SM Energy Co

SECTION 2—2025 Business Highlights and Capital Return Program

In 2025, we executed our core strategic objectives by achieving record operating cash flow, Adjusted EBITDAX and production; reducing net debt; returning capital to our stockholders; and expanding our top-tier inventory through the successful integration of the Uinta Basin asset and signing of the Merger Agreement with Civitas, which closed in January 2026.

(1) Adjusted EBITDAX represents net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items. Net debt is calculated as the total principal amount of outstanding senior unsecured notes plus amounts drawn on the revolving credit facility less cash and cash equivalents.

(2) Total capital returned to stockholders includes $92 million in dividends and $12 million of shares repurchased.

Beginning in September 2022, our Board approved our Stock Repurchase Program that authorized the repurchase of up to $500 million in aggregate value of our common stock, and in June 2024, our Board reauthorized and extended the program through 2027. During 2025, we returned $104 million of capital to our stockholders through our Capital Return Program. From implementation of the Capital Return Program through year-end 2025, we have repurchased approximately 10.5 million shares and paid approximately $267 million in dividends, bringing our total return of capital to our stockholders to approximately $648 million during that period. In February of 2026, we announced an increase in our fixed dividend policy of 10 percent to $0.88 per share per annum (paid quarterly), representing an expected dividend yield of approximately three percent as of the date of this Proxy Statement. Additionally, we expect to allocate approximately 20 percent of our quarterly 2026 free cash flow (after payment of dividends) to share repurchases, which allocation is expected to increase as leverage and absolute debt levels decline. We believe that our Capital Return Program, which we intend to continue funding with cash flows from operations, will be sustainable and will create long-term value for our stockholders.