SM Energy sells Eagle Ford assets for $800 Million

SM Energy CEO Jay Ottoson. Source: Bizjournals

SM Energy transaction expected to close Q1 2017

SM Energy Company announced it entered an agreement with subsidiary of Venado Oil and Gas, LLC , an affiliate of KKR, for the sale of the company’s third party operated assets in the Eagle Ford, including its ownership interest in related midstream assets, for a purchase price of $800 million, according to a press release.

Click here for video: CEO Mike Swihart explains how well automation reduces costs, boosts production for Permian Basin operators. Systems start at $3,000 fully installed by Production Lift Technologies of Midland, Texas.

“We are pleased to announce the signing of this agreement as we kick off 2017. This sale supports SM’s strategy to be a premier operator of top tier assets,” said Jay Ottoson, SM Energy CEO.

Our 2017 capital program will focus on our top tier oil position in the Midland Basin , consisting of approximately 87,600 net acres, and our top tier operated natural gas and NGL position in the Eagle Ford, consisting of approximately 161,500 net acres.”

The assets expected to be sold include approximately 37,500 net acres in the Maverick Basin /Eagle Ford area of south Texas and a 12.5 per cent interest in the Springfield Gathering System.

“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,” said Ottoson.

As of year-end 2015, net proved reserves associated with these assets were 65 MMBoe (38 per cent oil, 31 per cent natural gas and 31 per cent NGLs).

In the third quarter of 2016, these assets produced approximately 27,260 net Boe per day (33 per cent oil, 33 per cent natural gas and 34 per cent NGLs.)

The transaction is expected to close in the first quarter of 2017, with an effective date of Nov. 1, 2016 , and the purchase price will be subject to certain closing price adjustments.