Initiation of Coverage: Beyond The Honeymoon; Initiate At Buy As Merger Benefits Roll Through

Research evidence excerpt

Initiation of Coverage: Beyond The Honeymoon; Initiate At Buy As Merger Benefits Roll Through

Global Research

14 July 2026ab

Initiation of Coverage

EquitiesSM Energy

Beyond The Honeymoon; Initiate At Buy As United States

Merger Benefits Roll Through Oil Companies, Secondary

12-month rating Buy

Prior : No Rating

12m price target US$36.00

Initiate At Buy and $36 PT

Prior :

We initiate coverage of SM with a Buy rating and a $36 PT. SM scaled and diversified its

assets through the CIVI merger, with execution on the larger portfolio showing Price (13 Jul 2026) US$29.89

impressive early results. Achieving further cost savings and debt reduction are two near- RIC: SM.N BBG: SM US

term catalysts, which set up SM to inflect capital returns higher in 2027. SM's large

Trading data and key metrics

valuation gap is still intact (2.6x 2027E EV/EBITDA vs. peers' 3.5x average), creating a

positive risk-reward skew. Our $4.87Bn FY27 Adj. EBITDAX estimate trails Street's 52-wk range US$34.81-17.57

$5.04Bn, with the lower forecast likely due to Street estimates not yet being fully MTM. Market cap. US$7.12b

With SM trading at 2.6x FY27E EV/EBITDA, we see its shares pricing in $62/Bbl FY27 WTI Shares o/s 238m (COM)

vs. our $71/Bbl forecast. Free float 98%

Avg. daily volume ('000) 1,137

Key Highlights For Our SM Initiation & Buy Rating: Avg. daily value (m) US$33.5

Synergies & Integration. SM lifted its CIVI synergies estimate from $200mm to Common s/h equity (12/26E) US$7.66b

$375mm and demonstrated strong initial execution on the larger asset base. 1Q26 P/BV (12/26E) 0.9x

production beat on well performance, and SM raised its FY26 oil/total production Net debt to EBITDA (12/26E) 1.3x

outlook, left its FY26 budget unchanged, with a positive follow through expected

EPS (UBS, diluted) (USD)