SM Energy Co recently released its 10-Q report. SM Energy is an independent oil and gas producer focused on acquiring, exploring, developing, and producing oil, gas, and natural gas liquids in the United States. Its working interests are concentrated in the Midland Basin, South Texas, the Uinta Basin, and the DJ Basin, and the company is headquartered in Denver after changing its name from St. Mary Land & Exploration Company in 2010.
The company’s management discussion centered on the January 30, 2026 completion of its merger with Civitas, followed by the April 30, 2026 South Texas divestiture that brought in $896 million in net cash proceeds. SM Energy said the divestiture helped it move toward its target of selling more than $1.0 billion in assets within a year of the merger, while also reducing debt and strengthening its capital structure. During the first half of 2026, the company issued 2034 Senior Notes and used most of the proceeds to repurchase $894 million of higher-coupon 2028 Civitas Senior Notes. It then used the South Texas sale proceeds to fully redeem $400 million of 2026 Civitas Senior Notes on May 11 and $419 million of 2026 Senior Notes on June 1, both at par. As of June 30, 2026, SM Energy had no borrowings outstanding on its revolving credit facility.
Operationally, SM Energy said its oil-weighted portfolio now spans about 233,000 net acres in the Permian Basin, 301,000 net acres in the DJ Basin, 95,000 net acres in South Texas after the divestiture, and 99,000 net acres in the Uinta Basin. The company said benchmark oil prices reached their highest levels since 2022 during the first half of 2026, while gas prices remained volatile and were pressured by basis differentials in the Permian and DJ basins. In the second quarter, it said Waha differentials widened in April and May before narrowing in June as additional pipeline capacity came online, while CIG Rockies pricing in the DJ Basin remained weak through most of the quarter.
For the second quarter ended June 30, 2026, oil, gas, and NGL production revenue rose 46% sequentially to $2.2 billion from $1.5 billion in the first quarter. Average daily equivalent production increased 18% sequentially to 439.7 MBOE per day, reflecting a full quarter of production from the merger assets, and realized price per BOE increased 22%. Production expense climbed 30% sequentially to $556 million from $428 million. SM Energy recorded a net derivative gain of $272 million in the quarter, compared with a net derivative loss of $697 million in the first quarter, including derivative settlement losses of $220 million and $30 million, respectively.
Net income for the second quarter was $1.1 billion, or $4.46 per diluted share, versus a net loss of $335 million, or $1.68 per diluted share, in the first quarter. Net cash provided by operating activities rose to $1.1 billion from $640 million sequentially, and adjusted EBITDAX increased to $1.4 billion from $970 million. The company said its 2026 capital program is expected to total between $2.65 billion and $2.85 billion, excluding acquisitions, with spending directed toward oil and liquids-rich development projects and inventory replacement. The market has reacted to these announcements by moving the company's shares -0.48% to a price of $28.88. Check out the company's full 10-Q submission here.
