stockrowWhat it does
SM Energy is an independent energy company that acquires, explores for, develops and produces crude oil, natural gas and natural gas liquids, or NGLs. It sells that production to customers rather than operating as a refiner or retailer. The company was founded in 1908 and is headquartered in Denver.
Its work starts with acreage that may contain oil and gas. It uses geological and engineering information to identify locations, drills and completes wells, and produces hydrocarbons from them. Some natural gas can also be processed to extract NGLs. The company develops existing acreage and acquires assets to add locations for future drilling.
All of SM Energy’s operations are in the United States. Its 2025 production came from the Midland Basin and South Texas in Texas and the Uinta Basin in Utah. Its merger with Civitas, completed on January 30, 2026, added operations in Colorado’s Denver-Julesburg Basin and the Delaware Basin in Texas and New Mexico, as well as additional Midland Basin acreage.
SM Energy’s assets include both producing wells and locations it expects to develop. At December 31, 2025, before the Civitas assets were included, it had estimated net proved reserves of 673.0 MMBOE, or million barrels of oil equivalent.
How it makes money
SM Energy generates revenue by producing and selling oil, gas and NGLs. Its exploration and production business accounted for all reported segment revenue in 2025.
2025 exploration and production segment revenue: $3.2 billion.
Crude oil accounted for 81.6% of revenue in 2025. The rest came from natural gas and NGLs. Revenue depends on how much the company produces and the prices it realizes when it sells that production. Existing wells provide ongoing production, while drilling and completing new wells and acquiring properties add production capacity.
Average net daily equivalent production increased 21 percent in 2025 compared with 2024. That reflected a full year of production from the Uinta Basin assets and well performance. Oil and NGL realized prices fell in 2025, while realized gas prices rose. Oil, gas and NGL production revenue increased to $3.1 billion for 2025 from $2.7 billion for 2024, primarily because of the full year of Uinta Basin production.
The company also uses commodity derivative contracts. It recorded net derivative gains of $178 million in 2025, including $132 million of net derivative settlement gains. These gains are separate from production revenue.
Producing oil and gas requires continuing expenditure. SM Energy incurs costs to drill and complete wells, operate producing properties, transport production and pay production and property taxes. It also allocates costs of its assets over time through depletion, depreciation and amortization. Production expense was $11.72 per BOE in 2025.
| Product or service | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Crude Oil | $2.6 billion | 81.6% | 17.1% |
| Natural Gas | $353.0 million | 11.2% | 41.8% |
| Natural Gas Liquids (NGL) | $224.0 million | 7.14% | −4.68% |
Customers and how it sells
SM Energy sells its oil, gas and NGL production to customers, including major customers and groups of entities under common control. One major customer accounted for 28.0% of 2025 revenue, and one group of entities under common control accounted for 12.0%. A second major customer accounted for 6.00%.
The company’s ability to deliver production to market depends on gathering, processing and transportation systems. Its Uinta Basin operations use rail systems operated by third parties to transport crude oil. Sales of both crude oil and natural gas are affected by the availability, terms and cost of transportation.
In 2025, the Midland Basin generated $1.4 billion of revenue, South Texas generated $891.0 million, and the Uinta Basin generated $875.0 million. The Midland Basin assets were in West Texas; the South Texas assets included acreage in the Maverick Basin; and the Uinta Basin assets were in northeastern Utah.
The Civitas merger expanded SM Energy’s operating footprint in 2026. Its portfolio then included the Delaware Basin in Texas and New Mexico and the Denver-Julesburg Basin in Colorado, alongside its existing areas. The 2025 revenue figures do not include Civitas operations.
| Region | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Midland Basin | $1.4 billion | 43.7% | −12.4% |
| South Texas | $891.0 million | 28.4% | −1.00% |
| Uinta Basin | $875.0 million | 27.9% | 328.9% |
Suppliers and costs
SM Energy relies on drilling rigs, completion crews, equipment and services to drill and maintain wells, as well as on services for gathering, transporting and processing oil, gas, NGLs and water. Supplies used in drilling and completion include pipe, chemicals, water and sand. The company competes with other producers for equipment and services and can face shortages, delays or increased costs.
Its production costs include lease operating expense, transportation, production taxes and property taxes. Production expense per BOE increased 15 percent in 2025 compared with 2024. Transportation costs per BOE increased 44 percent, primarily because a full year of Uinta Basin production carried higher transportation costs per BOE than production from the Midland Basin and South Texas.
Drilling and completion also require capital spending. SM Energy expects its 2026 capital program, excluding acquisitions, to be approximately $2.65 billion to $2.85 billion. It expects to fund the program with operating cash flow and, if needed, borrowings under its revolving credit facility.
- Revenue$3.2B
- Cost of revenue−$885.0M
- Research and development−$57.0M
- Selling, general and administrative−$161.0M
- Other operating costs−$1.1B
- Operating income$1.0B
Competitive position
SM Energy competes with major and independent oil and gas companies, particularly when acquiring prospective properties. It also competes for drilling rigs, crews, other equipment and services, and for specialized workers such as geologists, geophysicists and engineers. Some competitors have larger technical teams and greater financial and operating resources. SM Energy does not identify individual competitors by name.
Some oil and gas companies also operate gathering, processing or refining businesses, transport water, own equipment or generate electricity. These activities can give them an advantage. The industry also competes with alternative energy sources, including solar and wind, and with other fossil fuels such as coal.
SM Energy identifies its acreage, technical expertise, technology and financial resources as factors in its competitive position. Its portfolio includes established production and development acreage across several U.S. basins.
Our reading: Acreage and technical capabilities provide a basis for continued development, but their competitive advantage is constrained by the resources and integrated operations available to other producers. Our reading: Competition for equipment and personnel limits how much control any producer has over the cost and timing of new wells.
It was reported on 26 October 2026 that SM Energy’s market share had increased during the cycle.
Growth opportunities
SM Energy seeks to grow through development of its acreage, exploration, acquisitions and operating improvements. It uses geological and engineering data, analytics and technology to identify and develop drilling locations. Its South Texas program has focused on the Austin Chalk formation, while its Uinta Basin work has included delineation and development in the Lower Green River and Wasatch formations.
The Civitas merger expanded the company’s portfolio into the Denver-Julesburg and Delaware basins and added Midland Basin acreage. SM Energy expects the acquired assets to increase production volumes in 2026. It also aims to capture savings in overhead, drilling and completion, operating costs and the cost of capital. It was reported on 3 November 2026 that the company had substantially completed the integration of Civitas Resources.
SM Energy expects its 2026 capital program to be approximately $2.65 billion to $2.85 billion, excluding acquisitions, and plans to focus it on oil development projects. It also agreed in February 2026 to sell certain South Texas assets to Caturus for $950 million, subject to purchase price adjustments. The company expects the transaction to advance its debt-reduction goals and help it substantially achieve its commitment to at least $1.0 billion of divestitures within one year of the Civitas merger closing.
In 2025, average net daily production rose 21 percent, with the Uinta Basin contributing a full year of production rather than only the fourth quarter.
- $2.6BFY2021
- $3.4BFY2022
- $2.4BFY2023
- $2.7BFY2024
- $3.2BFY2025
Structural risks
- Commodity prices: Oil, gas and NGL prices are volatile. Price declines can affect profitability, cash flow, access to capital and the company’s ability to grow. They can also reduce the amount available under its credit agreement.
- Merger integration: SM Energy may not achieve the expected benefits of the Civitas merger. Integration can involve unforeseen expenses, unknown liabilities, regulatory conditions and difficulties combining systems and retaining personnel.
- Market access: Constraints or interruptions on third-party gathering, processing, pipeline and rail systems can limit access to markets. Uinta Basin crude transportation by rail also carries accident and derailment risks.
- Drilling and reserves: Drilling and completion costs are uncertain, and work can be delayed by shortages, supply-chain problems or unexpected geological conditions. Reserve estimates are imprecise and change as new information becomes available.
- Divestiture and regulation: The proposed South Texas asset sale may not close on expected terms or at all, affecting debt-reduction objectives. Changing laws and regulations can increase costs or delay development.
Bottom line
Our reading
SM Energy is an upstream producer whose revenue depends on selling oil and gas from a portfolio that now spans several U.S. basins. [item1] Its acreage and development program support future production, but commodity prices, transport access and the cost of replacing produced reserves remain central exposures. The Civitas merger adds assets and integration demands, while the planned South Texas sale is tied to reducing debt. [item1a] [item7]