SM Energy: 2Q26 Preview: Anticipating Another Solid Print as SM Begins to Walk and Chew Gum under CEO McDonald

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SM Energy: 2Q26 Preview: Anticipating Another Solid Print as SM Begins to Walk and Chew Gum under CEO McDonald

for 3Q26 is our

expectation that capex in the September quarter will be $693mm, which is above Quarterly Forecasts (FYE Dec)

the STe of $652mm, as we expect the company’s 4Q26 capex to decline to $580mm Adj. EPS ($)

vs. $619mm as they plan to pullback activity in 4Q to reach their full-year capex 2025A 2026E 2027E

forecast. Q1 1.76 1.55A 1.74

Q2 1.50 1.95 1.48

Q3 1.33 1.24 1.61

We recently hosted SM’s new CEO, Beth McDonald, at the JPM Natural Resources Q4 0.83 1.50 1.71

Conference. We came away with a constructive view on SM’s post-merger FY 5.42 6.23 6.55

trajectory, anchored by the CIVI acquisition that doubled the company in size

Style Exposure

while delivering double-digit accretion underwritten at $60/bbl oil. The

combination has repositioned SM as a multi-basin operator across four of the top

U.S. shale plays, providing the portfolio with important scale and diversification.

SM’s strategic roadmap of “Integrate, Execute, and Bolster” is tracking ahead of

plan across all three fronts: synergy capture targets have been raised to $375 MM

from the prior $200–$300 MM range, 1Q production came in 6% ahead of

guidance, and the $950 MM South TX asset sale closed post-quarter to

substantially achieve the company’s $1 B+ divestiture target. CEO McDonald

highlighted that the company is executing ahead of schedule and that 2027 is

shaping up to be a meaningful inflection point where the full earnings and cash flow

power of the combined platform can be realized. We believe the company is on

track to deliver its 2H26 production target of 430 MBoe/d (JPMe of 434.6 MBoe/

d).

On capital allocation, CEO McDonald noted that the current oil price environment