Q3 2025 SM Energy Co Earnings Call

November 3, 2025

Operator: During the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Wade Pursell, Executive Vice President and Chief Financial Officer. Thank you. You may begin.

Operator: Joining the conference. Please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Wade Pursell, Executive Vice President and Chief Financial Officer. Thank you. You may begin.

Please note. This conference is being recorded I will now turn the conference over to Wade for South Executive Vice President and Chief Financial Officer. Thank you you may begin.

Thank you Sherry good morning, everyone and thank you for joining us on this very exciting day in the history of our companies our call today is to discuss SM energy company in Civitas resources merger announcement.

Wade Pursell: Thank you, Sherry. Good morning, everyone, and thank you for joining us on this very exciting day in the history of our companies. Our call today is to discuss SM Energy Company and Civitas Resources' merger announcement. Earlier this morning, we issued a press release and posted a presentation to our website. We hope that you've had a chance to review both of those. During today's call, we'll be making forward-looking statements, which consist of statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs, goals, expectations, forecasts, projections, and future performance, and the assumptions underlying the statements. Please note there are a number of factors that will cause actual results to differ materially from our statements.

Wade Pursell: Thank you, Sherry. Good morning, everyone, and thank you for joining us on this very exciting day in the history of our companies. Our call today is to discuss SM Energy Company and Civitas Resources merger announcement. Earlier this morning, we issued a press release, posted a presentation to our website. We hope that you've had a chance to review both of those. During today's call, we'll be making forward-looking statements which consist of statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs, goals, expectations, forecasts, projections, and future performance and the assumptions underlying the statements. Please note there are a number of factors that will cause actual results to differ materially from our statements.

Earlier. This morning, we issued a press release posted a presentation to our website, we hope that you've had a chance to review both of those.

So during today's call, we'll be making forward looking statements, which consistent statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs goals expectations forecast projections and future performance and the assumptions underlying these statements. Please note.

There are a number of factors that will cause actual results to differ materially from our statements.

Also please recognize that except as required by applicable law, we undertake no duty to update any forward looking statements and you should not place undue reliance on such statements. We may also refer to certain non-GAAP financial measures and metrics to help facilitate comparisons across periods and with peers. Please refer to slides two and three and the <unk>.

Wade Pursell: Also, please recognize that, except as required by applicable law, we undertake no duty to update any forward-looking statements, and you should not place undue reliance on such statements. We may also refer to certain non-GAAP financial measures and metrics to help facilitate comparisons across periods and with peers. Please refer to slides two and three in the presentation posted earlier this morning for additional discussion of forward-looking statements and non-GAAP measures. Today's prepared remarks will be given by SM Energy Company's Chief Executive Officer, Herb Vogel, and President and Chief Operating Officer, Beth McDonald, and Civitas Resources' Interim Chief Executive Officer, Wouter van Kempen. I'll now turn the call over to Herb.

Wade Pursell: Please recognize that except as required by applicable law, we undertake no duty to update any forward-looking statements and you should not place undue reliance on such statements. We may also refer to certain non-GAAP financial measures and metrics to help facilitate comparisons across periods and with peers. Please refer to slides two and three in the presentation posted earlier this morning for additional discussion of forward-looking statements and non-GAAP measures. Today's prepared remarks will be given by SM Energy Company's Chief Executive Officer, Herb Vogel, President and Chief Operating Officer, Beth McDonald, and Civitas Resources Interim Chief Executive Officer, Wouter van Kempen. I'll now turn the call over to Herb. Herb?

Presentation posted earlier this morning for additional discussion of forward looking statements and non-GAAP measures today's prepared remarks will be given by SM energy Company's Chief Executive Officer, Herb Vogel, and President and Chief operating Officer, Beth Mcdonald, and Civitas resources interim Chief Executive Officer.

About art van Kempen.

I'll now turn the call over to Herb.

Thanks Ryan.

Good morning, everyone and thank you for joining us today.

Herb Vogel: Thanks, Wade. Good morning, everyone, and thank you for joining us today. Earlier this morning, we announced that we've entered into a merger agreement with Civitas Resources. Wouter, Beth, and I are excited to share how this transformational merger delivers superior value for both SM Energy's and Civitas's stockholders. This is more than just a combination of two companies. It's a remarkable opportunity that creates value-enhancing scale, value-driven synergies, and value-accretive substance in the form of significant free cash flow generation. Before handing the call over to Wouter for a few remarks, I want to extend my congratulations to Wouter and the entire Civitas team for building Civitas into a leading sustainable energy producer. Today's transaction reflects the exceptional talent and operational excellence they've cultivated. I look forward to seeing what our two companies can achieve as one stronger organization. I will now turn the call over to Wouter. Wouter?

Herb Vogel: Thanks, Wade. Good morning, everyone, and thank you for joining us today. Earlier this morning, we announced that we've entered into a merger agreement with Civitas Resources. Wouter, Beth, and I are excited to share how this transformational merger delivers superior value for both SM Energy's and Civitas' stockholders. This is more than just a combination of two companies. It's a remarkable opportunity that creates value-enhancing scale, value-driven synergies, and value-accretive substance in the form of significant free cash flow generation. Before handing the call over to Wouter for a few remarks, I want to extend my congratulations to Wouter and the entire Civitas team for building Civitas into a leading sustainable energy producer. Today's transaction reflects the exceptional talent and operational excellence they've cultivated. I look forward to seeing what our two companies can achieve as one stronger organization. I will now turn the call over to Wouter. Wouter?

Earlier. This morning, we announced that we've entered into a merger agreement with Civitas resources.

Router Beth and I are excited to share how this transformational merger deliver superior value for both <unk> and <unk> stockholders.

This is more than just a combination of two companies.

It's a remarkable opportunity that creates value enhancing scale value driven synergies and value accretive substance in the form of significant free cash flow generation.

Before handing the call over to Walter for a few remarks I want to extend my congratulations to <unk> and the entire civitas team for building civitas into a leading sustainable energy producer today's transaction reflects the exceptional talent and operational excellence they've cultivated.

Look forward to seeing what our two companies can achieve is one stronger organization I'll now turn the call over to motor voucher.

And good morning, everyone. Thank you for joining us today marks a very significant milestone for both <unk> and SM energy. We firmly believe this merger unlocks new potential does lead to deliver enhanced shareholder value and achieve outcomes that neither company could reach in the panoply.

Wouter van Kempen: Thanks, Herb. Good morning, everyone. Thank you for joining us. Today marks a very significant milestone for both Civitas and SM Energy. We firmly believe this merger unlocks new potential to deliver enhanced shareholder value and achieve outcomes that neither company could reach independently. While our asset portfolios and operational practices share many advantages, it's the integration of our strong technical teams that will truly elevate our performance, bringing out the very best of both organizations to sharpen our competitive edge and drive increased returns. The advantages of scale are clear. Our industry continues to consolidate into larger, financially robust enterprises that lead with top-tier operational and environmental standards. This combined company will be well-positioned to responsibly produce energy supplies, making people's lives better and contributing to energy security and prosperity while delivering sustainable value to our shareholders.

Wade Pursell: Thanks, Herb, and good morning, everyone. Thank you for joining us. Today marks a very significant milestone for both Civitas and SM Energy. We firmly believe this merger unlocks new potential to deliver enhanced shareholder value and achieve outcomes that neither company could reach independently. While our asset portfolios and operational practices share many advantages, it's the integration of our strong technical teams that will truly elevate our performance, bringing out the very best of both organizations to sharpen our competitive edge and drive increased returns. The advantages of scale are clear. Our industry continues to consolidate into larger, financially robust enterprises that lead with top-tier operational and environmental standards. This combined company will be well-positioned to responsibly produce energy supplies, making people's lives better, and contributing to energy security and prosperity while delivering sustainable value to our shareholders.

While our asset portfolio some operational practices share many advantages. It's the integration of our strong technical teams that will truly elevate our performance, bringing out the very best of both organizations to sharpen our competitive edge and drive increased returns.

The advantages of scale are clear our industry continues to consolidate into larger financially robust enterprises that lead with top tier operational and environmental standards. This combined company will be well positioned to responsibly produce energy supplies, making people's lives better and contributing.

Two energy security and prosperity, while delivering sustainable value to our shareholders confidence that shareholders from both companies will recognize the meaningful synergies. This merger of forwards and we're eager to move swiftly through integration and heard market recognition for the value we see in a unified organization.

Wouter van Kempen: We're confident that shareholders from both companies will recognize the meaningful synergies this merger affords, and we're eager to move swiftly through integration and earn market recognition for the value we see in our unified organization. Finally, I want to acknowledge our employees. Today's announcement would not have been possible without the dedication and talent of our people, Civitas' greatest assets. I extend my sincere thanks to each and every employee for your commitment to one another and our mission of delivering long-term shareholder value while advancing sustainable energy development. I will now turn it over to Beth to walk you through the highlights of the transaction.

Wade Pursell: We're confident that shareholders from both companies will recognize the meaningful synergies this merger affords, and we're eager to move swiftly through integration and earn market recognition for the value we see in our unified organization. Finally, I want to acknowledge our employees. Today's announcement would not have been possible without the dedication and talent of our people, Civitas' greatest assets. I extend my sincere thanks to each and every employee for your commitment to one another and our mission of delivering long-term shareholder value while advancing sustainable energy development. I will now turn it over to Beth to walk you through the highlights of the transaction.

Finally, I want to acknowledge our employees today's announcement would not have been possible without the dedication and talent of our people <unk> greatest assets.

Extend my sincere thanks to each and every employee for your commitment to one another and our mission of delivering long term shareholder value, while advancing sustainable energy development.

I will now turn it over to Beth to walk you sort of highlights of the transaction.

Thank you Walter I'll begin on slide four as Herb said this is a remarkable opportunity when it creates a company with value enhancing scale consisting of a premier portfolio across the highest return U S basins delivers a step change in free cash flow, enabling sustained capital returns and enhances trading liquidity.

Beth McDonald: Thank you, Wouter. I'll begin on slide four. As Herb said, this is a remarkable opportunity, one that creates a company with value-enhancing scale consisting of a premier portfolio across the highest-return US basins, delivers a step change in free cash flow, enabling sustained capital returns, and enhances trading liquidity with broader investor appeal. We have brought together two highly complementary portfolios and teams to generate value-driven synergies, which are identifiable, achievable, and deliverable by proven management. The synergies are expected to drive greater accretion, accelerate debt reduction, and deliver through cycle returns. Our returns-based technical focus will unlock significant value, and our people, processes, and infrastructure will work together to capture identified synergies and accelerate integration. Stockholders will benefit from accretion on key financial metrics and from the substance of this transaction, which is the expected significant free cash flow that the combined company will generate.

Beth McDonald: Thank you, Wouter. I'll begin on slide 4. As Herb said, this is a remarkable opportunity, one that creates a company with value-enhancing scale consisting of a premier portfolio across the highest return US basins, delivers a step change in free cash flow, enabling sustained capital returns and enhances trading liquidity with broader investor appeal. We have brought together two highly complementary portfolios and teams to generate value-driven synergies, which are identifiable, achievable, and deliverable by proven management. The synergies are expected to drive greater accretion, accelerate debt reduction, and deliver through-cycle returns. Our returns-based technical focus will unlock significant value, and our people, processes, and infrastructure will work together to capture identified synergies and accelerate integration. Stockholders will benefit from accretion on key financial metrics and from the substance of this transaction, which is the expected significant free cash flow that the combined company will generate.

With broader Investor appeal.

We have brought together two highly complementary portfolios and team to generate value driven synergies, which are identifiable achievable and deliverable by proven management.

The synergies are expected to drive greater accretion accelerate debt reduction and deliver through cycle returns.

Our returns based technical focus will unlock significant value in our people processes and infrastructure will work together to capture identified synergies and accelerate integration.

Stockholders will benefit from accretion on key financial metrics and from the substance of this transaction, which is the expected significant free cash flow that the combined company will generate.

On a per share basis. The transaction provides significant cash flow debt adjusted cash flow free cash flow and NAV accretion even before synergies.

Beth McDonald: On a per-share basis, the transaction provides significant cash flow, debt-adjusted cash flow, free cash flow, and NAV accretion even before synergies. We will prioritize applying free cash flow, along with any proceeds from opportunistic divestitures we plan to pursue, to debt reduction while maintaining a sustainable quarterly fixed dividend of $0.20 per share until we reach our leverage target of 1x. Upon reaching our target, we plan to direct our free cash flow towards growing our regular dividend, and upholding a consistent stock repurchase program. Finally, but certainly not last, we are proud of the excellent safety and environmental track record of both companies and are committed to continuing that legacy. Turning to slide five, this combination results in a step change in scale showcasing a premier portfolio.

Beth McDonald: On a per-share basis, the transaction provides significant cash flow, debt-adjusted cash flow, free cash flow, and NAV accretion even before synergies. We will prioritize applying free cash flow along with any proceeds from opportunistic divestitures we plan to pursue to debt reduction while maintaining a sustainable quarterly fixed dividend of $0.20 per share until we reach our leverage target of 1x. Upon reaching our target, we plan to direct our free cash flow towards growing our regular dividend and upholding a consistent stock repurchase program. Finally, but certainly not last, we are proud of the excellent safety and environmental track record of both companies and are committed to continuing that legacy. Turning to slide 5, this combination results in a step change in scale, showcasing a premier portfolio.

Prioritize applying free cash flow along with any proceeds from opportunistic divestitures, we plan to pursue to debt reduction while maintaining a sustainable quarterly fixed dividend of <unk> 20 per share until we reach our leverage target of one times.

Upon reaching our target we plan to direct our free cash flow towards growing our regular dividend and I am holding a consistent stock repurchase program.

Finally, but certainly not last we are proud of the excellent safety and environmental track record of both company and are committed to continuing that legacy.

Turning to slide five this combination results in a step change in scale showcasing our premier portfolio pro forma as of June 30th 2025, The company holds.

Beth McDonald: Pro forma, as of 30 June 2025, the company holds over 800,000 net acres in four contiguous states. Production totaled approximately 526,000 barrels of oil equivalent per day. Estimated net proved reserves pro forma as of year-end 2024 totaled nearly 1.5 billion barrels of oil equivalent. The combined company has approximately 50% of the production and remaining locations in the Permian Basin. This step change in scale across these top-tier assets will drive differentiated free cash flow and sustain stockholder value. On slide six, you can see the contribution to value-enhancing scale that is provided by our positions in the highest return US Shale basin. Each of these basins provides unique value and competitive returns, which will further strengthen our technical expertise and bolster our ability to deliver synergies across all assets. I'm now on slide seven.

Beth McDonald: Pro forma, as of 30 June 2025, the company holds over 800,000 net acres in four contiguous states and production totaled approximately 526,000 barrels of oil equivalent per day. Estimated net proved reserves pro forma as of year-end 2024 totaled nearly 1.5 billion barrels of oil equivalent. The combined company has approximately 50% of the production and remaining locations in the Permian Basin. This step change in scale across these top-tier assets will drive differentiated free cash flow and sustained stockholder value. On slide six, you can see the contribution to value-enhancing scale that is provided by our positions in the highest-return US shale basin. Each of these basins provides unique value and competitive returns, which will further strengthen our technical expertise and bolster our ability to deliver synergies across all assets. I'm now on slide seven.

Over 800000 net acres in four contiguous states.

Production totaled approximately 526000 barrels of oil equivalent per day.

Estimated net proved reserves pro forma as of year end 2024 totaled nearly $1 5 billion barrels of oil equivalent.

Buying company has approximately 50% of the production and remaining locations in the Permian Basin.

This step change in scale across these top tier assets will drive differentiated free cash flow with sustained stockholder value.

On slide six you can see the contribution to value enhancing scale that is provided by our positions in the highest return U S shale basin.

Each of these basins provides unique value and competitive returns, which will further strengthen our technical expertise and bolster our ability to deliver synergies across all assets.

I'm now on slide seven.

As the combined company's cornerstone asset the Permian position represents nearly half of the pro forma production and just under half of the year end 2020 for estimated net proved reserves on an oil equivalent basis.

Beth McDonald: As the combined company's cornerstone asset, the Permian position represents nearly half of the pro forma BOE production and just under half of the year-end 2024 estimated net proved reserves on an oil-equivalent basis. This premier asset is also a source of potential inventory growth and new horizons that we are currently delineating. We are excited about each of our four core areas as they will deliver strong free cash flow, generate highly economic returns, and collectively provide multiple opportunities for inventory growth. With slide eight, we will showcase the value-enhancing scale this combination provides through a relative size comparison. The transaction transforms the pro forma company into a top-tier US independent oil-focused producer, better positioned as an attractive investment due to the step change in free cash flow, net equivalent production, and enterprise value.

Beth McDonald: As the combined company's cornerstone asset, the Permian position represents nearly half of the pro forma BOE production and just under half of the year-end 2024 estimated net proved reserves on an oil equivalent basis. This premier asset is also a source of potential inventory growth in new horizons that we are currently delineating. We are excited about each of our four core areas as they will deliver strong free cash flow, generate highly economic returns, and collectively provide multiple opportunities for inventory growth. With slide eight, we will showcase the value-enhancing scale this combination provides through a relative size comparison. The transaction transforms the pro forma company into a top 10 US independent oil-focused producer, better positioned as an attractive investment due to the step change in free cash flow, net equivalent production, and enterprise value.

This premier asset is also a source of potential inventory growth and new horizons that we're currently delineating.

Excited about each of our four core areas as they will deliver strong free cash flow generate highly economic returns and collectively provide multiple opportunities for inventory growth.

With slide eight we will showcase the value enhancing scale. This combination provides through a relative size comparison the transaction transforms the pro forma company into a top 10 U S independent oil focused producer better positioned as an attractive investment due to the step change in free cash flow net equivalent production.

<unk> and enterprise value.

We expect this expanded scale will appeal to a broader universe of institutional investors and will increase pro forma trading liquidity.

Beth McDonald: We expect this expanded scale will appeal to a broader universe of institutional investors, and will increase pro forma trading liquidity. We now turn our attention to the value-driven synergies that bolster this combination. The combined technical expertise is expected to unlock significant value and drive synergies. Our proven technical team has repeatedly demonstrated differentiated technical abilities, generating meaningful value across SM Energy's legacy core assets. By leveraging advanced technology and fostering a collaborative, inquisitive culture that challenges paradigms and solves complex problems, we achieve operational excellence. Our recent integration success, powered by exceptional talent, streamlined process, and robust technology, instills confidence in our ability to deliver a cohesive outcome. We recognize the great performance of the Civitas team and a similar culture of technical excellence, and look forward to welcoming members to collaborate and learn from each other to create value for our stockholders together.

Beth McDonald: We expect this expanded scale will appeal to a broader universe of institutional investors and will increase pro forma trading liquidity. We now turn our attention to the value-driven synergies that bolster this combination. The combined technical expertise is expected to unlock significant value and drive synergies. Our proven technical team has repeatedly demonstrated differentiated technical abilities, generating meaningful value across SM Energy's legacy core assets. By leveraging advanced technology and fostering a collaborative, inquisitive culture that challenges paradigms and solves complex problems, we achieve operational excellence. Our recent integration success, powered by exceptional talent, streamlined process, and robust technology, instills confidence in our ability to deliver a cohesive outcome. We recognize the great performance of the Civitas team and a similar culture of technical excellence, and look forward to welcoming members to collaborate and learn from each other to create value for our stockholders together.

We now turn our attention to the value driven synergies that bolster this combination.

The combined technical expertise is expected to unlock significant value and drive synergies.

Our proven technical team has repeatedly demonstrated differentiated technical abilities generating meaningful value across SM Energy's legacy core assets.

By leveraging advanced technology, and fostering a collaborative inquisitive culture, a challenging paradigms and solve complex problems, we achieve operational excellence.

Our recent our recent integration success powered by exceptional talent streamline process and robust technology instills confidence in our ability to deliver a cohesive outcome.

We recognize the great performance of the Civitas team and a similar culture of technical excellence.

And look forward to welcoming members to collaborate and learn from each other to create value for our stockholders together.

Moving to slide 10, let's spend a few minutes looking at our plans to enhance stockholder value by delivering identifiable and achievable annual synergies totaling $200 million with upside potential to $300 million.

Beth McDonald: Moving to slide 10, let's spend a few minutes looking at our plans to enhance stockholder value by delivering identifiable and achievable annual synergies totaling $200 million, with upside potential to $300 million. We believe the complementary operations lead to significant pro forma annual synergies that are achievable post-integration. We have identified approximately $70 million of overhead and G&A synergies, with $25 million of potential upside driven by a streamlined corporate structure and optimized G&A across the combined asset base. On the drilling and completion side, we have identified approximately $100 million of synergies, with a potential for an additional $50 million. We expect to achieve these synergies through improved capital efficiency, an optimized drilling program, and lower LOE with integration and scale. The combined company will benefit from swapping learnings to lower drilling and completion costs while continuing to deliver highly economic wells.

Beth McDonald: Moving to slide 10, let's spend a few minutes looking at our plans to enhance stockholder value by delivering identifiable and achievable annual synergies totaling $200 million, with upside potential to $300 million. We believe the complementary operations lead to significant pro forma annual synergies that are achievable post-integration. We have identified approximately $70 million of overhead and G&A synergies, with $25 million of potential upside, driven by a streamlined corporate structure and optimized G&A across the combined asset base. On the drilling and completion side, we have identified approximately $100 million of synergies with a potential for an additional $50 million. We expect to achieve these synergies through improved capital efficiency, an optimized drilling program, and lower LOE with integration and scale.

We believe the complementary operations lead to significant pro forma annual synergies that are achievable post integration.

We have identified approximately $70 million of overhead and G&A synergies with $25 million of potential upside driven by a streamlined corporate structure and optimize G&A across the combined asset base.

On the drilling and completion side, we have identified approximately $100 million of synergies with a potential for an additional $15 million we.

To achieve these synergies through improved capital efficiency and optimized drilling program and lower LOE with integration and scale.

The combined company will benefit from swapping learnings to lower drilling and completion costs, while continuing to deliver highly economic wells on.

Beth McDonald: The combined company will benefit from swapping learnings to lower drilling and completion costs while continuing to deliver highly economic wells. On the operations front, we expect the combined company to benefit from several opportunities from Civitas' low-cost operations and SM's technical focus to lower costs and increase performance. We anticipate gaining purchasing power, debundling services, bringing recurring costs in-house, and optimizing our operations with machine learning and AI. Reducing our cost of capital is the next identifiable and achievable synergy that will enhance stockholder value. The previously mentioned costs and operating synergies will accelerate debt reduction and provide interest savings. We also expect to be able to opportunistically refinance certain tranches of debt at a lower cost of capital due to an improved credit profile. We estimate achievable cost of capital savings at $30 million with potential upside for an additional $25 million.

On the operations front, we expect the combined company to benefit from several opportunities from civitas as low cost operations and SME technical focus to lower cost and increased performance we.

Beth McDonald: On the operations front, we expect the combined company to benefit from several opportunities from Civitas's low-cost operations and SM's technical focus to lower costs and increase performance. We anticipate gaining purchasing power, debundling services, bringing recurring costs in-house, and optimizing our operations with machine learning and AI. Reducing our cost of capital is the next identifiable and achievable synergy that will enhance stockholder value. The previously mentioned costs and operating synergies will accelerate debt reduction and provide interest savings. We also expect to be able to opportunistically refinance certain tranches of debt at a lower cost of capital due to an improved credit profile. We estimate achievable cost of capital savings at $30 million, with potential upside for an additional $25 million. Neither of these estimates include the potential for cost of capital synergies if we achieve investment-grade status.

We anticipate gaining purchasing power de bundling services, bringing recurring costs in house and optimizing our operations with machine learning and AI.

Reducing our cost of capital as the next identifiable and achievable synergy that will enhance stockholder value.

Previously mentioned costs and operating synergies will accelerate debt reduction and provide interest savings.

And we also expect to be able to opportunistically refinance certain tranches of debt at a lower cost of capital due to an improved credit profile.

We estimate achievable cost of capital savings of $30 million with potential upside for an additional $25 million.

Neither of these estimates include the potential for cost of capital synergies, if we achieve investment grade status.

Beth McDonald: Neither of these estimates include the potential for cost of capital synergies if we achieve investment-grade status. As is apparent from our diligence to date, we believe the identified and achievable synergies will enhance stockholder value in the near term, reduce debt faster, and create a sustainable return of capital program. Next, slide 11 showcases how the combination of our two companies provides for value-accretive substance as we realize significant accretion across key financial metrics before synergies. The identified and achievable value-enhancing annual run rate synergies of $200 million to $300 million meaningfully increase the free cash flow generation of the pro forma company. We plan to prioritize free cash flow to debt reduction with a path to 1x net leverage by year-end 2027 at $65 WTI.

As is apparent from our diligence to date, we believe the identified an achievable synergies will enhance stockholder value in the near term reduce debt faster.

Beth McDonald: As is apparent from our diligence to date, we believe the identified and achievable synergies will enhance stockholder value in the near term, reduce debt faster, and create a sustainable return of capital program. Next, slide 11 showcases how the combination of our two companies provides for value-accretive substance as we realize significant accretion across key financial metrics before synergies. The identified and achievable value-enhancing annual run-rate synergies of $200 million to $300 million meaningfully increase the free cash flow generation of the pro forma company. We plan to prioritize free cash flow to debt reduction with a path to 1x net leverage by year-end 2027 at $65 WTI. At $60 WTI, leverage is expected to be slightly higher at 1.4x at year-end 2027. While we are encouraged that leverage is at a manageable level, we will seek to reduce debt faster through opportunistic asset sales at the appropriate time.

<unk>, a sustainable return of capital program.

Next slide 11 showcases how the combination of our two companies provides for value accretive substance as we realized significant accretion across key financial metrics before synergies.

The identified an achievable value enhancing annual run rate synergies of $200 million of $300 million.

We increased the free cash flow generation of the pro forma company.

We plan to prioritize free cash flow to debt reduction with a path to one times net leverage by year end 'twenty seven at $65 <unk>.

At $60 Wty Leverages is expected to be slightly higher at one four times at year end 'twenty seven.

Beth McDonald: At $60 WTI, leverage is expected to be slightly higher at 1.4x at year-end 2027. While we are encouraged that leverage is at a manageable level, we will seek to reduce debt faster through opportunistic asset sales at the appropriate time. Scale, diversification, and synergy enhance free cash flow, strengthen the pro forma company's credit profile. Several opportunities to accelerate the achievement of our leverage target exist through an optimized drilling program and, as mentioned before, potential asset sales. We will evaluate those as a part of our effort to continue to maximize free cash flow generation and improve the pro forma balance sheet. Turning to stockholder returns, we remain firmly committed to our sustainable quarterly dividend, fixed dividend at $0.20 per share. The previous board-authorized $500 million share repurchase program remains in effect.

While we are encouraged that leverages at a manageable level, we will seek to reduce debt faster through opportunistic asset sales at the appropriate time.

Scale diversification and synergy enhanced free cash flow strengthen the pro forma company's credit profile.

Beth McDonald: Scale, diversification, and synergy-enhanced free cash flow strengthen the pro forma company's credit profile. Several opportunities to accelerate the achievement of our leverage target exist through an optimized drilling program and, as mentioned before, potential asset sales. We will evaluate those as a part of our effort to continue to maximize free cash flow generation and improve the pro forma balance sheet. Turning to stockholder returns, we remain firmly committed to our sustainable quarterly fixed dividend at $0.20 per share. The previous board-authorized $500 million share repurchase program remains in effect. This transaction is highly accretive on a per-share basis, which is why our near-term policy and priority is reducing debt and strengthening the balance sheet. Once we achieve our leverage target of near 1x, buybacks will become a larger part of our capital return program. Even before then, we never rule out the possibility of opportunistically repurchasing shares.

Several opportunities to accelerate the achievement of our leverage target exist through an optimized drilling program and as mentioned before a potential asset sales.

We will evaluate those as a part of our effort to continue to maximize free cash flow generation and improve the pro forma balance sheet.

Turning to stockholder returns, we remain firmly committed to our sustainable quarterly dividend fixed dividend of <unk> 20 per share.

Previous board authorized $500 million share repurchase program remains in effect. This transaction is highly accretive on a per share basis, which is why our near term policy and priority is reducing debt and strengthening the balance sheet.

Beth McDonald: This transaction is highly accretive on a per-share basis, which is why our near-term policy and priority is reducing debt and strengthening the balance sheet. Once we achieve our leverage target of near 1x, buybacks will become a larger part of our capital return program. Even before them, we never rule out the possibility of opportunistically repurchasing shares. Taken together, this financial policy provides stockholders with value-accretive substance through an attractive mix of disciplined balance sheet prioritization, consistent capital returns through a sustainable fixed dividend, and future share buybacks upon achieving our 1x leverage target. I'm now on slide 12, looking at the manageable maturities of the pro forma debt profile. As of Q3, combined liquidity totaled $4.4 billion.

Once we achieve our leverage target of near one times buybacks will become a larger part of our capital return program and even before them, we never rule out the possibility of Opportunistically repurchasing shares.

Taken together this financial policy provide stockholders with value accretive substance through an attractive mix of disciplined balance sheet prioritization consistent capital returns through a sustainable fixed dividend and future share buybacks upon achieving our one times leverage target.

Beth McDonald: Taken together, this financial policy provides stockholders with value-accretive substance through an attractive mix of disciplined balance sheet prioritization, consistent capital returns through a sustainable fixed dividend, and future share buybacks upon achieving our 1x leverage target. I'm now on slide 12, looking at the manageable maturities of the pro forma debt profile. As of Q3, combined liquidity totaled $4.4 billion. The well-staggered maturities provide opportunity to reduce debt with the significant free cash flow generated pro forma through potential asset sales and through reduced interest costs upon refinancing enabled by an enhanced credit profile. Moving to slide 13, the pro forma company will be recognized as a dependable leader of sustainability and stewardship, building stronger communities through responsible action. Each of the top-tier assets contributes to this recognition as a premier operator. Stepping back, I'm now on slide 14.

I'm now on slide 12, looking at the manageable maturities of the pro forma debt profile.

As of Q3 combined liquidity totaled $4 4 billion.

Well staggered maturities provide opportunity to reduce debt with the significant free cash flow generated pro forma through potential asset sales and through reduced interest cost upon refinancing enabled by an enhanced credit profile.

Beth McDonald: The well-staggered maturities provide opportunity to reduce debt with the significant free cash flow generated pro forma through potential asset sales and through reduced interest costs upon refinancing enabled by an enhanced credit profile. Moving to slide 13. The pro forma company will be recognized as a dependable leader of sustainability and stewardship, building stronger communities through responsible action. Each of the top-tier assets contributes to this recognition as a premier operator. Stepping back, I'm now on slide 14. This strategic combination is transformational, delivering superior value to stockholders, immediate and significant per-share accretion, and long-term value creation. This merger is about creating something stronger together than either company would achieve on its own. Sherry, we are now ready to take questions.

Moving to slide 13, the pro forma company will be recognized as a dependable leader of sustainability and stewardship building stronger communities through responsible action.

Each of the top tier assets contributes to this recognition as a premier operator.

Stepping back I'm now on slide 14. This strategic combination is transformational delivering superior value to stockholders immediate and significant per share accretion and long term value creation.

Beth McDonald: This strategic combination is transformational, delivering superior value to stockholders, immediate and significant per-share accretion, and long-term value creation. This merger is about creating something stronger together than either company would achieve on its own. Sherry, we are now ready to take questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. Our first question is from Scott Arnold with RBC Capital Markets. Please proceed. Yeah, thanks all.

This merger is about creating something stronger together than either company would achieve on its own.

<unk>, we are now ready to take questions.

Thank you if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. Our first question is from Scott Arnold with RBC Capital Markets. Please proceed.

Let's start here.

One moment, while we poll for questions.

Our first question is from Scott.

<unk> with RBC capital markets. Please proceed.

Yes. Thanks, all for my first question. This morning, I was wondering if you could give us a little bit of color on.

Scott Hanold: Yeah, thanks, all. Hey, for my first question this morning, I was wondering if you could give us a little bit of color on, you know, the process in terms of how you all came up with the relative value all-allocation to each in the merger ratio. I guess I was a bit surprised that SM shareholders aren't a majority owner here.

Beth McDonald: Hey, for my first question this morning, I was wondering if you could give us a little bit of color on the process in terms of how you all came up with the relative value allocation to each in the merger ratio. I guess I was a bit surprised that SM shareholders aren't a majority owner here. Scott, I'll start and then see if Bauder wants to add anything on that. It was pretty much balanced based on the way the market traded over time. We looked at the appropriate shares based on market trading and the values of the assets that both were contributing. It was a pretty logical, straightforward sort of approach. Yeah, nothing to add. On a per-share basis, the results are quite accretive. Okay, thanks.

Hum.

In terms of how you all came up with the relative value will allocation to each in the merger ratio.

I guess that was a bit surprised that SM shareholders arent a majority owner here.

Scott I'll start and then if Bob has wants to add anything on that.

Herb Vogel: Scott, I'll start and then see if Wouter wants to add anything on that. It was pretty much balanced based on the way the market traded over time. We looked at the appropriate shares based on market trading and the values of the assets that both were contributing. It was a pretty logical, straightforward sort of approach.

Pretty much balanced based on the way the market traded over time.

And we looked at appropriate shares based on market trading and the values of the assets, but both are contributing so pretty logical straightforward sort of approach.

Yes, nothing to add.

Okay.

[Company Representative] (Civitas Resources): Yeah, nothing to add. On a per-share basis, the results are quite accretive.

Wouter van Kempen: Yeah, nothing to add. On a per-share basis, the results are quite accretive.

On a per share basis, the results are quite accretive.

Okay. Thanks.

I guess my follow up is on.

Scott Hanold: Okay, thanks. I guess my follow-up is on, I guess, Beth, you had mentioned a few times, you know, potential asset divestitures to help get leverage down. I think obviously that's gonna be an important aspect of this merger and in seeing that leverage ratio get down, you know, faster than hopefully, you know, than you all provided here. Hopefully that's.

Bob You had mentioned a few times.

Beth McDonald: I guess my follow-up is on, I guess, Beth, you had mentioned a few times potential asset investors to help get leverage done. I think obviously that's going to be an important aspect of this merger and seeing that leverage ratio get down faster than, hopefully, than you all provided here. Hopefully that's pretty conservative. Can you give us a sense of when you think about investitures, what would you consider as non-core type assets? What would be at the top of the pecking order? I think it's a little bit premature or early to tell you specifics about what asset we would go after. I think if you look back at what the assets are that we really value are ones that generate high free cash flow, but in turn, ones that have a runway of strong, highly economic returns.

Potential asset divestitures to help get Levered zone at the <unk>, obviously, that's going to be an important aspect of this merger and seeing that leverage ratio get down faster than hopefully.

You all provided here, so hopefully that Brad conservative, but can you can you give us a sense of like when you think about like divestitures, what would you consider as like non core type assets, what would be at the top of the pecking order.

Beth McDonald: Right.

Scott Hanold: Being conservative. Can you give us a sense of like when you think about, like, divestitures, what would you consider as, like, non-core type assets? What would be at the top of the pecking order?

I think it's a little bit premature early to tell you specifics about what asset we would go after I think if you look back at what the assets are that we really value our ones that generate high free cash flow, but in turn ones that have a runway of strong highly economic returns and so we will balance.

Beth McDonald: I think it's a little bit premature or early to tell you specifics about what asset we would go after. I think if you look back at what the assets are that we really value are ones that generate high free cash flow, but in turn, ones that have a runway of strong, highly economic returns. We'll balance those, as well as the commodity price environment as we look to what assets we could potentially sell.

Those as well as the commodity price environment as we look to what assets, we could potentially sell.

Beth McDonald: We'll balance those as well as the commodity price environment as we look to what assets we could potentially sell. Okay. Is this a process that may take a while? When will you have identified those potential assets? Do you guys have something in mind, or will it be something more into 2026 as you get the combined kind of entity together? Yes, Scott, it'll be more into 2026. Our focus right now is on successful integration of the two businesses and making sure that execution happens in a safe way as well. We'll be focused on that, but we'll also be looking at that prioritization at the same time. Thank you. Our next question is from Leo Marinari with Roth MKM. Please proceed. Yeah, hi, good morning. I wanted to just follow up a little bit on the synergies here.

Okay.

So it may take a while like when will you have identified those potential assets do you guys have something in mind or will.

Scott Hanold: Okay. Is this a process that may take a while? Like, when will you have identified those potential assets? Do you guys have something in mind or will it be something, you know, more into 2026 as you get the combined kinda entity together?

Will it be something more into 2026 as you get the combined entity together.

Yes got it it'll be more into 2026, our focus right now is on successful integration of the two businesses and making sure that execution happens.

Beth McDonald: Yes, Scott, it'll be more into 2026. Our focus right now is on successful integration of the two businesses and making sure that execution happens in a safe way as well. We'll be focused on that, but we'll also be looking at that prioritization at the same time.

And Ah Safeway as well and so we'll be focused on that but we'll also be looking at that privatization at the same time.

Thank you.

Our next question is from Leo Marinara with.

Scott Hanold: Thank you.

Operator: Our next question is from Leo Mariani with Roth MKM. Please proceed.

Russ.

Please proceed.

Yes, hi, good morning wanted to just follow up a little bit on the synergies here. So you guys identified kind of as your base case $200 million you can provide a little bit of color kind of around the timing there and then with respect to the basically kind of operational synergies of kind of a 100 to 100.

Leo Mariani: Yeah. Hi, good morning. Wanted to just follow up a little bit on the synergies here. You guys identified kind of as your base case $200 million. Can you provide a little bit of color kind of around the timing there? With respect to the basically kind of operational synergies of kind of $100 to $150 million, which I guess is the upside case, can you provide a little bit more color around kind of how you get there? I mean, there's not too much in the way of asset overlap between the two companies. Just wanted to dive a little bit more into the synergies here, please.

Beth McDonald: You guys identified kind of as your base case, $200 million. Can you provide a little bit of color around the timing there? With respect to the basically kind of operational synergies of $100 to 150 million, which I guess is the upside case, can you provide a little bit more color around how you get there? I mean, there's not too much in the way of asset overlap between the two companies. I just wanted to dive a little bit more into the synergies here, please. Hey, Leo, thanks for joining. I'll just start by saying we're not assuming any synergies for 2026. This is really the run rate for 2027, and Beth can elaborate on all the synergies that we've assumed.

Millions I guess is the upside case can you provide a little more color around kind of how you get there I mean, there is not too much in the way of asset overlap between the two companies. So just wanted to dive a little bit more of the synergies here. Please.

Hey, Leo Thanks for joining I'll, just start by saying, we're not assuming any synergies for 2026. So this is really the run rate for 2027, and then Beth can elaborate on all the synergies that we've assumed.

Herb Vogel: Hey, Leo, thanks for joining. I'll just start by saying we're not assuming any synergies for 2026, so this is really the run rate for 2027. Beth can elaborate on all the synergies that we've assumed.

So I'll quickly hit on the fact that we think on the G&A front as well as the cost of capital front those are the.

Beth McDonald: Yeah, I'll quickly hit on the fact that we think on the G&A front, as well as the cost of capital front, the 70 and 30 are relatively low. We think we can reach the upside potential there. As it relates to the operational synergies, there's really quite a bit, actually, when you look at the overall technical teams. Let's start with the fact that we'll combine the best people and the best practices among both of these great organizations. Beyond there, we know that we can swap our learnings. We have joint learnings that we know that they drill some of the longest laterals in the DJ Basin, and with that combined with our landing zones and completion designs, we think can be differential for performance. When you look across the planning side of the Permian and within the Midland Basin, we can really plan for efficiency.

Beth McDonald: I'll quickly hit on the fact that we think on a G&A front as well as the cost of capital front, those are the 70 and 30 are relatively low. We think we can reach the upside potential there. As it relates to the operational synergies, there's really quite a bit, actually, when you look at the overall technical teams. Let's start with the fact that we'll combine the best people and the best practices among both of these great organizations. Beyond there, we know that we can swap our learnings. We have joint learnings that we know that they drill some of the longest laterals in the DJ Basin. With that combined with our landing zones and completion designs, we think can be differential for performance.

The 70 and 30 are relatively low we think we can reach the upside potential there and then as it relates to the operational synergies, there's there's really quite a bit actually when you. When you look at the overall technical team, let's start with the fact that will combine the best people and the best practices among both.

These great organizations beyond there we know that we can do swap, but we can swap our learnings we have joint learnings that we we know that they will.

They drill some of the longest laterals in the DJ basin.

And with that combined with our landing zones and completion designs. We think can be differential for performance. When you look across the planning side of the Permian and within the Midland Basin. We can really plan for efficiency. So when you look at our drilling rigs or frac fleets and our drill out crews the faster that we can.

Beth McDonald: When you look across the planning side of the Permian and within the Midland Basin, we can really plan for efficiency. When you look at our drilling rigs, our frack fleets, and our drill out crews, the faster that we go, the more efficient that we go in a safe way, we can actually get to greater capital efficiency together with the combined activity levels. There's those pieces as well as what I mentioned on the call, which we're really bundling de-bundling services, bringing recurring costs in-house, think chemicals, utilizing field gas and recycled water. Those kind of things just continue to elevate with scale. We really see that there is differential operational synergies in this transaction.

Beth McDonald: When you look at our drilling rigs, our frac fleets, and our drill-out crews, the faster that we go, the more efficient that we go, and in a safe way, we can actually get to greater capital efficiency together with the combined activity levels. There are those pieces, as well as what I mentioned on the call, which were really bundling, debundling services, bringing recurring costs in-house—think chemicals, utilizing field gas, and recycled water. Those kind of things just continue to elevate with scale, and we really see that there are differential operational synergies in this transaction. I might add on the cost of capital, just to be clear on the cost of capital. I think we've been pretty modest on the assumption there, something like 100 basis point savings.

No the more efficient that we go and in a safe way, we can actually get to greater capital efficiency together with a combined activity levels.

So there's there's those pieces as well as what I mentioned on the call, which were really bundling de bundling services, bringing recurring costs in house think chemicals utilizing field gas in recycled water those kind of things just continue to elevate with scale and so we really see that there is differential operation.

All synergies in this transaction.

I might add on the cost of capital just to begin.

Just to be clear on the cost of capital I think we've been pretty modest on the assumption there something like 100 basis points savings and if you look at the combined.

Wade Pursell: I might add on the cost of capital.

Herb Vogel: Go ahead.

Wade Pursell: Just to be-

Herb Vogel: Go ahead.

Wade Pursell: Just to be clear on the cost of capital, I think we've been pretty modest on the assumption there. Something like 100 basis point savings. If you look at the combined, you know, the improvement of the credit profile and look at where the coupons are versus, you know, where we could be going in the market, that's pretty easy to see. We certainly haven't assumed anything in the investment-grade area. This is a path toward that. Pretty good check mark on the scale side. Now focused on getting leverage down below 1 times and enhancing that further.

Moving to the credit profile and look at where the coupons are versus where we could be going in the market that's pretty easy to see we certainly haven't assumed anything in the investment grade area. This is a path toward that.

Beth McDonald: If you look at the combined, the improvement of the credit profile and look at where the coupons are versus where we could be going in the market, that's pretty easy to see. We certainly haven't assumed anything in the investment-grade area. This is a path toward that. Pretty good checkmark on the scale side, now focused on getting leverage down below 1x and enhancing that further. Yeah, and Leo, just add one—Leo, I'll add one other thing—that it's just when we look at, reflect back on our combination with XCL, we found that some teams can get quite complacent in the way they do things, and that gets challenged when you look really closely and you're working together with another. It's how much more shows up than you expect because of that. Fresh look. We expect to see fresh looks from both sides here on this one.

Pretty good checkmark on the scale side now focused on getting leverage down below one times and enhancing that for them.

Yes.

On one allele and one other thing, but it's just when we look at reflect back on our combination with <unk>. We found that sometimes can get quite complacent in the way they do things and that gets challenged when you look really closely and youre working together with another and its how much more shows up than you expect.

Herb Vogel: Yeah. Leo, I'll just add one other thing.

Wade Pursell: Yep.

Herb Vogel: That it's just when we reflect back on our combination with XCL, we found that, you know, some teams can get quite complacent in the way they do things. That gets challenged when you look really closely and you're working together with another. It's how much more shows up than you expect because of that fresh look. We expect to see fresh looks from both sides here on this one.

That.

Fresh look and we expect to see fresh looks from both sides here on this one.

Okay very thorough answer I appreciate that and then just also wanted to just kind of ask on the leverage side. So you guys kind of spoke to a couple of cases kind of 65 and $60 oil.

Beth McDonald: Okay, very thorough answer. Appreciate that. Also wanted to just kind of ask on the leverage side. You guys kind of spoke to a couple of cases, kind of the 65 and $60 oil case. Obviously, Strip is unfortunately a little closer to $60 over the next couple of years. As you're looking at it, in the $60 scenario, do you have a better sense of when you guys get to that kind of 1x leverage in your models here? Yeah, it'll depend on several things, Leo. One is we haven't put forth our plan for next year from an activity standpoint. If it stays down in that area, you know that we focus on free cash flow maximization, certainly not production.

Leo Mariani: Okay. Very, very thorough answer. Appreciate that. Then just also wanted to just kind of ask on the leverage side. You guys kind of spoke to a couple cases, kind of the $65 and $60, you know, oil case. Obviously strip is unfortunately a little closer to $60, over the next, you know, couple years. As you're looking at it, you know, in the $60 scenario, do you have a better sense of when you guys get to that kind of 1x, you know, leverage, in your models here?

All case, obviously strip is unfortunately, a little closer to <unk> over the next couple of years, so as Youre looking at it.

In the $60 scenario do you have a better sense of when you guys get to that kind of one times leverage and your models there.

Yes.

It'll depend on several things Leo one is we don't we haven't put forth our plan for next year from an activity standpoint.

Wade Pursell: Yeah. You know, it'll depend on several things, Leo. One is, you know, we haven't put forth our plan for next year from an activity standpoint. You know, if it stays down in that area, you know, you know that we focus on free cash flow maximization, not, certainly not production. I think it would be logical to assume that just putting the two companies together and if prices stay low, you might have an activity profile that's, you know, somewhat less than the combined looks right now, again, based on free cash flow generation, and that would certainly enhance the de-levering effort. That'll be one factor. Certainly a big factor will be divestiture, you know, opportunities and when that happens.

If it stays down in that area.

You know that we focus on free cash flow maximization, not certainly not production. So it would be I think it would be logical to assume that just putting the two companies together and if prices stay low you might have an activity profile.

Beth McDonald: I think it would be logical to assume that just putting the two companies together, and if prices stay low, you might have an activity profile that's somewhat less than the combined looks right now. Just again, based on free cash flow generation, and that would certainly enhance the delevering effort. That'll be one factor. Certainly a big factor will be divestiture opportunities and when that happens. Other than that, it's hard to project too far ahead beyond next year at this point. Okay, and your kind of assumptions on leverage, I assume, don't assume any divestiture opportunities. That's more just paying off debt with free cash flow over time? That would be the base case. Exactly. Okay, thank you. Thank you. Our next question is from Philip Jungworth with BMO Capital Markets. Please proceed. Thanks. Good morning, guys.

Somewhat less than the combined looks right now.

Again based on free cash flow generation and that would certainly enhance the de levering effort.

That'll be one factor didn't certainly a big batch will be.

Divestiture opportunities and when that happens other than that it's hard to hard to project too far ahead beyond beyond next year at this point.

Wade Pursell: Other than that, it's hard to project too far ahead beyond next year at this point.

Okay, and your and your kind of assumptions on leverage I assume don't assume any divestiture opportunities that's more just paying off debt with free cash flow over time.

Leo Mariani: Okay. In your kind of assumptions on leverage, I don't assume any divestiture opportunities. That's more just paying off debt with free cash flow over time.

That would be the base.

Exactly okay.

Wade Pursell: That would be the base case. Exactly.

Thank you.

Thank you our next.

Leo Mariani: Okay. Thank you.

Our next question is from Philip Jungwirth with BMO capital markets. Please proceed.

Wade Pursell: Thank you.

Operator: Our next question is from Phillip Jungwirth with BMO Capital Markets. Please proceed.

Thanks, Good morning, guys.

In the Midland SM has always operated in the north and western sides of the basin a lot of the civitas acreage is going to be more south or east.

Phillip Jungwirth: Thanks. Good morning, guys. In the Midland, SM has always operated in the north and western sides of the basin. A lot of the Civitas acreage is gonna be more south or east. How do you view the different trade-offs, opportunities, and also challenges of this part of the basin versus where you've historically operated?

Beth McDonald: In the Midland, SM has always operated in the north and western sides of the basin. A lot of the Civitas acreage is going to be more south or east. How do you view the different trade-offs, opportunities, and also challenges of this part of the basin versus where you've historically operated? Yeah, hi, Philip. It's Beth. Just wanted to have a little pointed clarification there. One of our anchor assets that really was a foothold into the Midland Basin was Sweety Peck. That's actually in the southern part of the Midland Basin. We have an extreme amount of knowledge of the entire Midland Basin and how the geology changes across that. We'll continue to just look at that and really bolster our technical abilities by combining both teams together.

How do you view the different trade offs opportunities and also challenges of this part of the basin versus where you have historically operated.

Yeah, Hi, Philip it's Beth just wanted to have a little point of clarification. There one of our anchor assets that really was a foothold into the Midland Basin was sweetie Peck and so that's actually in the southern part of the Midland Basin, and we have an extreme amount of knowledge of the entire Midland Bay.

Beth McDonald: Yeah. Hi, Phillip, it's Beth. just wanted to have a little point of clarification there. One of our anchor assets that really was a foothold into the Midland Basin was Sweetie Peck, and so that's actually in the southern part of the Midland Basin. We have an extreme amount of knowledge of the entire Midland Basin and how the geology changes across that. We'll continue to just look at that and really bolster our technical abilities by combining both teams together. we look at it just like we would our Sweetie Peck acreage as well as a complementary base for the you know, Howard County acreage. you know, we see significant synergies there.

And and how the geology changes across that and so we'll continue to just look at that and really bolster our technical abilities by combining both teams together.

So we look at it just like we would our sweetie Peck acreage as well as a complementary base for the Howard.

Beth McDonald: We look at it just like we would our Sweety Peck acreage, as well as a complementary base for the Howard County acreage. We see significant synergies there. Okay, great. Following up on the prior question, just in the deck, you did note 1.4x expected leverage by year-end 2027 at $60. It looked a little high versus our model, but just without getting into the details, is there any high-level framework or assumptions you're using here? I assume it's just kind of a maintenance production and CapEx outlook, but wanted to make sure. It's a very conservative type of outlook. Exactly. Okay, thanks. Our next question is from John Abbott with Wolfe Research. Please proceed. Thank you very much for taking our questions. My first question is back to the synergies.

Howard County acreage and we.

We see significant synergies there.

Okay.

Okay, Great and then following up on the prior question just in the deck you did know one four times expected leverage by year end 2000 and 760.

Phillip Jungwirth: Okay, great. Following up on the prior question, just in the deck, you did note 1.4x expected leverage by year-end 2027 at $60. Slipped a little high versus our model, but just without getting into the details, is there any high-level framework or assumptions you're using here? I assume it's just kind of a maintenance production and CapEx outlook, but wanted to make sure.

Slipped a little hybrids are model budgets without getting into the details is there any high level framework or assumptions, you're using here I assume it's just kind of a maintenance production and capex outlook, but wanted to make sure.

It's a very conservative that that type of outlook exactly.

Wade Pursell: It's a very conservative, that type of outlook. Exactly.

Okay. Thanks.

Phillip Jungwirth: Okay, thanks.

Our next question is from John Abbott with Wolfe Research. Please proceed.

Operator: Our next question is from John Abbott with Wolfe Research. Please proceed.

Thank you very much for taking our questions.

My first question is back to the synergies like Civitas and it's really on are some of these sort of synergies driven also by the individual.

John Abbott: Thank you very much for taking our questions. My first question is back to the synergies. You know, like, Civitas and it's really on, are some of these sort of synergies driven also by the individual programs that the companies were already executing on? For example, Civitas was already executing on a $100 million optimization program, you know, and then maybe they would expand upon that. I guess when you come to that synergy number, how much of this is already being baked in on an individual company basis versus the pro forma basis?

Beth McDonald: Like Civitas, and it's really on, are some of these sort of synergies driven also by the individual programs that the companies were already executing on? For example, Civitas was already executing on a $100 million optimization program, and then maybe they would expand upon that. I guess when you come to that synergy number, how much of this is already being baked in on an individual company basis versus the pro forma basis? Yeah, hey, John. There are none that are baked in from the Civitas plan. These are actually going forward with the new pro forma company and the synergies that we identified and we believe are achievable together. Appreciate it. My next question is really for Bauder. If we go back to second quarter results, there was the discussion of the desire for looking for more consistent operational performance, and that would drive value.

Programs with the companies we're already executing upon.

For example, civitas was already executing on $100 million optimization program.

And then maybe they would expand upon that but so I guess when you come to that synergy number how much of this is already being baked in on on it.

On an individual company basis versus the pro forma basis.

Yeah, Hey, John there there are none that are baked in from the Civitas plan. These are actually going forward with the new pro forma company and the synergies that we identified and we believe are achievable together.

Beth McDonald: Yeah. Hey, John. There are none that are baked in from the Civitas plan. These are actually going forward with the new pro forma company and the synergies that we identified and we believe are achievable together.

Appreciate it and then my next question is really provider.

If we go out where we go back to second quarter results.

John Abbott: Appreciate it. My next question is really for Wouter. you know, if we go, if we go back to Q2 results, you know, there was the discussion of the desire for, you know, looking for more consistent operational performance, and that would drive value. I mean, we haven't seen that as of yet. The deal's been announced before that. Why do the deal? Why was this the appropriate decision for Civitas at this time versus letting the execution and operation side play out first?

There was the discussion of <unk>.

The desire for you know looking for more consistent operational performance and that would drive value.

We haven't seen that as of yet the deal's been announced before that so why do the deal why why was this the appropriate decision for civitas at this time, we're sledding execution and operation side play out first.

Beth McDonald: I mean, we haven't seen that as of yet. The deal's been announced before that. Why do the deal—why was this the appropriate decision for Civitas at this time versus letting the execution operation side play out first? Yeah, thanks, John. Obviously, we're not announcing our earnings here today. We're announcing our earnings on Friday, so I can't talk about that. In the end, you can never time deals in a perfect way, and you never know what shows up at what time. I can tell you that from our side and the Civitas side and the entire Civitas team, everybody's been working really, really hard on the third quarter to make sure that we deliver on the promises that we're making. We had those discussions at our August conference call. In the end, this is the right time to do this.

Yeah. So thanks, Joel and obviously, we're not announcing our earnings here today were announcing our earnings on Friday, So can talk about that but in the end.

Wouter van Kempen: Yeah. Thanks, John. Obviously, we're not announcing our earnings here today. We're announcing our earnings on Friday, so can't talk about that. In the end, you can never time deals in a perfect way, and you never know what shows up at what time. I can tell you that, from our side and the Civitas side and the entire Civitas team, everybody's been working really, really hard on the Q3 to make sure that we deliver on the promises that we're making. We had those discussions at our August conference call. In the end, this is the right time to do this. This is the right opportunity, and this makes both companies a lot stronger. We're very excited about it.

You can't you can never time deals in a perfect way.

<unk> never know what shows up at what time.

I can tell you that from our side on the ship with our size and the entire civitas team.

Everybody is working really really hard on the third quarter to make sure that we deliver on the promises that we're making and we have those discussions at our at our August conference call.

And in the end. This is the right time to do this this is the right opportunity. This makes both companies a lot stronger so we're very excited about it.

Beth McDonald: This is the right opportunity, and this makes both companies a lot stronger. We're very excited about it. Thank you very much for taking our questions. Our next question is from Oliver Hong with TPH & Company. Please proceed. Good morning, all, and thanks for taking the questions. For my first question, maybe just a follow-up in terms of just when we're thinking about each of your respective basins on a pro forma basis, is there one where you would potentially look to let oil volumes roll a bit more meaningfully if we're talking about oil prices being in the $50 to $55 range next year? I would say at this point, it's a little premature to answer that question. We love all four of our basins.

Okay.

Thank you very much for taking our questions.

John Abbott: Thank you very much for taking our questions.

Our next question is from Oliver hung with.

T P H and company. Please proceed.

Operator: Our next question is from Oliver Huang with TPH & Co.. Please proceed.

Good morning, all and thanks for taking the questions.

For my first question, maybe just a follow up in terms of just when we're thinking about each of your respective basins are on a pro forma basis is there one where you would potentially look to let oil volumes roll a bit more meaningfully if we're talking about oil prices being in the $50 to $55 range next year.

Oliver Huang: Good morning, all, and thanks for taking the questions. For my first question, maybe to follow up in terms of when we're thinking about each of your respective basins on a pro forma basis, is there one where you would potentially look to let oil volumes roll a bit more meaningfully if we're talking about oil prices being in the $50 to 55 range next year?

I would say at this point, it's a little premature to answer that question, we love all four of our basins.

Beth McDonald: I would say at this point, it's a little premature to answer that question. We love all four of our basins, you know. If you look at slide six in the presentation, it really focuses on the advantages and the unique value that each of those bring. We'll use that in conjunction as we build our 2026 pro forma plan.

And if you look at slide six in the presentation. It really focuses on the advantages and the unique value that each of those bring and so we'll use that in conjunction as we build our 2026 pro forma plan.

Beth McDonald: If you look at slide six in the presentation, it really focuses on the advantages and the unique value that each of those bring. We'll use that in conjunction as we build our 2026 pro forma plan. Okay, that makes sense. For my second question, just had a quick question around inventory. I was doing some rough math around your pro forma net locations highlighted in slide five. If we think about the SM and SIVI standalone programs this year, I think it's roughly 400 net 10,000-foot equivalent locations of lateral turn-in lines. That implies roughly six years of inventory. Trying to get a better understanding of what is included within the assumption of that 2,400 total shown in the slide and what you all feel might fall into the upside bucket that would not have been reflected in that figure.

Okay that makes sense and for my second question just had a quick question around inventory.

Oliver Huang: Okay, that makes sense. For my second question, just, had a quick question around inventory. Was doing some rough math around your pro forma net locations highlighted in slide 5. If we think about the SM and Civitas standalone programs this year, I think it's roughly 400 net 10,000-foot equivalent locations of lateral turn-in lines. That imply roughly 6 years of inventory. Trying to get a better understanding of what is included within the assumption of that 2,400 total shown in the slide, and what you all feel might fall into the upside bucket that would not have been reflected in that figure.

Was doing some rough math around your pro forma net locations highlighted in slide five if we think about the S. M and cities Standalone programs. This year I think it's roughly 410000 foot equivalent locations of lateral turned in lines.

Would that imply roughly six years of inventory so trying to get a better understanding of what is included within the assumption of that 2400 total shown in the slide and what you all feel might fall into the upside bucket that would not have been reflected in that figure.

Yeah. So really when you are looking at the in various inventory, we all kind of know that that's backward looking so that's really the minimum amount of inventory that we would expect going forward. It doesn't include a lot of the upside that we're excited about and that we've talked about you know as far as Woodford Barnett Upper cube.

Beth McDonald: Yeah, so really, when you're looking at the inveros inventory, we all kind of know that that's backward-looking. That's really the minimum amount of inventory that we would expect going forward. It doesn't include a lot of the upside that we're excited about and that we've talked about. As far as Woodford, Barnett, Upper Cube, there are multiple zones that we're delineating now that aren't reflected in that amount right now. We see upside there. Also, as you heard Wade talk about future, and we look at the current commodity price environment and the activity level, there will probably slow down a bit. We're focused on free cash flow generation and maximization of that free cash flow to increase time to debt reduction. A resulting factor that comes out of that is that your inventory is prolonged a bit. Okay, sounds good. Thanks for the time.

Beth McDonald: Really when you're looking at the Enverus inventory, we all kinda know that that's backward-looking. That's really the minimum amount of inventory that we would expect going forward. It doesn't include a lot of the upside that we're excited about and that we've talked about, you know, as far as Woodford, Barnett, Upper Cube. You know, there's multiple zones that we're delineating now that aren't reflected in that amount right now. We see upside there. Also as you, as you heard Wade talk about future and we look at the current commodity price environment and the activity level there will probably slow down a bit. Again, we're focused on free cash flow generation and maximization of that free cash flow to increase time to debt reduction.

So there's there's multiple zones that we're delineating now that arent reflected in that amount right now and so we see upside there.

Also as you heard Wade.

When you talk about future and we look at the current commodity price environment and the activity level, there will probably slow down a bit again, we're focused on free cash flow generation and maximization of that free cash flow to.

Increased time to debt reduction but.

Our resulting.

Beth McDonald: A resulting, you know, factor that comes out of that is that your inventory is prolonged a bit.

After that comes out of that is that your inventory is prolonged debate.

Beth McDonald: A resulting, you know, factor that comes out of that is that your inventory is prolonged a bit.

Okay. It sounds good thanks for the time.

Oliver Huang: Okay. Sounds good. Thanks for the time.

Our next question is from David <unk> with TD Cowen. Please proceed.

Operator: Our next question is from David Deckelbaum with TD Cowen. Please proceed.

Beth McDonald: Our next question is from David Decobomb with TD Cowen. Please proceed. Congrats, Herbert and Beth. Appreciate you guys taking my questions. I'm curious, as you looked at the synergies, particularly just given the increased scale in areas like the Midlands, do the announced synergies envision any capital optimization between assets, perhaps emphasizing capital allocation to the Midlands versus perhaps some other areas, or should we mostly assume that those slides are kind of combining the current plans as we see them today? It's a combination of both, David. It's a combination of combining the plans to an optimal drilling program, but it's also really around capital efficiency and learnings, right? We also think that we have price negotiation, potential purchasing power with scale, and that we can really plan for efficiency through our drilling completions and drill-out crews.

Yeah.

Congrats her her Buda and Beth I appreciate you guys taking my questions.

David Deckelbaum: Congrats, Herb, Wouter, and Beth. Appreciate you guys taking my questions. I'm curious as you looked at the synergies, particularly just given, you know, the increased scale in areas like the Midland Basin, do the announced synergies envision any capital optimization between assets, perhaps emphasizing capital allocation to the Midland Basin versus perhaps some other areas? Should we mostly assume that those slides are kind of combining the current plans as we see them today?

I'm curious as you as you looked at the synergies, particularly just given the increased scale in areas like the Midland.

Due to.

The announced synergies envision any capital optimization between assets, perhaps emphasizing capital allocation to the Midland.

Versus perhaps some other areas or should we mostly assume that those slides are kind of combining the current.

Plans is as we see them today.

It's a combination of both David so it's.

It's a combination of combining the plans to an optimal drilling program, but it's also really around capital efficiency and learnings right. So we also think that we have price negotiation potential purchasing power with scale and that we can really plan for efficiency through our drilling completions and drill.

Beth McDonald: It's a combination of both, David. It's a combination of combining the plans to an optimal drilling program, but it's also really around capital efficiency and learnings, right? We also think that we have price negotiation potential purchasing power with scale, and that we can really plan for efficiency through our drilling completions and drill out crews. Keeping those busy within the Midland Basin among all of our acreage will just help drive those efficiencies even further.

Cruise keeping those busy within the Midland basin, among all of our acreage will just help drive those efficiencies even further.

Beth McDonald: Keeping those busy within the Midland Basin among all of our acreage will just help drive those efficiencies even further. I appreciate that. I know you've been asked a few times already about asset sales, and you mentioned them earlier. You also laid out, obviously, the priority on deleveraging post this deal, perhaps at the expense of returns of capital to shareholders. I guess, how do you think about the priority of divesting non-core assets? Do you already internally have sort of an absolute dollar target that you would be looking to pursue? No, not at this time. It's really early in the process. Like I said before, we're really focused on the execution and the integration of the deal. In the meantime, we'll prioritize what assets really make sense, especially as we go into the current commodity price environment.

I appreciate that and I know you've been asked a few times already about asset sales and you mentioned them earlier you also laid out obviously the priority on day.

David Deckelbaum: Appreciate that. I know you've been asked, you know, a few times already about asset sales, and you mentioned them earlier. You also laid out, obviously, the priority on deleveraging, post this deal, you know, perhaps at the expense of returns of capital to shareholders. I guess, how do you think about the priority of divesting non-core assets? Do you already internally have, you know, sort of an absolute dollar target that you would be looking to pursue?

Deleveraging post this deal perhaps at the expense of returns of capital to shareholders.

I guess, how do you think about the priority of divesting noncore assets and you're already internally have you know sort of an absolute dollar target that you would be looking to pursue.

No not at this time, we you know it's really early in the process and like I said before we're really focused on the execution and the integration of the deal in the meantime, we will prioritize what assets really makes sense, especially as we go into the current commodity price environment. So we just we have more work to do.

Beth McDonald: No, not at this time. You know, it's really early in the process, and like I said before, we're really focused on the execution and the integration of the deal. In the meantime, we'll prioritize what assets really make sense, especially as we go into the current commodity price environment. We have more work to do, and there's not a specific dollar amount that we're targeting. You could back into dollar amounts that could show you what asset sales are needed with these synergies to get us to one times faster.

And theres not a specific dollar amount that we're targeting you can back into dollar amounts that could show you what asset cells are needed with these synergies to get us to one times faster wouldn't be a lot yes.

Beth McDonald: We have more work to do, and there's not a specific dollar amount that we're targeting. You could back into dollar amounts that could show you what asset sales are needed with these synergies to get us to 1x faster. Wouldn't be a lot. Yeah. It's not a lot. Thank you all. Yep. Our next question is from Noel Parks with Tudor Pickering Holt. Please proceed. Hi, good morning. Just had a couple. I think one thing I found interesting is that in the Permian, the degree of overlap is not particularly high between the two companies, so it's a nicely larger combined footprint. Any thoughts on, I guess, just as you looked at various Permian opportunities, what your thinking was in terms of whether you're looking more for expansion of footprint, solvation of footprint? Also, I'm not really familiar with your gas infrastructure strategy in the Permian.

It's not a lot.

Herb Vogel: Wouldn't be a lot.

Thank you all.

Beth McDonald: Yeah.

Herb Vogel: Yeah.

Beth McDonald: It's not a lot.

Yep.

David Deckelbaum: Thank you all.

Our next question is from Noel Parks with Tuohy Brothers. Please proceed.

Beth McDonald: Yep.

Operator: Our next question is from Noel Parks with Tuohy Brothers. Please proceed.

Hi, good morning.

Just had a couple.

Noel Parks: Hi. Good morning. Just had a couple. I think one thing I found interesting is that in the Permian, the degree of overlap is not particularly high between the two companies, so it's a nicely larger combined footprint. Any thoughts on, I guess just as you looked at various Permian opportunities, just what your thinking was in terms of, you know, whether you're looking more for expansion of footprint versus consolidation of footprint? I'm not really familiar with your gas infrastructure strategy in the Permian. I just wondered if you could talk a little bit about that and how that might shift with the merger?

I think one thing I.

Found interesting is that in the Permian.

Degree of overlap is not particularly high between the two companies. So it's a nice new larger combined footprint.

<unk>.

Any thoughts on.

Yes.

Just as you looked at various Permian opportunities just what your thinking was in terms of.

You know what they were looking more for expansion of footprint consolidation of footprint and also I'm not really familiar with your gas.

Restructure strategy.

In the Permian I, just wonder if you could talk a little bit about that and how that might shift with the with the merger.

Beth McDonald: I just wondered if you could talk a little bit about that and how that might shift with the merger. Yeah, I'll start with just talking high level about the synergies that we see from the combined footprint. I know I'm repeating myself a little bit, but we have joint learnings that we have between the two companies. We know that in certain zones, we outperform each other, so we can combine those learnings as well as the Civitas longer lateral learnings. We think that that will really drive down our cost on the drilling side. As far as our technical expertise, we think SM Energy really can unlock value on a performance side. We think the combined operational excellence, as well as the scale, purchasing power, debundling, bringing in chemicals in-house, those kinds of things can really drive that efficiency.

Yeah, I'll start with just talking high level about the synergies that we see from the combined footprint in and I know I'm repeating myself, a little bit, but we have joint learnings that we have between the two companies we.

Beth McDonald: Yeah. I'll start with just talking high level about the synergies that we see from the combined footprint. I know I'm repeating myself a little bit, but we have joint learnings that we have between the two companies. We know that in certain zones, we outperform each other, so we can combine those learnings as well as the Civitas longer lateral learnings. We think that that will really drive down our costs on the drilling side. As far as our technical expertise, we think SM Energy really can unlock value on a performance side. We think the combined operational excellence as well as the scale, purchasing power, you know, debundling, bringing in chemicals in-house, those kinds of things can really drive that efficiency.

We know that and certain zones, we outperform each other so we can combine those learnings as well as the.

The civitas longer lateral learnings and we think that that will really drive down our cost.

On the drilling side as far as our technical expertise, we think SM energy it really can unlock value on a performance side. So we think that combine the operational excellence as well as the scale purchasing power Bun de bundling, bringing in chemicals in house those kinds of things can really driving that efficiency.

As far as the the gas infrastructure.

Beth McDonald: You know, as far as the gas infrastructure, you know, we've really been focused on increasing our margins there and getting that gas to market as much as we can, right? You're very familiar probably with Waha prices. We

Beth McDonald: As far as the gas infrastructure, we've really been focused on increasing our margins there and getting that gas to market as much as we can, right? You're very familiar probably with Waha prices. We've been doing a great job there on the hedging side to really cover us as far as Waha is concerned. We've never had any takeaway issues. We don't expect those to continue. I'll just chime in and say that if you thought of the Southern Midland Basin five or six years ago, people underestimated how good the economics were there. Over time, people have recognized there are more zones there that are economic, and we can actually do better in them. That's partly technology and partly lateral length. The way to look at it is there's opportunity to improve on historical Southern Midland Basin potential for the industry as a whole. Got it. Thanks.

We've really been focused on increasing our margins there and getting that gas to two market as much as we can right. So youre very familiar probably with with what prices and so we've been doing a great job there on the hedging side to really cover us as far as warehouse concerned, but we'd never has.

Noel Parks: Sure.

Beth McDonald: We've been doing a great job there on the hedging side to really cover us as far as Waha is concerned, but we've never had any takeaway issues, so we don't expect those to continue.

Any takeaway issues. So we don't expect those to continue.

No I'll just chime in and just say that become part of the southern Midland Basin five six years ago people underestimated how good the economics were there and over time people recognize theres more zones. There that are economic and we can actually do better than them and that's partly technology as part of the lateral length.

Herb Vogel: Noel, I'll just chime in and just say that, you know, if you come thought of the Southern Midland Basin five, six years ago, people underestimated how good the economics were there. Over time, people have recognized there's more zones there that are economic, and we can actually do better in them, and that's partly technology and partly lateral length. That's the way to look at it is there's opportunity to improve on historical Southern Midland Basin potential for the industry as a whole.

So that's the way to look at it is there is opportunity to improve on historical southern Midland basin potential for the industry as a whole.

Got it thanks and.

I'm wondering in terms of a.

Noel Parks: Got it. Thanks. I was just wondering, in terms of post-deal accounting, is there anything for us to be aware of as far as tax carry forwards? Of course, gonna have some tax legislative changes for 2026. Just wondering if there are any considerations there.

Post deal accounting.

Beth McDonald: I just was wondering, in terms of post-deal accounting, is there anything for us to be aware of as far as tax carry forwards? We're, of course, going to have some tax legislative changes for 2026. Just wondering if there are any considerations there. Yeah, it's a great question in this environment, especially. Nothing significant to answer your question about the impact of tax and little carry forwards or anything like that. We're both benefiting from the big, beautiful bill, no question. As far as how much federal taxes, we both have the Civitas very similar to us in that regard. So minimal taxes in the foreseeable future, I would say. A similar story on a combined basis. Great. Thanks a lot. Thank you. Our next question is from Bill Dzellem with Titan Capital Management. Please proceed. Thank you.

Is there anything for.

Us to be aware of as far as tax carryforwards.

Of course I have some some tax.

Legislative changes for 'twenty 'twenty six but.

Just.

Wondering if.

Are there any considerations there.

Yes.

A great question in this environment, especially.

Hi.

Herb Vogel: Yeah, I mean, it's a great question in this environment, especially. You know, nothing significant to answer your question about the, you know, impact of carry forwards or anything like that. We're both benefiting from the big beautiful bill, no question. As far as how much federal taxes we both have, Civitas is very similar to us in that regard. Minimal taxes in the foreseeable future, I would say. A similar story on a combined basis.

Nothing nothing significant to answer your question about the yeah.

Impact of tax code will occur.

Carryforwards or anything like that where both benefiting from the from the Big Beautiful Bill No question as far as how much federal taxes, we both have to see.

So very similar to us in that regard so minimal taxes in the foreseeable future I would say a similar a similar story on a combined basis.

Great. Thanks, a lot.

Thank you.

Noel Parks: Great. Thanks a lot.

Our next question is from build to sell them with <unk>.

Herb Vogel: Thank you.

Operator: Our next question is from William Dezellem with Tieton Capital Management. Please proceed.

In capital management. Please proceed.

Thank you we would you please discuss your strategy.

Our strategy for production growth and what you do or do not have an and how that interrelate with cash flow generation. Please.

William Dezellem: Thank you. Would you please discuss your strategy for production growth and what goals you do or do not have and how that interrelates with cash flow generation, please?

Beth McDonald: Would you please discuss your strategy for production growth and what goals you do or do not have and how that interrelates with cash flow generation, please? Yeah. Bill, this is Herb. Just briefly, if you've followed us for a long time, you know we plan each year, looking forward the next two to three years, and maximize free cash flow generation. Production is not an input or a goal. It's an output of that maximization, and it's driven by commodity price and commodity price mix. We continue to drive that. That's been very successful for us in achieving our targets on the debt side, free cash flow generation, and return to capital. That's the way to look at it. Don't think of production targets. Think of maximizing free cash flow generation. To a point. I mean, we shoot for flattish.

Yeah Bill this is herb just briefly.

Briefly if you followed us for a long time you know.

Herb Vogel: Yeah. Bill, this is Herb. Just briefly, if you followed us for a long time, you know we plan each year, looking forward the next two to three years and maximize free cash flow generation. Production is not an input or a goal, it's an output of that maximization, and it's driven by commodity price and commodity price mix. We continue to drive that, and that's been very successful for us in achieving our targets on the debt side, free cash flow generation, and return to capital. That's the way to look at it. Don't think of production targets, think of maximizing free cash flow generation.

Plan each year.

Looking forward. The next two to three years and maximize free cash flow generation. So production is not an input or a goal. It's an output of that maximization, and it's driven by commodity price and commodity price mix.

And we continue to drive that and Thats been very successful for us in achieving our targets on the debt side free cash flow generation and return of capital. So that's the way to look at it and don't think of production targets think of maximizing free cash flow generation to a point I mean, we target we shoot for flattish I mean, obviously, we could generate a ton of free cash.

Wade Pursell: To a point. I mean, we shoot for flattish. I mean, obviously, we could generate a ton of free cash by letting it fall. It's, it's not... But looking at it over a multiyear period, I think is the key to that.

Cash by letting it fall so it's not.

Beth McDonald: I mean, obviously, we could generate a ton of free cash by letting it fall. Looking at it over a multi-year period, I think, is the key to that. Yep. Yep. Thank you both. As a reminder, this is Star One on your telephone keypad if you would like to ask a question. Our next question is from Jeff Jay with Daniel Energy Partners. Please proceed. Hi, good morning. Just one for me. As I look at the D&C synergy number, I'm just wondering, and I'm sorry if I missed it, but is there a reduction in activity that's kind of contemplated in that figure, or is it purely efficiency, pricing, etc.? Hey, Jeff, it's efficiency and pricing only. We have not baked in anywhere any sort of change in activity. Okay. Thank you. Yep. Our final question is from Scott Hunner for the follow-up with RBC Capital Markets.

Looking at it over a multi year period I think is the key to that.

Thank you both.

Herb Vogel: Yep.

Wade Pursell: Yep.

William Dezellem: Thank you both.

As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question is from Jeff J with Daniel Energy Partners. Please proceed.

Operator: As a reminder, just star one on your telephone keypad if you would like to ask a question. Our next question is from Jeff Pape with Daniel Energy Partners. Please proceed.

Hi, Good morning, just one for me as I look at the DNC synergy number I'm, just wondering and I'm sorry, if I missed it but is there a reduction in activity that's kind of contemplated in that figure or is it.

Jeff Pape: Hi. Good morning. Just one for me. As I look at the D and C synergy number, I'm just wondering, and I'm sorry if I missed it, but is there a reduction in activity that's kind of contemplated in that figure, or is it purely efficiency, pricing, et cetera?

Really efficiency pricing et cetera.

Hey, Josh said, it its efficiency and pricing only so we have.

Beth McDonald: Hey, Jeff. It's efficiency and pricing only. We have not baked in anywhere any sort of change in activity.

Not baked in anywhere any sort of change in activity. So.

Okay. Thank you.

Yep.

Jeff Pape: Okay. Thank you.

Our final question is from Scott hung up for the follow up with RBC capital markets. Please proceed.

Beth McDonald: Yep.

Operator: Our final question is from Scott Hanold for the follow-up with RBC Capital Markets. Please proceed.

Yes. Thanks, I appreciate the follow up and just.

Beth McDonald: Please proceed. Yeah, thanks. Appreciate the follow-up. Just a question on the management structure moving forward. Obviously, in the first part of next year, this merger is expected to happen, and Beth will be taking over the CEO role. Can you discuss what are the plans to backfill the COO role? With Beth, look, you're stepping up into a new role, and certainly, with the merger, it's going to create a lot of work and potential complexities. Can you talk to your priorities as you take the reins? Let me just start with that. We haven't announced the leadership fully. We've got in mind where we're going to go and really be focused on getting the synergies and having an effective integration. Beth, do you want to? Yeah. I would just say the priorities of where we're taking SM Energy haven't changed.

Question on the management structure moving forward obviously.

Scott Hanold: Yeah. Thanks. Appreciate the follow-up. Just a question on the management structure moving forward. Obviously, in the 1st part of next year, this merger is expected to happen and Beth will be taking over the CEO role. Can you discuss, you know, what are the plans to, you know, backfill the COO role? You know, with Beth, like, you know, look, you're stepping up into a new role and certainly, you know, with the merger, it's gonna create a lot of work and potential complexities. Can you talk to your priorities as you take the reins?

In the first part of next year that this merger is expected to happen and Beth will be taking over the CEO role can you.

Discuss what are the plans to backfill the CEO role and.

Beth like look you're stepping up into a new role in and certainly with the merger its going to create a lot of a lot of work and potential complexities can you talk to your priorities.

As you take the reins.

But let me just start with that.

We haven't announced the leadership fully we've got in mind, where we're going to go and really be focused on getting the synergies and having an effective integration.

Herb Vogel: Let me just start with that we haven't announced the leadership fully. We've got in mind where we're gonna go and really be focused on getting the synergies and having an effective integration. Beth, you want to.

Yeah, and I would just say that.

The priorities of where we're taking that same energy haven't changed their long lasting and they're really focused especially as it relates to this deal on debt reduction keeping our fixed dividend and growing that over time once we get back to that one times level, and then going back to the share repurchases and so that is.

Beth McDonald: Yeah. I would just say the priorities of where we're taking SM Energy haven't changed. They're long-lasting, and they're really focused, especially as it relates to this deal on debt reduction, keeping our fixed dividend and then growing that over time once we get back to that one times level, and then going back to the share repurchases. That is the continuation of what we've been doing, as well as adding to our inventory for a sustainable and repeatable program long term.

Beth McDonald: They're long-lasting, and they're really focused, especially as it relates to this deal, on debt reduction, keeping our fixed dividend, and then growing that over time once we get back to that one-time level, and then going back to the share repurchases. That is the continuation of what we've been doing, as well as adding to our inventory for a sustainable and repeatable program long-term. Okay. Appreciate that. We'll look forward to seeing that. Just really quickly, I think you kind of inferred this or said this, but just to make sure I've got my thoughts straight. The way we should look at the combined company moving forward in terms of allocation of activity between the basins, it should be very similar to what individual companies have at this point, pending any decisions you make later on. Yeah, I think that's a good assumption for right now, Scott. Okay.

The continuation of what we've been doing as well as adding to our inventory for a sustainable and repeatable program long term.

Okay. I appreciate that we'll look forward to seeing that and just real quick one I think you kind of inferred this or said this but just to make sure I am.

Scott Hanold: Okay. Appreciate that. We'll look forward to seeing that. Just really quickly, I think you kind of inferred this or said this, just to make sure I'm, you know, got my thoughts straight. The way we should look at the combined company moving forward in terms of allocation of activity between the basins, it should be very similar to what individual companies have at this point, pending, you know, any decisions you make later on.

Got my thoughts straight, but the way we should look at that.

The combined company moving forward in terms of allocation of activity between the basins. It should be very similar to what individual companies have at this point pending any decisions you make later on.

Yeah, I think that's a good assumption for right now Scott.

Okay. Thank you.

Beth McDonald: Yeah, I think that's a good assumption for right now, Scott.

Thank you.

Scott Hanold: Okay. Thank you.

Beth McDonald: Thank you. Thank you. There are no further questions. I would like to turn the conference over to Herb Vogel for closing remarks. Thank you, Sherry. Thank you all for joining us today. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

There are no further questions I would like to turn the conference over to Herb Vogel for closing remarks.

Beth McDonald: Thank you.

Herb Vogel: Thank you.

Operator: There are no further questions. I would like to turn the conference over to Herb Vogel for closing remarks.

Thank you Sherry and thank you all for joining us today.

Herb Vogel: Thank you, Sherry, and thank you all for joining us today.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Q3 2025 SM Energy Co Earnings Call

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