SM Energy Company Q4 FY2025 earnings call

• 2025 was pivotal: delivered record operating cash flow, adjusted EBITDAX, and oil volumes; integrated Uinta assets; reduced net debt by $437 million; returned capital to stockholders; expanded scale and inventory via merger with Civitas. - 2026 strategic objectives: Integrate - focus on integrating Civitas and capturing $200 - $300 million in synergies, already actioned $185 million of target. Execute - plan maximizes sustainable free cash flow by investing in high return opportunities, reset activity levels to 11 rigs, prioritizes value over volume. Bolster - relates to balance sheet and return to capital framework; increased fixed dividend by 10% to $0.88 per share annually; plan to allocate 80% of quarterly free cash flow after dividends to debt reduction and 20% to stock repurchases.

In 2025, SM Energy delivered record operating cash flow, adjusted EBITDAX, and oil volumes. Oil was 53% of total. They integrated oil - weighted Uinta assets, reduced net debt by $437 million, ending the year at roughly one times leverage, and expanded scale and inventory across top U.S. basins. For 2026, capital investments will total $2.65 to $2.85 billion with high margin Permian activities receiving about 45% of total. Activity levels are reset to 11 rigs, down from 14 pro forma average. Second half 2026 volumes expected to be 420 - 430,000 BOE per day at 55% oil.

• 2026 capital investments total $2.65 to $2.85 billion, with high margin Permian activities getting about 45% of total. - Activity levels reset to 11 rigs, down three from pro forma average of 14. - Second half 2026 volumes expected to range between 420 and 430,000 BOE per day at 55% oil. - Increased fixed dividend by 10% to $0.88 per share annually; plan to allocate 80% of quarterly free cash flow after dividends to debt reduction and 20% to stock repurchases, with intention to increase share buyback allocation as debt is reduced.

Q: Brian Veli with Capital One Securities asked about total production guidance, three - stream to two - stream conversion in basins and price realizations.

A: Spoke about plan prioritizing value over volume, reconciliation on slide nine, specific details on DJ, Permian basins and how to model realizations.

Q: Brian Veli followed up on 1Q CapEx and rig count.

A: Started with combined portfolio strength, said started with 15 rigs and will lower to average 11 by year end.

Q: Tim Resvin with KeyBank Capital Markets asked about leverage profile and inventory life.

A: Said in mid - ones area of leverage, desire to get to low ones area, and inventory is high confidence 3P locations.

Q: Tim Resvin followed up on Permian assets integration.

A: Talked about strength of Midland Basin portfolio, technical team working on optimizing stacked pay development.

Q: Warren of Fufon with Roth Capital Partners asked about capital cadence, production cadence and cash tax.

A: Spoke about prioritizing value over volume, legacy Civitas assets impact, second half 2026 run rate, and minimal cash tax due to IDCs and Big Beautiful Bill.

Q: Oliver Huang with Tudor Pickering and Holt asked about Permian program composition and maintenance capex.

A: Said Permian program has about one - third Delaware and two - thirds Midland Basin, and maintenance capex in ballpark of this year's CapEx.

Q: Michael Scialla with Stevens asked about production areas and dividend increase.

A: Talked about capital allocation prioritizing free cash flow, Uinta and South Texas as growth areas, and dividend increase due to confidence in combined company.

Q: Kevin McCurdy with Pickering Energy Partners asked about DJ program and duck count.

A: Spoke about great returns and capitally efficient DJ program, duck count related to planned activity slowdown for capital efficiency