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Income Taxes | 3 Months Ended
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Mar. 31, 2026
Income Tax Disclosure [Abstract] |
Income Taxes | Note 4 - Income Taxes The provision for income taxes consisted of the following:
| For the Three Months Ended March 31, |  |
| 2026 |  | 2025 |  |  |  |
| (in millions)
Current portion of income tax expense: |  |  |  |  |  |  |
Federal | $ | (5) |  |  | $ | (21) |  |  |  |  |
State | (5) |  |  | (2) |  |  |  |  |
Deferred portion of income tax (expense) benefit | 85 |  |  | (26) |  |  |  |  |
Income tax (expense) benefit | $ | 75 |  |  | $ | (50) |  |  |  |  |
Effective tax rate | 18.3 | % |  | 21.4 | % |  |  |  |
Income tax expense or benefit differs from the amount that would be calculated by applying the statutory United States federal income tax rate to income or loss before income taxes. These differences can relate to the effect of federal and state tax credits, state income taxes, excess tax benefits and deficiencies from stock-based compensation awards, tax deduction limitations on compensation of covered individuals, and the cumulative effect of other smaller permanent differences. The quarterly effective tax rate and the resulting income tax expense or benefit can also be affected by the proportional effects of forecast net income or loss and the correlative effect on the valuation allowance for each of the periods presented in the table above. Income tax expense or benefit can also reflect a period change from the remeasurement of deferred tax assets and liabilities resulting from a statutorily enacted tax rate change or a change in the composition of income and activities among multiple state tax jurisdictions due to a corporate reorganization. Due to the Civitas Merger and expected increase in activity in the state of Colorado, the Company recorded a remeasurement tax expense during the three months ended March 31, 2026, related to SM Energy’s historical net deferred tax balances. During the quarter, as a result of the Civitas Merger, it was determined that an ownership change occurred under Sections 382 and 383 of the Internal Revenue Code (“IRC”), changing the timing of when the Company can utilize certain tax attributes. The Company has assessed the recoverability of its deferred tax assets by considering whether it is more likely than not that all or a portion of the combined Company’s deferred tax assets will be realized. In making such a determination, the Company considered both the positive and negative evidence, including its recent history of profitability, and concluded that no additional valuation allowance is currently required. The Company will continue to assess the realizability of its acquired tax attributes considering any potential impacts under IRC 382, as permitted under ASC 805. The Company complies with authoritative accounting guidance regarding uncertain tax positions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. The Company does not expect a significant change to the recorded unrecognized tax benefits in 2026. The Company is no longer subject to United States federal or state income tax examinations by tax authorities for tax years prior to 2022. However, tax years in which net operating losses or tax credit carryforwards were generated remain subject to examination until such losses or credits are fully utilized or expire.

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