SM Energy Co

The tables below provide information regarding selected production and financial information for the three months ended December 31, 2024, and the preceding three quarters:

Selected Performance Metrics

Overview of Selected Production and Financial Information, Including Trends

(1) Amounts and percentage changes may not calculate due to rounding.

(2)Net derivative settlements for the years ended December 31, 2024, 2023, and 2022, are included within the net derivative (gain) loss line item in the accompanying consolidated statements of operations (“accompanying statements of operations”).

(3) Refer to Note 9 – Earnings Per Sharein Part II, Item 8 of this report for additional discussion.

Average net daily equivalent production for the year ended December 31, 2024, increased 12 percent compared with 2023, as a result of an increased number of completions, strong well performance, and production from our Uinta Basin assets during the fourth quarter of 2024. Oil production as a percentage of total production increased to 47 percent in 2024 from 43 percent in 2023, as a result of increased oil production from both our Midland Basin and South Texas assets, in addition to oil production from our Uinta Basin assets. In 2025, we expect total production volumes and oil as a percentage of total production to each increase compared with 2024. Refer to Comparison of Financial Results and Trends Between 2024 and 2023 and Between 2023 and 2022 below for additional discussion.

We present certain information on a per BOE basis in order to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis and discussion.

Our realized price on a per BOE basis remained flat for the year ended December 31, 2024, compared with 2023, primarily because a 24 percent increase in oil production was offset by decreases in oil and gas benchmark commodity prices. For the years ended December 31, 2024, and 2023, we recognized net gains on the settlement of our commodity derivative contracts of $1.10 per BOE and $0.49 per BOE, respectively.

LOE on a per BOE basis remained flat for the year ended December 31, 2024, compared with 2023, as increases in labor costs and certain other operating costs were offset by an increase in total net equivalent production and a decrease in workover expense due to the timing of activity. For 2025, we expect LOE on a per BOE basis to increase, compared with 2024, as our product mix continues to shift towards more oil production with our Uinta Basin assets, and as a result of expected increases in certain operating costs associated with our Midland Basin assets. We anticipate volatility in LOE on a per BOE basis as a result of changes in total production, timing of workover projects, changes in service provider costs, and industry activity, all of which affect total LOE.

Transportation costs on a per BOE basis increased nine percent for the year ended December 31, 2024, compared with 2023. This increase was due to a six percent increase in NGL production from our South Texas assets and 3.3 MMBOE of production from our Uinta Basin assets, both of which incur higher transportation costs than our Midland Basin assets. In general, we expect total transportation costs to fluctuate relative to changes in gas and NGL production from our South Texas assets and oil production from our Uinta Basin assets, where we incur a majority of our transportation costs. For 2025, we expect transportation costs on a per BOE basis to increase, compared with 2024, as a result of the addition of our Uinta Basin assets.

Production tax expense on a per BOE basis for the year ended December 31, 2024, decreased two percent compared with 2023, primarily as a result of a decrease in the realized price of gas. Our overall production tax rate was 4.3 percent and 4.4 percent for the years ended December 31, 2024, and 2023, respectively. We expect that our Uinta Basin assets will incur a lower production tax rate compared to our Midland Basin and South Texas assets. We generally expect production tax expense to correlate with oil, gas, and NGL production revenue on a per BOE and absolute basis. Product mix, the location of production, and incentives to encourage oil and gas development can also impact the amount of production tax expense that we recognize.

Ad valorem tax expense on a per BOE basis decreased 16 percent for the year ended December 31, 2024, compared with 2023, as a result of changes to the assessed values of our producing properties due to decreased commodity price assumptions used in the current year valuation, and increased net equivalent production. We anticipate volatility in ad valorem tax expense on a per BOE and absolute basis as the valuation of our producing properties changes, which is generally driven by fluctuations in commodity prices, and can be impacted by changes in tax laws.

Depletion, depreciation, and amortization (“DD&A”) expense on a per BOE basis increased four percent for the year ended December 31, 2024, compared with 2023, due to a shift in production mix to our Uinta Basin assets. Our Midland Basin and Uinta Basin assets have higher DD&A rates than our South Texas assets. For 2025, we expect DD&A expense per BOE and on an absolute basis to increase, compared with 2024, primarily as a result of expected increased production resulting from the addition of our Uinta Basin assets, and a shift in our production mix. Our DD&A rate fluctuates as a result of changes in our production mix, changes in our total estimated proved reserve volumes, changes in capital allocation, impairments, acquisition and divestiture activity, and carrying cost funding and sharing arrangements with third parties.

General and administrative (“G&A”) expense on a per BOE basis increased two percent for the year ended December 31, 2024, compared with 2023, primarily as a result of increases in certain G&A expenses resulting from the Uinta Basin Acquisition and increased compensation expense, partially offset by a 12 percent increase in average net equivalent production. For 2025, we expect G&A expense on an absolute basis to increase, compared with 2024, primarily as a result of an increase in employee headcount as a result of the Uinta Basin Acquisition and expected increases in compensation expense. We expect G&A expense on a per BOE basis to remain relatively flat, compared with 2024, as the expected increases in G&A expense on an absolute basis are expected to be mostly offset by increases in production. Certain components of G&A expense, and G&A expense on a per BOE basis, are impacted by the Company’s full year performance against performance targets established at the beginning of the year and, therefore, are subject to variability. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for the definition of the Uinta Basin Acquisition.

Refer to Comparison of Financial Results and Trends Between 2024 and 2023 and Between 2023 and 2022 for additional discussion of operating expenses.