What happened

Shares of U.S. onshore exploration and production company SM Energy (SM 2.00%) rose dramatically out of the gate on Oct. 29, gaining just over 15% in the first few minutes of trading. The reason for the advance was the company's third-quarter 2021 earnings update, which hit the market after the close on Oct. 28.

So what

Given the price action, you can probably guess that investors were pleased with the energy company's results. From a big-picture perspective, SM Energy produced 14.3 million barrels of oil equivalent (MMboe) in the third quarter, up from 12.4 MMboe in the second quarter.

That was better than the company was expecting, leading it to increase its full-year production guidance to between 49.5 MMboe and 50 MMboe. The top end of the previous guidance range was 49.5 MMboe, so it looks like SM Energy is set to have a solid year of production.

A person with a notebook in front of an oil well.

Image source: Getty Images.

Underneath this important number is a rising oil and natural gas-price environment. Not only does SM Energy appear to be executing well right now, but it's also getting a tailwind from commodity prices. Revenue, for example, came in at $760 million in the quarter, up from $281 million in the same stanza of 2020, a period in which energy prices weren't as robust, thanks to the demand declines related to the coronavirus pandemic.

With demand coming back and energy pricing in a broad uptrend, SM Energy is clearly back on its front feet again. Adjusted quarterly earnings per share, meanwhile, was $0.74 per share, up from an adjusted loss of $0.05 per share last year. Analysts had been expecting $0.15 per share.

Now what

SM Energy's shares are up around 2,350% over the past year, as investors reacted to an improving oil and natural-gas pricing environment. The third-quarter highlights show that the broad energy uptrend has been flowing through to the company's financial results.

Still, there's a lot of good news likely priced in here at this point. And even after that massive price advance, the company is still a relatively small player in the energy industry, with a roughly $4.3 billion market cap.

SM Energy is probably only appropriate for more aggressive investors who believe energy prices have more room to rise from here.