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SM Energy Co (SM)·Q2 2025 Earnings Summary

Executive Summary

  • Record net production of 19.0 MMBoe (209.1 MBoe/d) at 55% oil, driven by outperformance in Uinta Basin; GAAP diluted EPS $1.76 and Adjusted EPS $1.50; Adjusted EBITDAX $569.6M; Adjusted free cash flow $113.9M .
  • Versus S&P Global consensus, Adjusted EPS materially beat, EBITDA beat, while revenue modestly missed; management emphasized operational efficiency, takeaway optimization, and debt reduction to 1.2x net debt/Adjusted EBITDAX, with line-of-sight to ~1.0x by year-end at current prices .
  • Guidance updated: oil mix for FY25 raised to 53–54% (from 51–52%); capex raised to ~$1.375B (from ~$1.3B); DD&A raised to ~$16/Boe (from ~$15/Boe); cash taxes cut to ~$10M (from $75–$95M) due to OBBBA; Q3 capex $300–$320M and production 209–215 MBoe/d at 53–54% oil .
  • Catalysts: Uinta well performance and logistics execution, sharply lower 2025 cash taxes from OBBBA, higher oil mix, and progress to target leverage; watch WAHA gas basis and higher transportation costs as near-term headwinds .

What Went Well and What Went Wrong

What Went Well

  • Uinta Basin outperformance: production averaged 87% oil; improved logistics and takeaway yielded record volumes and better reliability, supporting the quarter’s beat and FCF generation .
  • Debt reduction and leverage progress: revolver paid to zero, cash $101.9M, net debt-to-Adjusted EBITDAX cut to 1.2x; CFO indicated line-of-sight to ~1.0x by year-end at current commodity prices .
  • Management tone on asset quality and execution: “Record production combined with our low breakeven cost assets delivered excellent bottom line results…we are well-positioned for a strong second half of the year” — CEO Herb Vogel .

What Went Wrong

  • Realized gas prices challenged by WAHA basis and pipeline constraints in Midland Basin; gas price declines vs Q1 pressured realized equivalents despite hedge gains .
  • Transportation cost per Boe rose meaningfully YoY (Q2: $4.13 vs $1.94), reflecting takeaway dynamics and regional mix; LOE also higher YoY .
  • Capex increased vs plan due to acceleration and non-operated projects, raising FY25 capex guidance (~$1.375B vs ~$1.3B prior), with incremental spend not impacting 2025 production .

Financial Results

GAAP and Adjusted Results vs prior periods

MetricQ2 2024Q1 2025Q2 2025
Oil, gas & NGL production revenue ($MM)$633.5 $839.6 $785.1
Total operating revenues & other income ($MM)$634.6 $844.5 $792.9
Net Income ($MM)$210.3 $182.3 $201.7
Diluted EPS (GAAP)$1.82 $1.59 $1.76
Adjusted Net Income ($MM)$214.4 $202.0 $171.9
Adjusted EPS (non-GAAP)$1.85 $1.76 $1.50
Adjusted EBITDAX ($MM)$485.9 $588.9 $569.6
Net Cash from Ops ($MM)$476.4 $483.0 $571.1
Adjusted Free Cash Flow ($MM)$98.4 $73.8 $113.9

Margin comparison (derived; based on reported figures)

Margin MetricQ2 2024Q1 2025Q2 2025
Net Income Margin % (Net Income / Total Op Revenues)33.1% 21.6% 25.4%
Adjusted EBITDAX Margin % (Adj EBITDAX / Total Op Revenues)76.5% 69.7% 71.9%

Production and pricing KPIs

KPIQ2 2024Q1 2025Q2 2025
Net production (MMBoe)14.4 17.8 19.0
Avg daily (MBoe/d)158.5 197.3 209.1
Oil % of total—53% 55%
Realized price per Boe pre-hedge ($/Boe)$43.92 $47.29 $41.27
Realized price per Boe post-hedge ($/Boe)$45.07 $47.73 $43.36
LOE ($/Boe)$4.82 $6.13 $5.52
Transportation ($/Boe)$1.94 $3.92 $4.13
DD&A ($/Boe)$12.46 $15.20 $15.40
Net debt ($BN)—$2.77 $2.63
Net debt / Adj EBITDAX (x)—1.3x 1.2x

Segment breakdown (Q2 2025)

Operating AreaOil (MBbl/MBbl/d)Gas (MMcf/MMcf/d)NGLs (MBbl/MBbl/d)Total (MBoe/MBoe/d)
Midland Basin4,906 / 53.9 16,193 / 177.9 4 / — 7,609 / 83.6
South Texas1,814 / 19.9 16,695 / 183.5 2,445 / 26.9 7,042 / 77.4
Uinta Basin3,811 / 41.9 3,357 / 36.9 2 / — 4,372 / 48.0
Total10,532 / 115.7 36,245 / 398.3 2,451 / 26.9 19,024 / 209.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net production (MBoe/d)FY2025200–215 200–215 Maintained
Oil % of totalFY202551–52% (~102–112 MBbl/d) 53–54% (~106–116 MBbl/d) Raised
Capital expenditures (net of accruals, excl. acquisitions)FY2025~$1.3B (non-op excluded) ~$1.375B (added non-op) Raised
DD&A ($/Boe)FY2025~$15 ~$16 Raised
Cash taxes ($M)FY2025$75–$95 ~$10 (OBBBA impact) Lowered
Capex (net of accruals)Q3 2025—$300–$320M New
Net productionQ3 2025—209–215 MBoe/d; 53–54% oil New
LOE ($/Boe)Q2 2025~$6.10 Actual: $5.81 YTD —

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 & Q1’25)Current Period (Q2’25)Trend
Uinta Basin performance & inventory depthIntegration focus; step-change in scale; program front-loaded; high oil margins Strong IPs and repeatability; costs trending down via conveyor system and completion optimization; production 87% oil Improving execution and confidence
Logistics & takeaway optimizationSome Q4’24 downtime; ethane rejection impacted volumes “Record volumes” at Price River Terminal; maximized SLC refinery barrels; rail logistics improved reliability Positive execution mitigating bottlenecks
WAHA gas basis headwindsTransportation costs elevated; caution on gas pricing Ongoing pipeline constraints pressuring WAHA basis; realized gas prices challenged Persistent headwind
Non-operated capex visibilityFY25 plan initially excluded non-op spend; to be confirmed Increased FY25 capex mainly for high-return non-op Midland projects; accelerated timing Clearer line-of-sight; spend raised
Taxes & policy (OBBBA)Cash taxes $75–$95M FY25 Cash taxes cut to ~$10M; benefits from bonus depreciation & R&D expensing; likely recurring per CFO Material positive

Management Commentary

  • “This was a standout quarter…Record production combined with our low breakeven cost assets delivered excellent bottom line results…we are well-positioned for a strong second half of the year, expecting to achieve our 1.0x leverage target by year-end at current commodity prices.” — CEO Herb Vogel .
  • “Costs are coming down [in Uinta]…stellar well performance…subsurface team worked very well with completion optimization.” — COO Beth McDonald .
  • “We ended the quarter at 1.2 times, really more like 1.1 times on a full-year basis for XCL…we have authorization…$500 million share buyback program…you very well could see us step in.” — CFO Wade Pursell .
  • “We’re cautious on gas…looking for sustained price signals…structural demand changes between LNG and data centers.” — CEO Herb Vogel .

Q&A Highlights

  • Cash taxes trajectory: CFO expects similar low cash taxes into 2026 if OBBBA provisions and spending remain similar; recurring benefit from R&D expensing highlighted .
  • Uinta sustainability and cadence: Q2 outperformance driven by front-half TILs and well results; expect continued strong performance but production timing front-end weighted; rig count reduced to six across assets for 2026 planning, aiming for free cash flow optimization .
  • Non-operated spend and capex phasing: FY25 capex raised primarily for high-return non-op Midland projects; Q4 capex expected to come down; incremental spend adds 2026 production, not 2025 .
  • Takeaway and marketing: Execution-driven increase in rail cars and SLC refinery volumes; optimization between SLC and Gulf Coast to maximize realizations; no change in broader marketing strategy .
  • Buyback flexibility: With leverage near 1.0x at current prices, management may opportunistically deploy buybacks under $500M authorization, watching oil price stability .

Estimates Context

MetricQ2 2024Q1 2025Q2 2025
Primary EPS Consensus Mean ($)1.522*1.618*1.252*
Primary EPS Actual ($, Adjusted)1.85 1.76 1.50
Revenue Consensus Mean ($MM)615.2*823.8*783.5*
Revenue Actual ($MM, S&P-defined)605.3*807.7*762.7*
EBITDA Consensus Mean ($MM)443.5*574.4*527.4*
EBITDA Actual ($MM, S&P-defined)459.0*546.2*587.9*

Notes: * Values retrieved from S&P Global.

  • Q2 2025: EPS beat (Adjusted $1.50 vs $1.252*), EBITDA beat ($587.9M* vs $527.4M*), revenue modest miss ($762.7M* vs $783.5M*). Q1 2025: EPS beat, revenue slight miss, EBITDA modest miss; Q2 2024: EPS beat, EBITDA beat, revenue slight miss. S&P Global values compared to company Adjusted EPS and S&P-defined revenue/EBITDA. .

Key Takeaways for Investors

  • Execution in Uinta is driving higher oil mix and strong FCF; management believes performance is repeatable with improving costs, supporting medium-term margin resilience .
  • FY25 guidance de-risks equity story: higher oil %, lower cash taxes (~$10M) via OBBBA, steady production range, and path to ~1.0x leverage; potential for opportunistic buybacks under $500M authorization .
  • Watch gas basis: WAHA constraints continue into 2026; transportation costs elevated; hedge book provides partial offset (oil collars ~$65–$70 and gas $3.67–$4.31 for 2H25) .
  • Non-op capex raises FY25 spend without 2025 volume uplift; positive for 2026 volumes but increases near-term capital intensity; Q4 capex expected to decline .
  • Near-term trading: EPS/EBITDA beats against consensus and tax relief could support sentiment; revenue miss and higher transport expense are offset by oilier mix and Uinta execution .
  • Medium-term thesis: differentiated logistics/marketing, improved Uinta well performance, and capital efficiency across three core areas underpin sustained FCF and deleveraging, with optionality for buybacks .
  • Risks: commodity volatility (especially gas), WAHA basis pressure, and timing of non-op projects; monitoring OBBBA implementation in Q3 results .