Sign in

You're signed outSign in or to get full access.

SE

SM Energy Co (SM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 came in strong on volumes and profitability, with net production 197.3 MBoe/d at 53% oil (high-end of guidance), GAAP diluted EPS $1.59 and Adjusted EPS $1.76; Adjusted EBITDAX was $588.9M, benefiting from successful Uinta Basin integration .
  • Revenue and adjusted EPS compared favorably to Street: normalized EPS beat consensus by ~$0.14*, while reported operating revenues were solid; management flagged higher LOE near term, raising full-year LOE guidance to ~$5.90/Boe .
  • Q2 outlook: production 197–203 MBoe/d at 54–55% oil, capex $375–$385M, LOE ~$6.10/Boe; full-year plan otherwise maintained (20% Boe growth, ~30% oil growth) .
  • Strategic narrative: Uinta now a third core area with margins comparable to Midland; debt reduction prioritized until ~1x leverage, with flexibility to defend equity opportunistically .

Note: Asterisk (*) indicates values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Uinta integration outperformed, driving oil mix and production to the high end of guidance; “We took the reins of the Uinta Basin operations on January 1 and are pleased to report a very successful first quarter that exceeded our expectations” – CEO Herb Vogel .
  • Adjusted EPS and Adjusted EBITDAX were notable beats versus consensus, supported by stronger volumes and pricing; CFO: “Production…supported adjusted EBITDAX and adjusted EPS that were notable beats to consensus” .
  • Balance sheet strength and liquidity reaffirmed; borrowing base and commitments held at $3.0B/$2.0B, available liquidity ~$2.0B, leverage ratio down to 1.3x; focus remains on reaching ~1x quickly .

What Went Wrong

  • LOE stepped up Q/Q, prompting a full-year LOE guidance increase to ~$5.90/Boe due to workovers, water disposal impacts from offset completions, and higher fuel gas costs (offset in revenue) .
  • Capex exceeded guidance midpoints due to $15M accelerated production equipment spend in Texas and $5M non-op Midland projects; front-end loaded capex profile continues into Q2 .
  • Transportation cost variability in Uinta persists (rail vs refinery mix), necessitating continued marketing optimization; Q1 transportation declined vs Q4, but mix-dependent volatility remains .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Operating Revenues ($MM)$643.6 $852.2 $844.5
Oil, Gas & NGL Revenue ($MM)$642.4 $835.9 $839.6
Diluted EPS (GAAP)$2.09 $1.64 $1.59
Adjusted EPS (Non-GAAP)$1.62 $1.91 $1.76
Adjusted EBITDAX ($MM)$481.5 $610.8 $588.9
Net Production (MBoe/d)170.0 208.0 197.3
Oil Mix (%)46% 51% 53%
Realized Price per Boe (pre-hedge)$41.08 $43.68 $47.29
LOE ($/Boe)$4.73 $5.35 $6.13
Net Derivative Settlement ($/Boe)$1.05 $1.17 $0.44

Segment/Area production mix (Q1 2025):

Operating AreaOil (MBbl / MBbl/d)Gas (MMcf / MMcf/d)NGL (MBbl / MBbl/d)Total (MBoe / MBoe/d)
Midland Basin4,664 / 51.8 15,992 / 177.7 5 / — 7,335 / 81.5
South Texas1,670 / 18.6 17,634 / 195.9 2,356 / 26.2 6,965 / 77.4
Uinta Basin2,997 / 33.3 2,751 / 30.6 — / — 3,456 / 38.4
Total9,332 / 103.7 36,376 / 404.2 2,361 / 26.2 17,756 / 197.3

Selected KPIs (Q1 2025):

KPIQ1 2025
Net cash provided by operating activities ($MM)$483.0 (before WC) / $482.985 GAAP
Adjusted Free Cash Flow ($MM)$73.8
Capex before changes in accruals ($MM)$440.8
Wells drilled / flowing completions (net)41 / 41
Net debt ($MM)$2,773.5
Net debt-to-Adjusted EBITDAX (TTM, x)1.3x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
LOE ($/Boe)FY 2025$5.30–$5.50 ~$5.90 Raised
Net Production (MBoe/d, oil %)Q2 2025n/a (full-year maintained)197–203 MBoe/d; 54–55% oil New quarter detail
Capex (ex-acq, $MM)Q2 2025n/a (front-end load noted) $375–$385; includes ~$10 non-op New quarter detail
LOE ($/Boe)Q2 2025n/a~$6.10 (workovers, water disposal, fuel gas) New quarter detail
Full-year growthFY 2025~20% Boe, ~30% oil Maintained Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Uinta Basin integration/performanceAcquisition closed Oct 1; margin competitive with core; Q4 ramp; area added scale “Exceeded expectations”; margins ~Midland; optimization continues; 15–20% crude to SLC refineries to lower transport Positive momentum; optimization ongoing
Capital allocation & leverage2025 plan: front-end loaded capex; leverage ~1.4x YE24; prioritize debt reduction Debt reduction prioritized until ~1x; flexibility to support equity opportunistically Discipline; optionality retained
Macro/tariffsTariffs/steel pricing monitored; hedging aligned with leverage Accelerated $15M equipment to mitigate tariff inflation risk; comfort at ~$55 oil scenario Proactive mitigation
AI/technology initiativesAdvanced analytics underpin portfolio and execution ML, computer vision, RPA, generative AI being implemented company-wide Expanding digital toolkit
Cost structure (LOE/transport)Q4 transport higher with rail; ethane rejection choice LOE higher (workovers, water, fuel gas); transport variability managed via refinery vs rail mix Near-term pressure; actions to optimize

Management Commentary

  • “We now have 3 top-tier assets and a strong balance sheet, which positions us very well for a more uncertain near-term future” – CEO Herb Vogel .
  • “First quarter production margin for the Uinta Basin came in at $40.93, nearly equal to our Midland Basin production margin” – COO Beth McDonald .
  • “Even at current prices… if you assume something like 55, we generate a lot of free cash flow… leverage metric gets down into that really close to 1x area” – CFO Wade Pursell .
  • “We layered on hedges… now hedged at 34% of expected remaining 2025 oil production and 38% natural gas” – CFO .

Q&A Highlights

  • Oil mix trajectory: modest increase from Q1 to Q2, major step-up in Q3 as larger Uinta pads come online; variability depends on wells brought on each quarter .
  • Capital returns vs leverage: debt reduction prioritized until ~1x; flexibility to step in occasionally to support stock not ruled out .
  • LOE composition: ~1/3 increase from fuel gas (offset in revenue) is sticky; elevated workovers and water costs may persist and are embedded in guidance .
  • Program flexibility: plan looks good at ~$55 oil; activity changes require more dramatic price shifts and careful coordination with procurement .
  • Uinta learnings: assets exceeded expectations; capital efficiency improving; first fully SM-designed Uinta pad hits in 2026, incorporating 2025 learnings .

Estimates Context

MetricConsensus (Q1 2025)ActualBeat/Miss
Primary EPS Consensus Mean$1.62*$1.76 (Adjusted EPS) Beat by ~$0.14*
Revenue Consensus Mean ($MM)$823.8*$807.7* (S&P “actual” series) / $844.5 company total operating revenues Miss vs S&P “actual” series; company-reported total revenues above consensus context*
EBITDA Consensus Mean ($MM)$574.4*$546.2* (S&P actual) / $588.9 Adjusted EBITDAX Slight miss vs S&P EBITDA; company EBITDAX higher (definitions differ)*

Notes:

  • S&P Global series can classify “actual” differently than company “total operating revenues”; comparisons above anchor on S&P for beat/miss and supplement with company-reported figures for completeness. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Uinta is delivering on margin and scale, underpinning oil mix improvement into Q2/Q3 and sustaining Adjusted EBITDAX strength; this is a core narrative driver .
  • Near-term cost pressure (LOE) is acknowledged and embedded in guidance; watch execution on workovers/water disposal and fuel gas accounting offsets .
  • Balance sheet trajectory remains favorable; reaffirmed liquidity and plan to reach ~1x leverage even at ~$55 oil provides downside protection .
  • Capex remains front-end loaded; Q2 cadence (25 net drills/50 net completions) sets up sequential volume growth into Q3; timing of TILs will matter for quarterly prints .
  • Marketing optimization (rail vs SLC refineries) should continue to reduce transportation drag in Uinta; monitor realizations and transport metrics .
  • Hedging coverage increased (34% oil, 38% gas for 2Q–4Q 2025), anchoring cash flow stability in volatile macro .
  • Strategic optionality preserved: if macro weakens below ~$50 oil, SM has contingency plans; program flexibility and procurement contracts enable responsive adjustments .