Breaking Down SM Energy Company (SM) Financial Health: Key Insights for Investors

Are you keeping a close watch on your investments and wondering how SM Energy Company (SM) is performing? With a dynamic landscape in the energy sector, understanding the financial health of companies like SM is crucial for making informed decisions. Did you know that SM Energy reported a record oil production for the full year 2024 of 29.4 MMBbls, up 23% from 2023, and a full year net income of $770.3 million? Let's delve into the key financial insights that can help you assess SM Energy's stability and growth potential.

SM Energy Company (SM) Revenue Analysis

SM Energy Company's financial performance is significantly shaped by its revenue streams, which are primarily derived from the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs). Understanding the composition and trends in these revenue sources is crucial for investors.

In 2024, SM Energy's revenue streams can be broken down as follows:

• Oil Sales: A significant portion of SM Energy's revenue comes from the sale of crude oil.
• Natural Gas Sales: Another key revenue stream is the sale of natural gas.
• NGL Sales: Sales of natural gas liquids, such as propane and butane, also contribute to the company's revenue.

Analyzing the historical trends in revenue growth rates provides insights into the company's performance. Here's a look at the year-over-year revenue growth:

SM Energy's total revenues for the year ended December 31, 2023 were $4.45 billion, compared to $6.27 billion for the year ended December 31, 2022. This represents a decrease of 29.0%.

A more detailed breakdown of revenue by product type reveals the specific contributions of each segment:

The decrease in total revenues from 2022 to 2023 was primarily due to lower commodity prices. The average realized sales prices, excluding the effects of derivative settlements, were:

• Oil: $76.28 per barrel in 2023 compared to $94.44 per barrel in 2022
• Natural Gas: $2.88 per Mcf in 2023 compared to $5.24 per Mcf in 2022
• NGLs: $23.53 per barrel in 2023 compared to $35.01 per barrel in 2022

These figures highlight the impact of commodity price volatility on SM Energy's financial performance. Changes in production volumes also play a role, but price fluctuations had a more significant impact in this period.

For further insights into SM Energy Company's financial health, you can read this comprehensive analysis: Breaking Down SM Energy Company (SM) Financial Health: Key Insights for Investors

SM Energy Company (SM) Profitability Metrics

Analyzing SM Energy Company's (SM) profitability involves examining various key metrics that provide insights into its financial health and operational efficiency. These metrics include gross profit, operating profit, and net profit margins, as well as trends in profitability over time and comparisons with industry averages.

For the full year 2024, SM Energy reported a net income of $770.3 million, or $6.67 per diluted common share. The adjusted net income was $6.80 per diluted common share for the same period. The adjusted EBITDAX was $2.0 billion for the full year 2024.

Here's a breakdown of SM Energy's profitability metrics:

• Gross Profit: For the fiscal year that ended in December 2024, SM Energy's gross profit was $1,170 million, calculated as revenue ($2,551.077 million) minus the cost of goods sold ($1,381.193 million). The gross profit for the quarter that ended in December 2024 was $345 million, with revenue at $798.244 million and cost of goods sold at $453.737 million.
• Operating Margin: As of March 2025 (TTM), the operating margin for SM Energy was 36.17%. At the end of 2024, the company also had an operating margin of 36.17%.
• Net Profit Margin: SM Energy's net margin reflects its financial strength, exceeding industry averages with a remarkable net margin of 22.53%, showcasing strong profitability and effective cost management.

A table summarizing SM Energy's profitability metrics for 2024:

SM Energy's revenue growth is noteworthy. As of December 31, 2024, the company achieved a revenue growth rate of 37.74%. This indicates a substantial increase in the company's top-line earnings. When compared to its industry peers, SM Energy stands out with a growth rate higher than the average among peers in the energy sector.

SM Energy's Return on Equity (ROE) and Return on Assets (ROA) are also impressive:

• ROE: With an impressive ROE of 4.54%, the company showcases effective utilization of equity capital.
• ROA: With an impressive 2.27% ROA, the company effectively utilizes its assets for optimal returns.

While SM Energy demonstrates strong financial performance, it also faces challenges in debt management. With a high debt-to-equity ratio of 0.66, the company relies more heavily on borrowed funds, indicating a higher level of financial risk.

In 2024, SM Energy focused on operational execution to realize a step change in scale through the successful integration of its recently acquired Uinta Basin assets, delivering low breakeven, high return wells across the portfolio by optimizing capital efficiency, demonstrating innovation, and remaining a leader in stewardship.

Additionally, SM Energy is committed to environmental and safety stewardship, with executive compensation linked to performance-based metrics, including environmental and safety measures.

See also: Mission Statement, Vision, & Core Values of SM Energy Company (SM).

SM Energy Company (SM) Debt vs. Equity Structure

Understanding how SM Energy Company finances its operations and growth is crucial for investors. This involves analyzing the company's debt levels, its debt-to-equity ratio, and how it strategically uses debt and equity.

As of December 31, 2024, SM Energy Company reported the following debt levels:

• Long-term debt: $2.12 billion
• Short-term debt: $17 million

The debt-to-equity ratio is a key metric for assessing a company's financial leverage. As of December 31, 2024, SM Energy Company's debt-to-equity ratio was approximately 0.73. This ratio is calculated by dividing the total liabilities by shareholder equity. To provide context, it's useful to compare this to industry standards.

SM Energy Company's debt-to-equity ratio of 0.73 suggests a balanced approach to financing, indicating that the company uses a reasonable amount of debt relative to equity. However, it is important to note that industry standards can vary. Some sources suggest that a debt-to-equity ratio of 1.5 to 2.0 is acceptable for energy companies, given the capital-intensive nature of the industry. Other sources state that an acceptable debt-to-equity ratio is typically below 1.0. Therefore, SM Energy Company's ratio falls within a moderate range, suggesting that the company is not overly leveraged compared to its equity.

Recent activities in debt management include:

• In February 2024, SM Energy Company announced redemption of its 6.75% Senior Notes due 2025.
• In November 2024, SM Energy Company priced an offering of $800 million aggregate principal amount of 5.000% Senior Notes due 2032.

The following table summarizes key components of SM Energy Company's capital structure as of December 31, 2024:

SM Energy Company strategically balances debt and equity to fund its operations and growth initiatives. The company's approach to capital structure is influenced by several factors, including current interest rates, market conditions, and investment opportunities. The company maintains a balanced capital structure to ensure financial flexibility and support its long-term strategic objectives.

For more insights into SM Energy Company's investors and their motivations, explore: Exploring SM Energy Company (SM) Investor Profile: Who’s Buying and Why?

SM Energy Company (SM) Liquidity and Solvency

Assessing a company's financial health involves a close look at its liquidity and solvency. Liquidity refers to a company's ability to meet its short-term obligations, while solvency concerns its ability to meet long-term obligations. For SM Energy Company (SM), evaluating these aspects provides insights into its financial stability and operational efficiency. You may want to check Mission Statement, Vision, & Core Values of SM Energy Company (SM).

Assessing SM Energy Company's Liquidity:

Analyzing SM Energy Company's liquidity involves examining key financial ratios and trends. These metrics offer a snapshot of the company's ability to cover its immediate liabilities.

• Current and Quick Ratios: These ratios provide a view of SM Energy's liquidity position.

The current ratio is calculated by dividing current assets by current liabilities. For the fiscal year 2024, if SM Energy's current assets totaled $1.2 billion and its current liabilities were $600 million, the current ratio would be 2.0. This indicates that SM Energy has $2 of current assets for every $1 of current liabilities.

The quick ratio, which excludes inventories from current assets, offers a more conservative measure. If SM Energy's current assets excluding inventory were $900 million, the quick ratio would be 1.5, suggesting a still healthy, but more constrained, short-term liquidity.

• Analysis of Working Capital Trends: Monitoring the trend of working capital (current assets minus current liabilities) helps to gauge the company's operational efficiency.

For instance, if SM Energy's working capital increased from $500 million in 2023 to $600 million in 2024, it signals improved short-term financial health. Conversely, a decreasing trend might raise concerns about the company's ability to manage its short-term obligations.

• Cash Flow Statements Overview: A review of cash flow statements reveals the trends in operating, investing, and financing activities.

Here’s an overview of what the cash flow statement might reveal:

Positive cash flow from operating activities indicates that the company is generating sufficient cash from its core business operations. Negative cash flow from investing activities suggests investments in capital expenditures, while negative cash flow from financing activities may reflect debt repayments or dividend payouts.

• Potential Liquidity Concerns or Strengths:

SM Energy's liquidity position can be influenced by various factors. A high level of debt, significant capital expenditure requirements, or volatile commodity prices could pose liquidity challenges. Conversely, strong operating cash flow, effective working capital management, and access to credit facilities can bolster its liquidity position.

SM Energy Company (SM) Valuation Analysis

Assessing whether SM Energy Company (SM) is overvalued or undervalued requires a multifaceted approach, incorporating key financial ratios, stock performance analysis, and analyst opinions. These elements, when combined, offer a comprehensive view of the company's current market position.

To determine if SM Energy is fairly priced, consider the following:

• Price-to-earnings (P/E) Ratio: This ratio indicates how much investors are willing to pay for each dollar of SM Energy's earnings. A high P/E ratio might suggest overvaluation, while a low P/E could indicate undervaluation, relative to industry peers or historical averages.
• Price-to-book (P/B) Ratio: The P/B ratio compares SM Energy's market capitalization to its book value of equity. It can help investors determine whether they are paying a premium for the company's net assets.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio compares the total value of SM Energy to its earnings before interest, taxes, depreciation, and amortization. It's useful for evaluating companies with different capital structures and tax rates.

Analyzing SM Energy's stock price trends provides context on market sentiment and investor confidence. Here's what to consider:

• Stock Price Trends: Reviewing the stock price movement over the last 12 months, or longer, can reveal patterns and trends. Significant price increases might suggest growing investor optimism, while declines could indicate concerns about the company's performance or industry conditions.
• Dividend Yield and Payout Ratios: If SM Energy pays dividends, the dividend yield (annual dividend per share divided by the stock price) indicates the return on investment from dividends alone. The payout ratio (dividends paid as a percentage of earnings) shows the sustainability of dividend payments.

External opinions on SM Energy's valuation can be gauged through:

• Analyst Consensus: Tracking analyst ratings (buy, hold, or sell) and price targets can provide insights into how Wall Street views SM Energy's valuation and future prospects. A consensus buy rating suggests analysts believe the stock is undervalued, while a sell rating indicates the opposite.

For fiscal year 2024, SM Energy reported strong operational and financial results. Here’s a snapshot of key performance indicators:

SM Energy's production averaged 153.5 Mboe/d, and the company generated $1.1 billion in free cash flow. Capital expenditures totaled $1.34 billion. At year-end 2024, net debt stood at $1.3 billion. These figures reflect a company focused on disciplined capital allocation and strong financial health.

Learn more about who is investing in SM Energy: Exploring SM Energy Company (SM) Investor Profile: Who’s Buying and Why?

SM Energy Company (SM) Risk Factors

Understanding the risks facing SM Energy Company is crucial for investors. These risks can stem from both internal and external factors, significantly impacting the company's financial health. Key areas of concern include industry competition, regulatory changes, and overall market conditions.

Industry Competition: The oil and gas industry is intensely competitive. SM Energy faces competition from a wide array of companies, ranging from large, integrated multinational corporations to smaller, independent operators. This competition can affect the prices SM Energy receives for its products, as well as the costs it incurs to acquire leases and operate its properties.

Regulatory Changes: The oil and gas industry is subject to extensive regulation at the federal, state, and local levels. These regulations cover a wide range of issues, including environmental protection, health and safety, and taxation. Changes in these regulations can increase SM Energy's costs of compliance and reduce the profitability of its operations. For instance, stricter environmental regulations could require the company to invest in new technologies or processes to reduce emissions or manage waste.

Market Conditions: The prices of oil and natural gas are subject to significant volatility and are influenced by numerous factors, including global supply and demand, economic conditions, geopolitical events, and weather patterns. A sustained decline in oil and gas prices could significantly reduce SM Energy's revenues, profitability, and cash flow. Additionally, changes in interest rates or credit market conditions could affect the company's ability to access capital on favorable terms.

In SM Energy's 2023 10-K filing, several key risk factors were highlighted that could potentially affect the company's financial performance. These include:

• Oil, natural gas and NGL prices: SM Energy's financial results are highly dependent on commodity prices.
• Estimates of reserves: Oil and gas reserve estimates are inherently uncertain.
• Drilling and production risks: Oil and gas operations involve significant risks.
• Competition: The oil and natural gas industry is very competitive.
• Midstream capacity: SM Energy depends upon the availability of gathering, processing and transportation capacity.
• Hedging: SM Energy's hedging activities may limit its benefit from increases in oil, natural gas and NGL prices.
• Acquisitions: SM Energy may not be able to successfully integrate acquired businesses or realize the anticipated benefits from acquisitions.
• Cybersecurity: SM Energy is subject to cybersecurity risks.
• Climate change: Climate change and related regulations may impact SM Energy.
• Regulatory compliance: SM Energy's operations are subject to extensive regulation.

SM Energy actively manages these risks through various mitigation strategies. These strategies include:

• Hedging: Using financial instruments to reduce exposure to commodity price volatility.
• Diversification: Spreading investments across different geographic areas and types of assets.
• Cost Management: Implementing measures to control operating costs and improve efficiency.
• Compliance Programs: Maintaining robust compliance programs to ensure adherence to all applicable laws and regulations.

For additional insights into SM Energy's strategic direction, explore Mission Statement, Vision, & Core Values of SM Energy Company (SM).

SM Energy Company (SM) Growth Opportunities

SM Energy Company's future growth prospects are influenced by several key factors, including its operational strategies, market conditions, and financial decisions. Here's an analysis of these drivers, alongside revenue growth projections and strategic initiatives.

Key growth drivers for SM Energy Company (SM) include:

• Operational Efficiency: Focusing on cost-effective drilling and completion techniques to enhance production rates.
• Technological Advancements: Investing in innovative technologies to improve resource recovery and reduce environmental impact.
• Market Expansion: Exploring opportunities in new geographical areas or formations to diversify production.
• Strategic Acquisitions: Acquiring additional acreage or resources to increase reserves and production capacity.

SM Energy Company is strategically positioned for future growth through several competitive advantages:

• Strong Asset Base: A diverse portfolio of high-quality assets in prolific basins.
• Experienced Management Team: A leadership team with a proven track record of operational excellence and strategic decision-making.
• Financial Flexibility: Access to capital markets and a strong balance sheet to fund growth initiatives.
• Focus on Sustainability: Commitment to responsible environmental practices, enhancing long-term value and attracting investors.

Here are revenue growth projections and earnings estimates:

SM Energy Company (SM) may drive future growth through strategic initiatives and partnerships, such as:

• Joint Ventures: Collaborating with other companies to develop infrastructure or explore new areas.
• Technology Partnerships: Teaming up with technology providers to implement innovative solutions.
• Supply Chain Optimization: Streamlining supply chain operations to reduce costs and improve efficiency.
• Community Engagement: Building strong relationships with local communities to ensure sustainable operations.

Read more about SM Energy Company's financial health: Breaking Down SM Energy Company (SM) Financial Health: Key Insights for Investors