SM Energy (SM) risk factors, FY2025 10-K

Risks Related to Oil and Gas Operations and the Industry

1. 01parties or by other interruptions beyond our control, which could obstruct, limit, or eliminate our access to oil, gas, and NGL marketsNew
2. 13The proposed divestiture of certain of our South Texas assets may not be completed on the anticipated terms or at all, which could adversely affect our ability to execute our publicly stated deleveraging objectivesNew
3. 14The loss of personnel could adversely affect our business
4. 15Our increasing dependence on digital technologies puts us at risk for a cyber incident that could result in information theft, data corruption, operational disruptions or financial loss48% rewritten
5. 16liability. As these cyber risks continue to evolve and our dependence on digital technologies grows, we may be required to expend significant additional resources to continue to modify or enhance our protective measures and remediate cyber vulnerabilitiesNew
6. 17We are incorporating artificial intelligence technologies into our processes and these technologies may present business, compliance, and reputational risks
7. 18Competition in our industry is intense, and many of our competitors have greater financial, technical, and human resources than we do
8. 19We have limited control over the activities on properties we do not operate
9. 20We rely on third-party service providers to conduct drilling and completion and other related operations
10. 21The inability of customers or co-owners of assets to meet their obligations may adversely affect our financial results
11. 22Many of our properties are in areas that may have been partially depleted or drained by offset wells and certain of our wells or future locations may be adversely affected by actions other operators may take when drilling, completing, or operating wells that they own
12. 23Oil and gas drilling, completion, and production activities are subject to numerous risks, including the risk that no commercially producible oil, gas, or NGLs will be found57% rewritten
13. 24The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our undeveloped reserves may not be ultimately developed or producedNew
14. 25If we are unable to replace reserves and increase our reserve life index, we will not be able to sustain production
15. 26Significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties. For example, newly acquired properties may have substantially different operating and geological characteristics or be in different geographic locations than our existing properties
16. 27The results of our operations are subject to drilling and completion technique risks, and results may not meet our expectations for reserves or production. As a result, we may incur material write-downs, and the value of our undeveloped acreage could decline if drilling and completion results are unsuccessful
17. 28The actual quantities and present value of our proved oil, gas, and NGL reserves may be less than we have estimated, and the cost to develop our reserves may be more than we have estimated
18. 29Our disposition activities may be subject to factors beyond our control, and in certain cases we may retain unforeseen liabilities for certain matters
19. 30Title to the properties in which we have an interest may be impaired by title defects
20. 31Our business could be negatively impacted by security threats, including cybersecurity threats, terrorism, armed conflict, and other disruptions
21. 32We are subject to operating and environmental risks and hazards that could result in substantial losses or liabilities that may not be fully insured
22. 33The impact of seasonal and extreme weather conditions and lease stipulations adversely affect our ability to conduct drilling activities in some of the areas where we operate

Risks Related to the Civitas Merger

1. 02We may be unable to successfully integrate Civitas’ business into our business or achieve the anticipated benefits of the Merger, which may have a material adverse effect on our business, financial condition or results of operationsNew
2. 03We have incurred additional costs in connection with the Merger, which will continue during a portion of 2026New
3. 04Securities class action and derivative lawsuits may be brought against us in connection with the Merger, which could result in substantial costs
4. 05The market price for our common stock may be affected by factors different from those that historically have affected SM Energy common stock or Civitas common stockNew
5. 06Our ability to utilize the former SM Energy’s carryover research and development credits and the former Civitas’ net operating losses (“NOL” or “NOLs”) and other tax attributes may be limited. The former Civitas had a material amount of federal tax NOLs that remained unutilized as of the Closing Date of the MergerNew
6. 07The historical business relationships of SM Energy and Civitas may be subject to disruption due to uncertainty associated with the Merger, which could have a material adverse effect on our results of operations, cash flows and financial positionNew
7. 08The synergies and other benefits attributable to the Merger may vary from expectationsNew

Risks Related to Commodity Prices and Global Macroeconomics

1. 09Oil, gas, and NGL prices are volatile, and declines in prices may adversely affect our profitability, financial condition, cash flows, access to capital, and ability to grow
2. 10Future oil, gas, and NGL price declines or unsuccessful exploration efforts may result in write-downs of our asset carrying values
3. 11Weakness in economic conditions, inflation, or uncertainty in financial markets may have material adverse impacts on our business that we cannot predict27% rewritten
4. 12Global geopolitical tensions may create heightened volatility in oil, gas, and NGL prices and could adversely affect our business, financial condition and results of operations

Risks Related to Litigation and Government Regulations

1. 34In the future, we may be subject to claims, litigation, administrative proceedings and regulatory actions that may not be resolved in our favorNew
2. 35Our operations are subject to complex laws and regulations, including environmental regulations, which result in substantial costs and other risks
3. 36Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays44% rewritten
4. 37Federal and state regulatory initiatives relating to air quality and greenhouse gas emissions could result in increased costs and additional operating restrictions or delays26% rewritten
5. 38Legislative and regulatory initiatives and litigation related to global warming and climate change could have an adverse effect on our operations and the demand for oil, gas, and NGLs, and could result in significant litigation, capital, and related expenses29% rewritten
6. 39Requirements to reduce gas flaring could have an adverse effect on our operations34% rewritten
7. 40limit the number of wells or the locations that we can drill. Any future laws or commitments may increase our operational costs, or restrict our production, which could have a material adverse effect on our financial condition, results of operations and cash flowsNew

Risks Related to Debt, Liquidity, and Access to Capital

1. 41Commodity price declines could result in a decrease in the amount available to us under our Credit AgreementNew
2. 42Negative public perception and investor sentiment regarding our business and the oil and gas industry as a whole could adversely affect our business, operations, and our ability to attract capital
3. 43Substantial capital is required to develop and replace our reserves
4. 44Downgrades in our credit ratings by various credit rating agencies could impact our access to capital and have a material adverse effect on our business and financial condition
5. 45Our commodity derivative contract activities may result in financial losses or may limit the prices we receive for oil, gas, and NGL sales
6. 46The amount of our debt may limit our ability to obtain financing for acquisitions, make us more vulnerable to adverse economic conditions, and make it more difficult for us to make payments on our debt28% rewritten
7. 47The agreements governing our debt arrangements contain various covenants that limit our discretion in the operation of our business, could prohibit us from engaging in transactions we believe to be beneficial, and could lead to the accelerated repayment of our debt

Risks Related to Corporate Governance and Ownership of Public Equity Securities

1. 48Our certificate of incorporation and by-laws have provisions that discourage corporate takeovers and could prevent stockholders from receiving a takeover premium on their investment, which could adversely affect the price of our common stock
2. 49The price of our common stock may fluctuate significantly, which may result in losses for investors30% rewritten
3. 50We may not always pay dividends on our common stock or repurchase common stock under our Stock Repurchase Program