SM Energy (SM) Up 4.5% Since Last Earnings Report: Can It Continue?

Core Viewpoint - SM Energy reported a mixed third-quarter earnings performance, beating earnings expectations but missing revenue estimates, while also announcing a significant merger with Civitas Resources valued at approximately $12.8 billion [2][13]. Financial Performance - Adjusted earnings for Q3 2025 were $1.33 per share, exceeding the Zacks Consensus Estimate of $1.25, but down from $1.62 in the same quarter last year [2]. - Total revenues for the quarter were $811.6 million, falling short of the Zacks Consensus Estimate of $838 million, yet up from $643.6 million year-over-year [2]. Production and Operational Metrics - Q3 production volume reached 213.8 thousand barrels of oil equivalent per day (MBoe/d), a 26% increase from 170 MBoe/d a year ago, slightly above the consensus estimate of 213 MBoe/d [4]. - Oil production rose approximately 47% year-over-year to 113.9 thousand barrels per day (MBbls/d), while natural gas production increased by 11% to 418.2 million cubic feet per day [5]. Pricing and Costs - The average realized oil price decreased by 15% to $63.83 per barrel, while the average realized price of natural gas improved by 50% to $2.19 per thousand cubic feet [6]. - Unit lease operating expenses increased by 20% year-over-year to $5.67 per Boe, while total hydrocarbon production expenses rose to $229 million from $148.4 million a year ago [7]. Capital Expenditures and Cash Flow - Capital expenditures for the quarter totaled $397.7 million, with adjusted free cash flow amounting to $234.3 million [8]. - For the fourth quarter of 2025, production is expected to be between 206-212 MBoe/d, with capital expenditures forecasted at $225-$245 million [11]. Merger Details - SM Energy announced an all-stock merger with Civitas Resources, with the combined entity valued at approximately $12.8 billion, including net debt [13]. - The merger is expected to create a high-quality asset portfolio across productive U.S. shale basins, with identified annual synergies of approximately $200 million [14]. Guidance and Outlook - For full-year 2025, net production volume is expected to be in the range of 207-208 MBoe/d, with capital expenditures updated to approximately $1.375-$1.395 billion [12]. - The consensus estimate for SM Energy has shifted downward by 8.46% recently, indicating a bearish outlook [16].