SM Energy Company

SM reported Q1 adjusted EBITDAX of $970 million, adjusted net income of $309 million, or $1.55 per diluted share, and adjusted free cash flow of $20 million. Production was 371,000 BOE/d, with oil at 190,000 b/d, both above the top end of guidance, and capital was $672 million, below guidance. Management said lease operating expense and transportation came in below guidance. For 2026, the company raised full-year production midpoint to 420,000 BOE/d from 410,000 and oil midpoint to 225,000 b/d from 221,000, while keeping capital guidance at $2.65 billion to $2.85 billion. It also expects second-half production run rate to be about 430,000 BOE/d and 238,000 b/d oil. South Texas asset sale proceeds of about $900 million were directed entirely to debt reduction, and management said debt is down by roughly $700 million since closing.

Beth McDonald framed the quarter as proof that the combined company is executing ahead of plan on integration, operations, and balance sheet improvement. She emphasized the company’s new “Integrate, Execute, Bolster” framework, said it is not using current oil price strength as a reason to raise activity, and reiterated that incremental free cash flow should support debt reduction and buybacks. Her tone was confident and constructive, with repeated emphasis on capital discipline, high-return projects, and stockholder returns.

Wade Pursell said financial performance was strong, citing $970 million of adjusted EBITDAX, $309 million of adjusted net income, and $20 million of adjusted free cash flow despite about $180 million of one-time integration and transaction cash costs. He noted lease operating expense and transportation were below guidance but kept guidance unchanged as cushion against inflation and to allow a full quarter of the new SM before revisiting. He also said absolute debt is down about $700 million since the merger close, leverage is moving into the low 1x area ahead of original targets, and the credit agencies and bank group have responded positively, including a reaffirmed $5 billion borrowing base.

Analysts focused on whether higher oil prices could lead SM to add activity or shift capital toward 2027 growth, but management said 2026 plans are unlikely to change and that the company will keep investing in high-return projects, generating free cash flow, and buying back stock. Questions also centered on cash taxes, asset sales, Uinta economics, U-turn wells, and the DJ Basin; management said cash taxes should be manageable if oil stays around current strip levels, more asset sales are possible but still under review, and the company is confident in U-turn wells and encouraged by the Uinta and DJ Basin. On hedging, management said it is still layering in 2027 hedges methodically and hedges roughly 50% of volumes on a rolling-year basis in the current leverage range.