# SM Energy Company (SM) — Financial Analysis

**Exchange:** NYSE  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-29  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/SM/thesis · /stocks/SM/memo

## Financial Snapshot

---
source: coverage-next-full
ticker: SM
step: "04"
title: Financial Quality & Adversarial Sweep
date: 2026-05-29
---

### Step 04 — Financial Quality: SM Energy Company (SM)

---

#### 1. Three-Year Financial Snapshot [S1]

##### Annual Income Statement ($ millions)

| Metric | FY2023 | FY2024 | FY2025 | TTM Q1-26 |
|--------|--------|--------|--------|-----------|
| Revenue | $2,374 | $2,690 | $3,154 | $3,788 |
| Gross Profit | $1,810 | $2,053 | $2,269 | $2,701 |
| Gross Margin | 76.2% | 76.3% | 72.0% | 71.3% |
| Operating Income | $987 | $1,076 | $1,000 | $426 |
| Operating Margin | 41.6% | 40.0% | 31.7% | 11.2% |
| EBITDA | $1,677 | $1,885 | $2,207 | $1,795 |
| EBITDA Margin | 70.6% | 70.1% | 69.9% | 47.4% |
| Net Income | $818 | $770 | $648 | $131 |
| Net Margin | 34.5% | 28.6% | 20.5% | 3.5% |
| EPS (Diluted) | $6.86 | $6.67 | $5.64 | $2.38 |

*TTM distorted by: (1) Q1 2026 $697M derivative mark-to-market loss, (2) merger-related charges, (3) partial-quarter Civitas consolidation; not representative of run-rate earnings*

##### Balance Sheet ($ millions, year-end)

| Item | FY2023 | FY2024 | FY2025 | TTM (Q1-26) |
|------|--------|--------|--------|-------------|
| Cash | $616 | $361 | $368 | $449 |
| Total Assets | $6,380 | $8,577 | $9,253 | $19,144 |
| Total Debt | $1,575 | $2,777 | $2,715 | $7,976 |
| Net Debt | $959 | $2,416 | $2,347 | $7,527 |
| Shareholders' Equity | $3,616 | $4,237 | $4,810 | $6,868 |
| Net Debt/Equity | 0.27x | 0.57x | 0.49x | 1.10x |
| Net Debt/EBITDA | 0.57x | 1.28x | 1.06x | 4.19x |

*TTM balance sheet Q1-26 now reflects combined Civitas entity; enormous step-up in assets, debt, and equity from all-stock deal*

##### Cash Flow ($ millions)

| Item | FY2023 | FY2024 | FY2025 | TTM |
|------|--------|--------|--------|-----|
| Operating Cash Flow | $1,574 | $1,783 | $2,011 | $2,168 |
| Capital Expenditures | ($989) | ($1,311) | ($1,438) | ($1,579) |
| Free Cash Flow | $585 | $472 | $573 | $589 |
| Dividends Paid | ($72) | ($86) | ($92) | ($151) |
| Share Repurchases | ($228) | ($85) | ($13) | ($13) |

---

#### 2. Accounting Quality Assessment [S2]

##### DD&A and Reserve Accounting
- SM uses the successful-efforts method of accounting (more conservative than full-cost)
- DD&A per BOE: $15.99 (FY2025) — rose 23% YoY, reflecting higher costs of Uinta Basin acquisition ($2.04B for 107 MMBoe proved = ~$19/BOE finding cost)
- Reserve engineers: Independent third-party (SLB/DeGolyer) — standard for investment-grade E&Ps
- Reserve life index (RLI): 673 MMBoe ÷ 75.5 MMBoe/yr production = ~8.9 years (adequate; typical for shale)
- Reserve replacement ratio FY2025: ~93% (production was 75.5 MMBoe vs. modest net reserve adds) — slight depletion of organic reserve base offset by acquisitions

##### Derivative Accounting
- SM marks derivatives to market (fair value accounting); this creates large GAAP swings
- Q1 2026: $697M derivative loss → GAAP net loss -$335M vs. adjusted NI +$309M
- Cash derivative settlements are included in operating cash flow — more meaningful than GAAP NI for E&Ps
- This is standard industry practice; not an accounting quality concern

##### Revenue Recognition
- Straightforward point-of-sale revenue recognition when hydrocarbons delivered at custody transfer points
- No complex multi-element arrangements; no subscriber/contract revenue complexity

##### SBC and Adjustments
- SBC is relatively modest vs. E&P peers; primarily performance share units (PSU) and RSUs for executives
- "Adjusted" metrics exclude derivative mark-to-market, impairment charges, and acquisition costs — standard for E&P sector

**Accounting Quality Grade: B+** (Standard E&P accounting; DD&A step-up from Uinta acquisition is legitimate but compresses reported earnings; derivative volatility is economic hedge, not manipulation)

---

#### 3. Adversarial Research Sweep [S3]

##### Short Reports / Activist Research
- **No known short reports** targeting SM Energy in the 2023–2025 period
- Short interest: ~7.3% of float (moderate; not elevated to activist short level >15%)
- No Bloomberg or SEC enforcement actions on file

##### Litigation & Legal Risks
- Standard oil and gas operational litigation (royalty disputes, environmental remediation, lease title)
- No material pending litigation flagged in 10-K FY2025 beyond routine matters
- Environmental: EPA Colorado Air Act compliance for DJ Basin operations (Civitas legacy); ~$50M remediation reserve
- Royalty disputes: Common in Permian and Uinta; no material judgments disclosed

##### ESG / Environmental Flags
- Colorado DJ Basin operations subject to SB 181 (Colorado oil and gas reform) — operational restrictions
- Uinta Basin in Utah: Protected land proximity; Bureau of Land Management permit dependencies
- Methane emissions intensity reported; aligned with industry standards

##### Governance Flags
- Board refreshment: Multiple directors added as part of Civitas merger; new 12-person board post-merger
- Staggered board: Yes (standard for E&P sector)
- Dual-class shares: No — standard NYSE single-class structure
- CEO succession: Managed succession from Vogel to McDonald; no activist involvement

##### Accounting Red Flags (Checked)
- Receivables surge: Q1 2026 AR of $915M vs. $331M FY2025 — explained by merger consolidation, not collection issue
- Impairment risk: South Texas assets carried at cost; divestiture for $950M vs. book value suggests no hidden impairment needed
- Negative working capital: Common in E&P (current ratio 0.39x Q1-26) — managed through credit facility, not a solvency concern

**Adversarial Sweep Result: CLEAN** — No material short thesis, no accounting fraud risk, no regulatory enforcement, standard E&P litigation profile.

---

#### 4. Financial Trend Quality Assessment [S4]

| Trend | Direction | Quality | Note |
|-------|-----------|---------|------|
| Revenue growth | +17% FY2025 | Good | Volume-driven; commodity price headwind |
| EBITDAX margin | ~70% stable | Excellent | Cost discipline maintained |
| FCF generation | Improving | Good | $573M FY2025 = 18.2% FCF margin |
| Net debt trajectory | Reducing (pre-merger) | Good | 1.05x FY2025; spike to ~1.9x post-merger |
| EPS trend | Declining FY2024→25 | Watch | Higher share count + more DD&A |
| ROIC trend | Declining 14%→10% | Concern | Post-Uinta acquisition dilution |
| Reserve replacement | ~93% | Adequate | Needs M&A to fully replace |

---

#### Source Index

| ID | Source | Reference |
|----|--------|-----------|
| S1 | StockAnalysis.com; SM Energy press releases | Financial statements |
| S2 | SM Energy 10-K FY2025; press releases | Accounting methodology |
| S3 | SEC EDGAR; web search; MarketBeat | Adversarial sweep |
| S4 | StockAnalysis ratios; press releases | Trend assessment |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/SM/fundamental

## Navigation

- Overview: /stocks/SM
- Financials (this page): /stocks/SM/financials
- Thesis: /stocks/SM/thesis
- Investment Memo: /stocks/SM/memo
- Coverage universe: /stocks