Purchase price of Permian Basin acreage is $980 million and the seller is Rock Oil Holdings LLC
DENVER – SM Energy Company has announced a purchase agreement to acquire 24,783 net acres in Howard County, West Texas, expanding the company’s Midland Basin footprint to approximately 46,750 net acres.
The acquired acreage position is largely contiguous and includes approximately 4,900 boe/d net production (with two new wells coming on-line in Aug.) and 6 MMBoe of proved developed producing reserves.
“We are demonstrated leaders in operational performance in the Midland Basin, and we have been looking for some time to expand our asset base, in the right location under the right terms,” said SM Energy CEO Jay Ottoson.
“This is a negotiated transaction for assets in Howard County, a region of the Midland Basin that is emerging as a top tier area for well performance.”
The transaction is expected to close on Oct. 4,, with an effective date of Sept. 1, and will be subject to customary purchase price adjustments.
“Our operational expertise in the region can be immediately applied to the acquisition assets. We expect that the implementation of pad drilling, reservoir modeling, zipper frac’s, and leading edge completion technologies will add value from the start,” said Ottoson.
“We anticipate running one rig in the area in the fourth quarter and two rigs throughout 2017. As a result, we are increasing our estimate of total capital spend for 2016 by approximately $15-20 million.”
