SM Energy Q1 2025 slides: Production hits high end of guidance amid Uinta integration

Introduction & Market Context

SM Energy (NYSE:SM) reported strong first-quarter 2025 results on May 1, with production reaching the high end of guidance as the company successfully integrated its Uinta Basin assets. The oil and gas producer continued to focus on operational execution while making progress on debt reduction and maintaining its dividend program.

The company’s presentation highlighted its position as a premier operator with top-tier assets across three key basins: Uinta, Midland, and South Texas, with a total of approximately 330,000 net acres.

As shown in the following map of SM Energy’s key assets:

Quarterly Performance Highlights

SM Energy delivered solid financial and operational results in the first quarter of 2025. Production reached 197.3 MBoe/d, at the high end of guidance, with oil comprising 53% of the total. The company generated $588.9 million in adjusted EBITDAX and $73.8 million in free cash flow.

Adjusted earnings per share came in at $1.76, while the company paid dividends of $22.9 million ($0.20 per share), representing an annualized yield of 3.5%.

The following slide summarizes SM Energy’s Q1 2025 performance metrics:

The company’s strategic objectives for 2025 focus on operational execution, returning capital to stockholders, and expanding its portfolio of top-tier economic drilling inventory. First-quarter results showed progress across all three areas, including successful Uinta Basin integration, debt reduction of $31 million, and expanded inventory in the Uinta Basin Upper Cube Douglas Creek formations.

This strategic framework is illustrated in the following slide:

Operational Execution Across Basins

SM Energy demonstrated strong operational execution across all three of its core basins. In the Uinta Basin, the company highlighted successful integration with achievements in drilling 3-mile laterals and record oil takeaway. Six new Lower Cube wells reached IP30 (initial 30-day production) with an average of 1,193 Boe/d per well and 91% oil content.

In South Texas, four new Austin Chalk wells achieved IP30 with an average of 1,061 Boe/d per well and 55% oil content. The company also noted that its wells are outperforming peers by significant margins – approximately 32% better in Howard County and 42% better in the Austin Chalk area.

The following chart demonstrates SM Energy’s well performance compared to peers:

The company’s Uinta Basin operations received a significant vote of confidence from Enverus, which added 57 sub-$50 breakeven locations to SM Energy’s inventory, representing a 28% increase. This addition validates the company’s acquisition strategy in the region.

As shown in this chart comparing Uinta production to other basins:

SM Energy also emphasized its focus on technology and innovation as drivers of differential performance. The company is leveraging machine learning algorithms, computer vision, robotic process automation, and generative AI to optimize operations and reduce costs.

Balance Sheet and Capital Return Strategy

SM Energy continued to strengthen its balance sheet during the quarter, reducing debt by $31 million and making progress toward its target of 1x leverage. As of March 31, 2025, the company reported:

• Net Debt-to-Adjusted EBITDAX: 1.3x
• Liquidity: $2.0 billion
• Net Debt: $2.8 billion

The company’s borrowing base and lender commitments were reaffirmed at $3.0 billion and $2.0 billion, respectively. Credit rating agency ratings for senior unsecured debt include BB- from S&P, BB from Fitch, and B1 from Moody’s.

In terms of capital return, SM Energy maintained its quarterly dividend of $0.20 per share, consistent with the increased dividend level announced in previous quarters. This aligns with the company’s earnings call from Q3 2024, which highlighted a focus on debt reduction before resuming share buybacks.

Forward-Looking Guidance

For the full year 2025, SM Energy is maintaining its capital expenditure guidance of $1.3 billion, with plans for 105 net drills and 150 net completions across its three core basins:

• Uinta Basin: ~35 drills | 50 completions with ~11,200’ average lateral length, utilizing 3 rigs and 1 crew
• Midland Basin: ~40 drills | 60 completions with ~12,300’ average lateral length, utilizing 3 rigs and 1 crew
• South Texas: ~30 drills | 40 completions with ~11,000’ average lateral length, utilizing 1 rig and 1 crew

The company also highlighted its leadership in sustainability, with Rystad recognizing SM Energy as the #1 ranked operator among oil-focused peers for ESG performance:

This recognition reinforces SM Energy’s commitment to responsible operations alongside its focus on operational excellence and financial discipline.

In the hedging arena, SM Energy has protected approximately 34% of its oil volumes and 38% of its gas volumes for the remainder of 2025 with swaps and collars, providing some downside protection while allowing for upside participation.

With a strong balance sheet, operational momentum across all three basins, and a clear strategic focus, SM Energy appears well-positioned to continue executing its 2025 plan while delivering value to shareholders.

Full presentation:

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