SM Energy(US:SM)2025-08-01 12:55Part I. Financial Information Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for SM Energy Company as of June 30, 2025, and for the three and six-month periods then ended, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with accompanying notes detailing significant accounting policies and financial activities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $101,877 | $0 | | Total current assets | $575,090 | $434,699 | | Total property and equipment, net | $8,260,768 | $7,992,709 | | Total assets | $8,993,235 | $8,576,647 | | Liabilities & Equity | | | | Total current liabilities | $837,947 | $789,950 | | Revolving credit facility | $0 | $68,500 | | Senior Notes, net | $2,711,148 | $2,708,243 | | Total noncurrent liabilities | $3,565,190 | $3,549,440 | | Total stockholders' equity | $4,590,098 | $4,237,257 | | Total liabilities and stockholders' equity | $8,993,235 | $8,576,647 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Oil, gas, and NGL production revenue | $785,076 | $633,451 | $1,624,696 | $1,193,047 | | Total operating revenues | $792,943 | $634,555 | $1,637,487 | $1,194,425 | | Income from operations | $294,908 | $279,380 | $571,196 | $457,775 | | Net income | $201,665 | $210,293 | $383,934 | $341,492 | | Diluted net income per share | $1.76 | $1.82 | $3.34 | $2.94 | | Net dividends declared per share | $0.20 | $0.18 | $0.40 | $0.36 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,054,128 | $752,382 | | Net cash used in investing activities | ($838,962) | ($654,967) | | Net cash used in financing activities | ($113,289) | ($123,710) | | Net change in cash | $101,877 | ($26,295) | Notes to Condensed Consolidated Financial Statements - The company is an independent energy firm focused on acquiring, exploring, developing, and producing oil, gas, and NGLs in Texas and Utah27 Production Revenue by Operating Area (in thousands) | Area | Q2 2025 Revenue | Q2 2024 Revenue | H1 2025 Revenue | H1 2024 Revenue | | :--- | :--- | :--- | :--- | :--- | | Midland Basin | $341,859 | $401,797 | $734,652 | $774,610 | | South Texas | $211,482 | $231,654 | $444,217 | $418,437 | | Uinta Basin | $231,735 | $0 | $445,827 | $0 | | Total | $785,076 | $633,451 | $1,624,696 | $1,193,047 | - As of June 30, 2025, $500.0 million remained available for stock repurchases through December 31, 2027. No shares were repurchased during the three and six months ended June 30, 20253738 - The company's credit facility has a borrowing base of $3.0 billion and lender commitments of $2.0 billion. As of June 30, 2025, there was no outstanding balance on the revolving credit facility, providing $1.998 billion in available borrowing capacity4246 - As of June 30, 2025, the company had commodity derivative contracts with a net asset fair value of $51.9 million60 - On May 22, 2025, stockholders approved the 2025 Equity Incentive Compensation Plan, which increased the total number of shares available for grant by approximately 2.0 million76 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results of operations, focusing on the second quarter and first half of 2025, highlighting the successful integration of Uinta Basin assets, operational execution, commodity price impacts, hedging strategy, capital allocation, and an updated outlook including an increased capital budget and the positive impacts of the OBBBA tax law Overview of the Company - The company's strategy focuses on sustainably growing value by optimizing its high-quality asset portfolio in the Midland, Maverick (South Texas), and Uinta Basins, generating cash flows, and maintaining a strong balance sheet9091 - Near-term goals include focusing on operational execution, generating cash flow for dividends, debt repayment, and stock repurchases, and expanding the drilling inventory through acquisition and exploration90 Second Quarter 2025 Overview and Outlook - In Q2 2025, the company completed the integration of Uinta Basin assets, paid off the revolving credit facility balance, and ended the quarter with $101.9 million in cash99 Q2 2025 Financial & Operational Highlights (vs. Q1 2025) | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Avg. Net Daily Production (MBOE/d) | 209.1 | 197.3 | +6% | | Net Income | $201.7 million | $182.3 million | +10.6% | | Diluted EPS | $1.76 | $1.59 | +10.7% | | Net Cash from Operations | $571.1 million | $483.0 million | +18.2% | | Adjusted EBITDAX (Non-GAAP) | $569.6 million | $588.9 million | -3.3% | - The 2025 capital program budget, excluding acquisitions, has been increased from approximately $1.3 billion to $1.375 billion, primarily to accommodate certain non-operated capital projects105158 Financial Results of Operations and Additional Comparative Data Production and Revenue Comparison | Metric | Q2 2025 | Q1 2025 | Sequential Change | H1 2025 | H1 2024 | YTD Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Avg. Daily Production (MBOE/d) | 209.1 | 197.3 | +6% | 203.2 | 151.8 | +34% | | Production Revenue (in millions) | $785.1 | $839.6 | -6% | $1,624.7 | $1,193.0 | +36% | Key Operating Expenses per BOE | Expense per BOE | Q2 2025 | Q1 2025 | Sequential Change | H1 2025 | H1 2024 | YTD Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Lease operating expense (LOE) | $5.52 | $6.13 | -10% | $5.81 | $5.16 | +13% | | Transportation costs | $4.13 | $3.92 | +5% | $4.03 | $2.00 | +102% | | DD&A | $15.40 | $15.20 | +1% | $15.30 | $12.52 | +22% | - The significant year-over-year increase in production, revenue, and certain costs (like transportation and DD&A) is primarily driven by the Uinta Basin acquisition, which closed on October 1, 2024121135136 - The newly enacted OBBBA tax law is expected to be beneficial, particularly through the reinstatement of 100% bonus depreciation, immediate expensing of R&D, and a less restrictive interest deduction limitation. The company does not expect to be subject to the Corporate Alternative Minimum Tax (CAMT) for the foreseeable future145 Overview of Liquidity and Capital Resources - The company believes it has sufficient liquidity to execute its business plan, funding its 2025 capital program and shareholder returns with cash flow from operations and its revolving credit facility if needed147148 - As of June 30, 2025, the company had no outstanding balance on its $2.0 billion revolving credit facility151153 - Primary uses of cash are for development, exploration, and acquisition of oil and gas properties. Capital expenditures for H1 2025 were $824.0 million157 - In H1 2025, the company paid $45.8 million in dividends. No stock was repurchased, with $500.0 million remaining available under the program160161 Cash Flow Analysis (in millions) | Cash Flow Activity | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $1,054.1 | $752.4 | +$301.7 | | Net cash used in investing activities | ($839.0) | ($655.0) | +$184.0 | | Net cash used in financing activities | ($113.3) | ($123.7) | -$10.4 | Non-GAAP Financial Measures Adjusted EBITDAX Reconciliation (Non-GAAP, in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (GAAP) | $201,665 | $210,293 | $383,934 | $341,492 | | Adjusted EBITDAX (non-GAAP) | $569,575 | $485,930 | $1,158,494 | $894,979 | - Adjusted EBITDAX is used as a performance measure to analyze the ability to internally generate funds and is a key metric for financial covenants under the Credit Agreement176 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to commodity price risk and interest rate risk, managing commodity price volatility through derivative contracts and minimizing current interest rate exposure due to an undrawn floating-rate revolving credit facility, while fixed-rate Senior Notes are unaffected by interest rate changes in terms of cash flow but their fair value fluctuates - A 10% decrease in average realized commodity prices would have reduced H1 2025 production revenue by approximately $162.5 million, partially offset by $48.8 million from derivative settlements170 - A 10% change in the forward price curves for commodities would change the net value of the company's derivative positions by approximately $122.2 million171 - As of June 30, 2025, the company had $2.7 billion in fixed-rate debt and no floating-rate debt outstanding, mitigating near-term interest rate cash flow risk169 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2025, with no material changes during the second quarter of 2025 affecting internal control over financial reporting - The CEO and CFO concluded that the company's Disclosure Controls are effective at a reasonable assurance level as of the end of the period covered by the report182 - No changes occurred in the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting183 Part II. Other Information Item 1. Legal Proceedings As of the filing date, the company reports no pending legal proceedings that are expected to have a materially adverse effect on its financial condition, results of operations, or cash flows - There are no pending legal proceedings against the company that are believed to be individually or collectively likely to have a materially adverse effect184 Item 1A. Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors have occurred since the 2024 Form 10-K filing185 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares of its common stock during the three months ended June 30, 2025, with $500.0 million remaining available for repurchases under its stock repurchase program authorized through December 31, 2027 - No shares of common stock were repurchased during the three months ended June 30, 2025186187 - As of June 30, 2025, $500.0 million remained available under the Stock Repurchase Program, which extends through December 31, 2027187 Item 6. Exhibits This section lists the exhibits filed or furnished with the Form 10-Q, including corporate governance documents, new compensatory plan agreements, and required certifications by the CEO and CFO - Exhibits filed with the report include the 2025 Equity Incentive Compensation Plan and forms of new Restricted Stock Unit and Performance Share Unit award agreements191