SM Energy Company has issued its 2026 outlook, designed to maximize free cash flow through disciplined investments in its high-return development projects. It also provided a new stockholder return framework, which includes a 10% increase to its quarterly dividend policy.

"Our 2026 plan maximizes free cash flow to further strengthen our balance sheet and accelerate returns to stockholders under our upgraded return of capital framework," said Beth McDonald, President and CEO. "Our expanded, top-tier asset portfolio provides flexibility to allocate capital to our highest-return opportunities. As previously messaged, we're adjusting activity levels to improve capital efficiency and generate higher free cash flow. The strength of our asset portfolio, combined with reduced rig activity, 14% lower capital spend, and our recently announced $950 million asset sale, gives us the confidence to increase our fixed dividend by 10%, while prioritizing debt reduction and accelerating share buybacks."

2026 OUTLOOK

The Company's 2026 plan focuses on three strategic priorities:

• Integrate and Capture Synergies – Successfully integrate Civitas Resources, Inc. ("Civitas") and action $200–$300 million of identified and expected synergies, of which approximately $185 million has already been actioned to date.
• Maximize Free Cash Flow – Execute high-grade investments across an expanded asset portfolio to enhance capital efficiency and maximize inventory value, with a safety-first, efficiency-driven operational mindset.
• Strengthen Capital Structure – Bolster the balance sheet and accelerate returns to stockholders through an increased return of capital framework. Highlights include:
  • $1.0+ Billion Divestiture Target – The Company's recently announced agreement to sell $950 million of certain South Texas assets (expected to close in the second quarter) largely accomplishes this objective and accelerates SM Energy's path to lower leverage.
  • Enhanced Liquidity – As announced on January 30, 2026, the Company's lenders increased the borrowing base to $5.0 billion, increased commitments to $2.5 billion, and extended the maturity date of the Company's revolving credit facility to January 30, 2031. Total liquidity as of February 20, 2026, was $2.9 billion.
  • New Stockholder Return Framework – Balances free cash flow allocation between debt reduction and returning capital to stockholders.
  • Annual fixed dividend policy increased 10% to $0.88 per share paid quarterly, representing an expected yield of nearly 4% at current market prices. See below for information regarding declaration of the first quarter dividend.
  • Calculated on a quarterly basis, after dividend payments, the Company plans to allocate free cash flow as follows:
    • Approximately 20% to share repurchases. Approximately $488 million of availability remains under the Company's previously authorized $500 million repurchase program, which extends through December 31, 2027.
    • Approximately 80% to debt reduction.
    • The Company expects to increase the allocation to share repurchases as leverage and absolute debt levels decline.

2026 GUIDANCE

The Company's merger with Civitas closed on January 30, 2026; therefore, full-year 2026 guidance reflects 11 months of Civitas contribution. In addition, 2026 guidance reflects the conversion of certain acquired volumes to two-stream reporting and the planned divestiture of certain South Texas assets, expected to close in the second quarter of 2026, with an effective date of February 1, 2026.

Full-Year 2026 Highlights:

• Capital expenditures, adjusted for accruals, are expected to be $2.65–$2.85 billion, with $2.3–$2.5 billion allocated to drilling, completion and well connection.
• Total net production volumes are expected to be 146–153 MMBoe (approximately 54% oil).
• Activity levels include an average of 11 operated rigs and 4.5 completion crews (down from 15 and seven, respectively, entering 2026, on a pro forma basis). The Company expects to drill approximately 245 net wells and turn-in-line approximately 295 net wells.
  • Permian – The Company plans to allocate approximately 45% of capital, running an average of six rigs and two completion crews to turn-in-line approximately 150 net wells.
  • DJ – The Company plans to allocate approximately 20% of capital to run an average of one rig and one completion crew to turn-in-line approximately 80 net wells.
  • South Texas – The Company plans to allocate approximately 15% of capital, running an average of 1.5 rigs and one completion crew to turn-in-line approximately 35 net wells.
  • Uinta – The Company plans to allocate approximately 20% of capital, running an average of 2.5 rigs and one completion crew to turn-in-line approximately 30 net wells.

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