After acquiring at least $2 billion in the Permian Basin in 2016, SM Energy Co. (NYSE: SM) said it’s exiting the Williston Basin as it shifts its business focus to Texas plays.

After saying in early January it would sell nonoperated Eagle Ford assets, the company is now exploring a sale of its core Bakken acreage.

SM Energy said Jan. 10 it has engaged Tudor, Pickering, Holt & Co. to run a bid process to sell the company’s assets in the southern area of Divide County, N.D. In December, production in Divide averaged 10,700 barrels of oil equivalent per day (boe/d).

Strategically, the Bakken assets aren’t capable of matching Permian returns, analysts said, making the Bakken acreage disposable.

In 2016, SM Energy added 65,875 net acres in Howard and Martin counties, Texas, including an acquisition expected to close in first-quarter 2017. The company added 7,450 boe/d in production.

Overall, SM Energy has 87,850 net acres in the Midland Basin with oil content of about 80%.

SM Energy said that with an acceptable offer on its Bakken assets, the company would close the transaction around the middle of 2017.

Jay Ottoson, president and CEO, said the sales process will drive up SM Energy’s shareholder value by concentrating capital spending in top-tier asset development.

“Over the next few years, we intend to focus on generating significant high-margin production growth from our operated acreage positions in the Midland Basin and Eagle Ford,” the company said. “We expect that the sale proceeds from this planned exit of the Williston Basin and from the pending sale of our nonoperated Eagle Ford assets will allow us to fully fund our drilling program while providing us with significant liquidity and the ability to reduce our outstanding debt."

The asset package consists of 126,500 net acres. No details were provided on the expected sales price.

“We expect the majority of the assets’ valuation will be ascribed to PDP with only limited upside credit for the undeveloped acreage,” said Kyle Rhodes, an analyst at RBC Capital Markets. “As such, we estimate the assets could be worth roughly $500 million-$550 million” assuming $40,000 per flowing boe.

In October, SM Energy sold 55,000 net acres in the Raven/Bear Den area outside of Divide to Oasis Petroleum Inc. (NYSE: OAS) for $785 million.

Rhodes said SM Energy was making a smart strategic move by passing the last significant hurdle to complete its transformation into an exclusive Permian/Eagle Ford operator and helping to close its valuation discount.

“Proceeds would likely plug any funding gap in 2019. However, comparable transactions are somewhat limited, making valuation a bit hazy,” he said.

Chris Stevens, an analyst at KeyBanc Capital Markets, also predicted a sales price between $500 million and $600 million.

The timing of the sale was unexpected, Stevens said, since SM Energy has a pending sale of its nonoperated Eagle Ford assets for $800 million. That would leave cash on the company’s balance sheet through 2018 at current strip prices.

Raymond James said the Divide asset cannot provide competitive returns with SM Energy’s Eagle Ford asset and “does not come close to our estimated Permian returns, closer to 60% on average.

“With that, and after having divested off its more ’noncore’ Bakken/Williston asset a couple months ago, we see this as a way for SM to continue down its path of coring up the portfolio and concentrating its efforts in Texas—particularly in the Midland Basin, where it has been busy in 2016 accumulating a large drilling inventory of high-returning wells in Howard County to complement its Sweetie Peck asset,” Raymond James said.

Darren Barbee can be reached at dbarbee@hartenergy.com.