SM Energy (SM) Q1 Results - May 1

[dan_s]

SM Energy (SM), one of my Top Picks in our Sweet 16 Growth Portfolio, announced Q1 2025 results after the markets closed on May 1.

Highlights include:

Net production was 17.8 MMBoe, or 197.3 MBoe/d, at 53% oil or 103.7 MBbls/d, at the high end of guidance, driven largely by our Uinta Basin assets outperforming expectations. Total daily production increased 36% and daily oil production increased 63% compared to first quarter 2024 with the increase largely attributable to the addition of the Uinta Basin assets. < Beat my production forecast of 195,000 Boepd and 101,400 bpd of oil.

Net income was $182.3 million, or $1.59 per diluted common share, and Adjusted net income was $1.76 per diluted common share. < Adjusted Net Income compares to my forecast of $182.0 million.

Net cash provided by operating activities of $483.0 million before net change in working capital of $31.6 million totaled $514.5 million. <Beat my forecast of $488.9 million.

Adjusted EBITDAX was $588.9 million, all of which benefited from strong production.

Capital expenditures before changes in accruals exceeded guidance due to approximately $15 million in accelerated spend for certain production equipment in Texas which allows for certainty in timing of related turn-in-lines, and is beneficial should steel prices increase as a result of tariffs, as well as $5.0 million in highly economic non-operated capital expenditures in the Midland Basin.

Adjusted free cash flow of $73.8 million was utilized, in part, for payment of dividends of $22.9 million, reduction of our revolving credit facility balance by $31.0 million, and final cash settlement of the Uinta Basin acquisition of $14.9 million.

Subsequent to quarter-end, the borrowing base and commitments on the Company's senior secured revolving credit facility were reaffirmed at $3.0 billion and $2.0 billion, respectively, providing the Company with available liquidity of approximately $2.0 billion.

Rystad Energy recognized SM Energy among the top three operators that excelled in sustainability in 2023. The Company considers stewardship as a key component of being a premier operator.

President and Chief Executive Officer Herb Vogel comments: "We took the reins of the Uinta Basin operations on January 1 and are pleased to report a very successful first quarter that exceeded our expectations. With a production margin consistent with our Midland Basin assets, the Uinta Basin adds a third core area and supports a step-change in scale.

Our long-term strategy is to be a premier operator of top-tier assets, focusing on our portfolio of low breakeven cost assets that endure through commodity price cycles and on returning capital to stockholders through our fixed dividend and share repurchase program. As we are in a period of market uncertainty, we are well positioned with a strong balance sheet nearing our one-times leverage target and our high-quality and long-duration drilling inventory, where we look forward to the upside opportunity presented by further delineation and optimization at each of our core areas."
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Bottomline: There is NOTHING that justifies SM trading at less than 1.5 X 2025 Operating Cash Flow per share. SM is free cash flow positive, Uinta Basin adds a 3rd high-quality core area with lots of Running Room. My valuation is $58/share.