeline capacity entered service and we expect these differentials to persist until additional pipeline capacity comes online induring the region,second whichhalf isof anticipated2026 into lateprovide 2026.adequate takeaway capacity out of the Permian Basin. In the DJ Basin, unfavorable differentials resultedat fromCIG aRockies differentpersisted setthrough the second quarter of regional pressures,2026 as aelevated warmstorage winterinventories and continued spring shoulder season reduceddemand weakness kept regional prices below benchmark levels, with only modest improvement late in the second quarter as summer cooling demand while record-high production pushed storage inventories to record levels.increased.
As global commodities, the prices of oil, gas, and NGLs, as well as broader financial markets, remain subject to heightened uncertainty and volatility. Market conditions are influenced by factors including real or perceived geopolitical risks; War and Geopolitical Instability; Organization of the Petroleum Exporting Countries (“OPEC”) plus other non-OPEC oil producing countries (collectively referred to as “OPEC+”) production decisions; fluctuations in global supply and demand (including demand from China); U.S. Federal Reserve monetary policy; movements in the strength of the U.S. dollar; shipping channel constraints and disruptions including restrictions in and closures of the Strait of Hormuz; tariffs and trade restrictions; the potential for economic recession in the U.S.; and changes in global oil inventory in storage. These factors have resulted in commodity price volatility, contributed to instances of supply chain disruptions, inflation, and interest rate fluctuations, and could have further industry-specific impacts that may require us to adjust our business plan. The timing and magnitude of future effects are inherently unpredictable.
Historically, tariffs have led to increased costs for products exchanged in international trade, and have heightened global political tensions. Changes in the U.S. and international trade policies, including the imposition, modification, or repeal of tariffs, continue to contribute to economic and market uncertainty. In recent periods, U.S. tariff policies and related trade actions have shifted frequently, and retaliatory measures or additional policy changes by other countries remain possible.possible, These outcomesand could negativelycontribute impactto globalbroader economic conditions, financialand market stability, and commodity prices. Volatility in political, trade, regulatory, and economic conditions could have a material adverse effect on our financial condition or results of operations. We are unable to reasonably estimate the period of time that these market conditions will exist or the extent to which they will impact our business, results of operations, and financial condition.instability.
The timing and magnitude of future effects of the factors discussed above are inherently unpredictable and could have a material adverse effect on our business, financial condition, and results of operations to an extent we are unable to reasonably estimate. Declines in oil, gas, and NGL prices are difficult to predict in a volatile price environment and could lead to impairments of proved and unproved properties.
Continuing volatility in political, trade, regulatory and economic conditions could impact supply and demand fundamentals, and any related declines in oil, gas, and NGL prices could lead to impairments of proved and unproved properties in the future. Future impairments of proved and unproved properties are difficult to predict, especially in a volatile price environment.
Our Permian Basin assets comprise approximately 229,000 net acres located in the Midland Basin and Delaware Basin of West Texas and New Mexico, (collectively referred to as the “Permian Basin”). Our acreage position in the Permian Basin provides future development and exploration opportunities within multiple oil-rich intervals, including the Spraberry, Wolfcamp, and Woodford formations in the Midland Basin and the Avalon, Bone Spring, and Wolfcamp formations in the Delaware Basin.
Our DJ Basin assets comprise approximately 303,000 net acres located primarily in northeastern Colorado (“DJ Basin”) and provide future development and exploration opportunities within multiple oil-rich intervals in the Niobrara and Codell formations, and includes acreage with light sweet crude oil and gas composition amenable to processing for NGL extraction.
As of March 31, 2026, our South Texas assets comprised approximately 155,000 net acres located in Dimmit and Webb counties, Texas (“South Texas”). Our overlapping acreage position in South Texas covered a significant portion of the western Eagle Ford shale and Austin Chalk formations, and included acreage across the oil, gas-condensate, and dry gas windows with gas composition amenable to processing for NGL extraction. Subsequent to March 31, 2026, we finalized the South Texas Divestiture, consisting of approximately 61,000 net acres, including the portion of our position located in the dry gas window. Refer to Note 2 - Mergers, Acquisitions, and Divestitures in Part I, Item 1 of this report for additional information.
Our Uinta Basin assets comprise approximately 62,000 net acres in northeastern Utah (“Uinta Basin”) and provide future development and exploration opportunities within multiple oil-rich intervals in the Lower Green River and Wasatch formations, and include acreage with waxy crude and gas composition amenable to processing for NGL extraction.
FirstSecond Quarter 2026 Overview and Outlook for the Remainder of 2026
During the firstsecond quarter of 2026:
•We completedcontinued theto Civitasadvance Merger onintegration Januaryefforts 30, 2026, and made meaningful progress on post-Merger integration, advancingacross key operational and organizational initiatives,workstreams and made further progress on capturing synergies. Integration remains a key priority.
•We issued the 2034 Senior Notes and used the majority of the net proceeds to repurchase $894 million in aggregate principal amount of the Civitas 2028 Senior Notes, excluding premiums paid, through the Tender Offer, of which $110 million settled subsequent to March 31, 2026.
•We announcedclosed our South Texas Divestiture, which subsequently closedDivestiture on April 30, 2026.2026, and received net cash proceeds of $896 million.
•We redeemed the entire $400 million and $419 million aggregate principal amounts outstanding of our 2026 Civitas Senior Notes and 2026 Senior Notes, respectively, at par.
•We resumed activity under our Stock Repurchase Program by repurchasing and subsequently retiring 2.6 million shares of our common stock at a cost of $84 million, excluding excise taxes, commissions, and fees.
We subsequently announced that we instructed the trustee under the 2027 Senior Notes to issue a notice of full redemption of the $417 million aggregate principal amount outstanding to the holders of such notes.
•Our Board of Directors approved an increase to our fixed dividend policy to $0.88 per share annually, paid in quarterly increments beginning in the first quarter of 2026.
Refer to Note 2 - Mergers, Acquisitions, and DivestituresDivestitures, Note 5 - Equity, and Note 6 - Long-Term Debt in Part I, Item 1 of this report for additional discussion.
Financial and Operational Results. Oil, gas, and NGL production revenue increased 11046 percent sequentially to $2.2 billion for the three months ended June 30, 2026, compared with $1.5 billion for the three months ended March 31, 2026, compared with $703 million for the three months ended December 31, 2025.2026. This increase was primarily driven by aan 7918 percent sequential quarterly increase in average daily equivalent production to 371.2439.7 MBOE per day, reflecting a full quarter of production from the assets acquired in the Merger, and a 2022 percent sequential quarterly increase in total realized price per BOE, before the effect of net derivative settlements (“realized price” or “realized prices”), resulting from increases in benchmark oil prices. Oil, gas, and NGL production expense increased 10730 percent sequentially to $556 million for the three months ended June 30, 2026, compared with $428 million for the three months ended March 31, 2026, compared with $207 million for the three months ended December 31, 2025. The sequential quarterly increases in production revenue, production expense, and average net daily equivalent production are primarily due to the inclusion of approximately two months of activity from the assets acquired in the Civitas Merger.2026.
We recorded a net derivative gain of $272 million and a net derivative loss of $697 million for the three months ended June 30, 2026, and March 31, 2026, respectively. Included within these amounts are net derivative settlement losses of $220 million and $30 million for the three months ended June 30, 2026, and March 31, 2026, respectively.
We recorded a net derivative loss of $697 million and a net derivative gain of $71 million for the three months ended March 31, 2026, and December 31, 2025, respectively. The net derivative loss during the first quarter 2026 resulted from rising oil prices primarily driven by the U.S.-Iran war, which began in late February 2026 and has significantly disrupted oil supply and shipping through the Strait of Hormuz. Included within these amounts are a net derivative settlement loss of $30 million and a net derivative settlement gain of $46 million for the three months ended March 31, 2026, and December 31, 2025, respectively.
Operational and financial activities during the three months ended MarchJune 31,30, 2026, resulted in the following:
•Net income of $1.1 billion, or $4.46 per diluted share, compared with a net loss of $335 million, or $1.68 per diluted share, for the three months ended March 31, 2026.
•A net loss of $335 million, or $1.68 per diluted share, compared with net income of $109 million, or $0.95 per diluted share, for the three months ended December 31, 2025, primarily driven by a $697 million net derivative loss resulting from an increase in the forward oil price curves underlying our commodity derivative contracts as of March 31, 2026. Of this net derivative loss, $667 million relates to commodity derivative contracts that are scheduled to settle after March 31, 2026.
•Net cash provided by operating activities of $640$1.1 million,billion, compared with $452$640 million for the three months ended DecemberMarch 31, 2025. The increase in net cash provided by operating activities was primarily due to the inclusion of two months of operating activity from assets acquired in the Civitas Merger.2026.
•Adjusted EBITDAX, a non-GAAP financial measure, of $970$1.4 million,billion, compared with $509$970 million for the three months ended DecemberMarch 31, 2025. The increase in adjusted EBITDAX was primarily due to the inclusion of two months of operating activity from the assets acquired in the Civitas Merger.2026. Refer to the caption Non-GAAP Financial Measures below for additional discussion and our definition of adjusted EBITDAX and reconciliations to net income (loss) and net cash provided by operating activities.
Refer to Overview of Selected Production and Financial Information, Including Trends and Comparison of Financial Results and Trends Between the Three Months Ended June 30, 2026, and March 31, 2026, and December 31, 2025, and Between the ThreeSix Months Ended MarchJune 31,30, 2026, and 2025 below for additional discussion.
During the three and six months ended MarchJune 31,30, 2026, costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, totaled $725$734 million.million and $1.5 billion, respectively. Total costs incurred includes activity in our core areas of operations, corporate charges incurred in exploration activities, and costs related to exploration efforts outside of our core areas of operation.
In our Permian Basin program, we averagedoperated sixan average of seven drilling rigs and twoone completion crewscrew during the firstsecond quarter of 2026, and our operations focused on development optimization and delineation of our assets in the Midland Basin and Delaware Basin. Average net daily equivalent production increased sequentially by 11728 percent to 182.6233.5 MBOE,MBOE per day, reflecting a full quarter of production from the inclusionassets ofacquired in the Merger, compared to two months of production fromincluded in the Civitasfirst assetsquarter acquiredof on2026 Januaryfollowing 30,the 2026.Closing Date of the Merger. Costs incurred during the three months ended MarchJune 31,30, 2026, totaled $336$300 million, or 4641 percent of our total costs incurred for the period. We anticipate operating an average of six drilling rigs and two completion crews for the remainder of 2026, focused on development of the Spraberry, Woodford, Bone Spring, Wolfcamp, and Avalon formations.
In our DJ Basin program, we operated between one and two drilling rigs during the firstsecond quarter of 2026 and one completion crew for a portion of the quarter, and our operations focused primarily on delineation and development. Average net daily equivalent production wasincreased 81.4sequentially by 46 percent to 118.8 MBOE forper day reflecting a full quarter of production from the threeassets monthsacquired ended March 31, 2026, reflectingin the inclusionMerger, ofcompared to two months of production fromincluded in the Civitasfirst assetsquarter acquiredof on2026 Januaryfollowing 30,the 2026.Closing Date of the Merger. Costs incurred during the three months ended MarchJune 31,30, 2026, totaled $113$178 million, or 1624 percent of our total costs incurred for the period. We anticipate operating an average of one drilling rig and one completion crew for the remainder of 2026, focused on further development and delineation of the Niobrara and Codell formations.
In our South Texas program, we operated twoone drilling rigsrig and averaged one completion crew during the firstsecond quarter of 2026, and our operations focused primarily on the development and further delineation of the Austin Chalk formation. The three months ended June 30, 2026, reflect only one month of activity related to the divested assets prior to April 30, 2026. Average net daily equivalent production decreased sequentially by 1530 percent to 68.047.4 MBOE.MBOE per day, primarily due to the South Texas Divestiture. Costs incurred during the three months ended MarchJune 31,30, 2026, totaled $120$133 million, or 1718 percent of our total costs incurred for the period. We anticipate operating one drilling rig during the remainder of 2026 and averaging one completion crew through the end of the third quarter of 2026 on our retained South Texas acreage,2026, focused primarily on developing the Austin Chalk formation.
In our Uinta Basin program, we operated threetwo drilling rigs and one completion crew during the firstsecond quarter of 2026, and our operations focused on delineation and development. Average net daily equivalent production decreasedincreased sequentially by eighttwo percent to 39.140.1 MBOE.MBOE per day. Costs incurred during the three months ended MarchJune 31,30, 2026, totaled $105$123 million, or 1517 percent of our total costs incurred for the period. We anticipate operating between two and three drilling rigs and one completion crew during the remainder of 2026, focused primarily on delineating and developing the Lower Green River and Wasatch formations.
The table below provides a quarterly summary of changes in our drilled but not completed well count and current year drilling and completion activity in our operated programs for the three and six months ended MarchJune 31,30, 2026:
(1) Subsequent to March 31, 2026, we divested 10 gross (10 net) drilled but not completed wells as part of the South Texas Divestiture.
(21) We acquired these drilled but not completed wells as part of the Civitas Merger on January 30, 2026.
(32) All drilling and completion activity related to the acquired assets in the Permian Basin and DJ Basin occurred after the Closing Date of the Merger.
(3) On April 30, 2026, as part of the South Texas Divestiture, we sold 10 gross (10 net) drilled but not completed wells.
(4) Includes adjustments related to normal business activities, including working interest changes for existing drilled but not completed wells and wells completed during the second quarter of 2026. Working interest changes can result from divestitures, joint development agreements, farm-outs, and other activities.
Production Results. The table below presents the disaggregation of our net production volumes by product type for each of our assets for the periods presented. The Permian Basin and DJ Basin amountsresults include activityproduction relatedfrom to the assetsproperties acquired in the CivitasMerger Merger, which is reflected only forafter the portionClosing Date of the quarter occurring after January 30, 2026.
Refer to Overview of Selected Production and Financial Information, Including Trends and Comparison of Financial Results and Trends Between the Three Months Ended June 30, 2026, and March 31, 2026, and December 31, 2025, and Between the ThreeSix Months Ended MarchJune 31,30, 2026, and 2025 below for discussion of production.
SM insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 3 filings (3 insiders, 3 trade dates, 45,703 shares, about $1.6M). Net open-market shares: -45,703 (purchases minus sales); net value about -$1.6M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-10 | Venkatraman Ashwin |
Open-market sale | 3,650 | $38.28 | $139.7K |
| 2026-08-21 | Pursell A Wade |
Gift | 5,000 | — | — |
| 2026-08-21 | Lebeck James Barker |
Open-market sale | 17,500 | $37.02 | $647.9K |
| 2026-07-24 | Pursell A Wade |
Option exercise | 16,917 | — | — |
| 2026-07-24 | Pursell A Wade |
Shares withheld for tax | 7,403 | $26.10 | $193.2K |
| 2026-07-24 | Lebeck James Barker |
Option exercise | 7,520 | — | — |
| 2026-07-24 | Lebeck James Barker |
Shares withheld for tax | 3,291 | $26.10 | $85.9K |
| 2026-07-01 | Lebeck James Barker |
Option exercise | 10,880 | — | — |
| 2026-07-01 | Lebeck James Barker |
Shares withheld for tax | 2,673 | $26.10 | $69.8K |
| 2026-07-01 | Lebeck James Barker |
Option exercise | 6,108 | — | — |
| 2026-07-01 | Lebeck James Barker |
Shares withheld for tax | 2,306 | $26.10 | $60.2K |
| 2026-07-01 | Lebeck James Barker |
Option exercise | 5,269 | — | — |
| 2026-07-01 | Lebeck James Barker |
Shares withheld for tax | 4,761 | $26.10 | $124.3K |
| 2026-07-01 | Mcdonald Elizabeth Anne |
Shares withheld for tax | 6,440 | $26.10 | $168.1K |
| 2026-07-01 | Mcdonald Elizabeth Anne |
Option exercise | 14,720 | — | — |
| 2026-07-01 | Mcdonald Elizabeth Anne |
Shares withheld for tax | 4,240 | $26.10 | $110.7K |
| 2026-07-01 | Mcdonald Elizabeth Anne |
Option exercise | 9,690 | — | — |
| 2026-07-01 | Bennett Alan D |
Option exercise | 630 | — | — |
| 2026-07-01 | Bennett Alan D |
Shares withheld for tax | 396 | $26.10 | $10.3K |
| 2026-07-01 | Bennett Alan D |
Option exercise | 948 | — | — |
| 2026-07-01 | Bennett Alan D |
Shares withheld for tax | 264 | $26.10 | $6.9K |
| 2026-07-01 | Bennett Alan D |
Option exercise | 1,919 | — | — |
| 2026-07-01 | Bennett Alan D |
Shares withheld for tax | 802 | $26.10 | $20.9K |
| 2026-07-01 | Pursell A Wade |
Shares withheld for tax | 5,800 | $26.10 | $151.4K |
| 2026-07-01 | Pursell A Wade |
Option exercise | 11,855 | — | — |
| 2026-07-01 | Pursell A Wade |
Shares withheld for tax | 3,705 | $26.10 | $96.7K |
| 2026-07-01 | Pursell A Wade |
Option exercise | 16,000 | — | — |
| 2026-07-01 | Pursell A Wade |
Option exercise | 9,543 | — | — |
| 2026-07-01 | Pursell A Wade |
Shares withheld for tax | 4,176 | $26.10 | $109.0K |
| 2026-07-01 | Mckenna Blake Douglas |
Shares withheld for tax | 1,196 | $26.10 | $31.2K |
| 2026-07-01 | Mckenna Blake Douglas |
Option exercise | 4,160 | — | — |
| 2026-06-30 | Lebeck James Barker |
Other | 622 | $15.90 | $9.9K |
| 2026-06-30 | Mcdonald Elizabeth Anne |
Other | 1,309 | $15.90 | $20.8K |
| 2026-06-30 | Pursell A Wade |
Other | 190 | $15.90 | $3.0K |
| 2026-06-22 | Venkatraman Ashwin |
Grant/award | 6,166 | — | — |
| 2026-06-22 | Helms Lloyd W Jr |
Grant/award | 9,024 | — | — |
| 2026-06-22 | Brookman Barton R Jr |
Grant/award | 9,024 | — | — |
| 2026-06-22 | Clark Morris R |
Grant/award | 6,166 | — | — |
| 2026-06-22 | Quintana Julio M |
Grant/award | 10,377 | — | — |
| 2026-06-22 | Robeson Rose M |
Grant/award | 6,166 | — | — |
| 2026-06-22 | Peru Ramiro G |
Grant/award | 6,166 | — | — |
| 2026-06-22 | Willard Howard A. |
Grant/award | 9,024 | — | — |
| 2026-06-22 | Fox Carrie M |
Grant/award | 9,024 | — | — |
| 2026-06-22 | Van Kempen Wouter T. |
Grant/award | 6,166 | — | — |
| 2026-05-21 | Peru Ramiro G |
Open-market sale | 24,553 | $33.98 | $834.3K |
| 2025-12-31 | Mcdonald Elizabeth Anne |
Other | 912 | $15.96 | $14.6K |
Well-known investors holding SM (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 4,493,473 | $117.3M | 0.08% | Reduced 11% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 1,186,853 | $31.0M | 0.07% | Reduced 3% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 1,000,121 | $26.1M | 0.01% | Reduced 7% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 435,571 | $11.4M | 0.01% | Added 1550% |
| Bridgewater Associates | 2026-06-30 | 265,019 | $6.9M | 0.03% | New position |
| Two Sigma Investments | 2026-06-30 | 87,490 | $2.3M | 0.0% | New position |