Source: Hart Energy
SM Energy Co. (NYSE: SM) kicked off the New Year with the sale of Eagle Ford assets as it positions itself further in the Permian Basin, the Denver-based company said Jan. 3.
A subsidiary of KKR-backed Venado Oil and Gas LLC agreed to pay $800 million for the acquisition of SM’s nonoperated assets in the Eagle Ford’s Maverick Basin in South Texas.
The assets are comprised of 37,500 net acres with 27,260 barrels of oil equivalent per day (boe/d). As of year-end 2015, net proved reserves associated with the assets were 65 MMboe (38% oil, 31% natural gas and 31% NGL). The deal includes a 12.5% interest in the Springfield Gathering System.
The sale by SM was a “widely anticipated move” though Mike Kelly, senior analyst at Seaport Global Securities LLC, said the price fell $200 million below his firm’s expectations. Other analysts, including those at KeyBanc Capital Markets and The Williams Capital Group, said SM beat their anticipated price of between $700 million and $750 million.
“While the price garnered comes in shy of the $1 billion we had previously estimated, pro-forma year-end 2017 net debt/EBITDA ticks marginally lower to 3.1x in our model [vs. 3.3x prior], and provides ample liquidity as SM transitions itself to a formidable Permian player, with its rig count set to rise to 11 by 2018 from four at year-end 2016,” Kelly said in a Jan. 3 report.
SM’s sale equates to $29,300 per flowing boe/d, assuming little upside is ascribed to the undeveloped acreage, Kelly said.
“The proceeds from this sale will provide us with additional flexibility to pursue aggressive growth from our Midland Basin assets, with related capital expenditures in excess of cash flow over the next few years, while at the same time improving our debt metrics and maintaining strong liquidity,” Jay Ottoson, SM’s president and CEO, said in a statement.
Ottoson said the company’s 2017 capital program will focus on its oil position in the Midland Basin and operated natural gas and NGL position in the Eagle Ford.
In second-half 2016, SM Energy made a series of acquisitions to build its position in the Midland to about 87,600 net acres from roughly 20,000 net acres.
Pro forma for the asset sale, SM has about 161,500 net acres in the Eagle Ford Shale.
Scotia Waterous was SM’s financial adviser for its sale, which is the company expects to close first-quarter 2017 with a Nov. 1 effective date.
Emily Patsy can be reached at epatsy@hartenergy.com.
RELATED:
SM Energy Doubles Midland Footprint With $980 Million Acquisition
SM Energy Buys Midland, Sells Williston In Deals Worth $1.9 Billion
SM Energy Offering 11% Of Shares For Midland Bolt-On, Capital
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