“We are particularly excited about re-starting our drilling program in the Permian Basin, where we are seeing faster drill times, lower costs and better wells.”
DENVER, Colorado – SM Energy Company is expanding production in the Permian Basin, where it already resumed drilling in the first quarter.
The company released financial results for Q1 2016 and provided an operations update.
First quarter production of 13.4 MMBoe, or 147,500 Boe per day, was 31 per cent oil, 25 per cent NGLs and 44 per cent natural gas.
Production benefited from strong initial rates from wells in the company’s Permian Basin program, where the company resumed drilling and completion activity early in the quarter.
Production was at the high end of guidance and, as expected, declined 10 per cent sequentially as the SM Energy stopped completions activity in the Eagle Ford from mid-fourth quarter of 2015 through Feb.and redirected capital to the Permian Basin.
“2016 is off to a very solid start. First quarter results were right on plan. The bank redetermination process was completed and affords us approximately $1 billion in liquidity and substantially improved financial flexibility,” said CEO Jay Ottoson.
“And, we made favorable long-term investments with the purchase of Permian acreage that expands our Sweetie Peck asset and our repurchase of certain senior notes in the market at a discount.”
First quarter of 2016 Permian Basin net production was 554,000 Boe and was 68 per cent oil. The company re-initiated drilling and completions activity at Sweetie Peck at the start of the year and plans to allocate approximately 30 per cent of 2016 capital expenditures to the area with primary focus on the Lower Spraberry and Wolfcamp B intervals; however, SM Energy believes that the Middle Spraberry and Wolfcamp D intervals also offer future upside potential.
To date, well results have been very strong. In the current price environment, the Permian Basin provides the strongest returns in the company’s portfolio, while offering substantial upside for reserve growth.
“We are particularly excited about re-starting our drilling program in the Permian Basin, where we are seeing faster drill times, lower costs and better wells. At our Sweetie Peck asset, we completed six wells year-to-date that have been on production for more than one month, four into the Wolfcamp B and two into the Lower Spraberry, all of which are demonstrating production rates that exceed internal expectations, as well as compare very favorably to regional peers. Top tier execution, combined with a near 10 per cent increase in net acreage during the first quarter, put our key Sweetie Peck asset into focus in 2016,” said Ottoson.
In the current price environment, the Permian Basin provides the strongest returns in the Company’s portfolio, while offering substantial upside for reserve growth.
First quarter of 2016 Eagle Ford net production was 10.1 MMBoe of which 7.6 MMBoe was operated and 2.5 MMBoe was third party operated. Eagle Ford production declined 12 per cent sequentially as the company and its partner in non-operated areas scaled back activity in the fourth quarter of 2015 as a result of low commodity prices.
First quarter of 2016 Rocky Mountain net production was 2.7 MMBoe and was 81 per cent oil. Regional production included 2.0 MMBoe from the Bakken/Three Forks area with the remainder from the Powder River Basin and other areas.
The Bakken/Three Forks continues to deliver solid results with further cost improvements and strong well performance as SM Energy continues to complete all wells using plug-n-perf technology.