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SM Energy Sells Noncore Assets in Three States

SM Energy Co. has agreed to sell two packages of noncore assets for a combined $172.5 million. They are one package of mainly waterflood assets in New Mexico and another of producing assets in North Dakota and Montana.

Year-end 2015 net proved reserves associated with the assets totaled about 9.5 million boe, 87% oil and 13% natural gas, all proved developed. Second quarter of 2016 net production from the assets was about 3,300 boe/d and was 82% oil and 18% natural gas. Net acreage associated with these sales is about 79,000 acres. The buyer was not disclosed.

"We are committed to improving liquidity and debt metrics while managing our portfolio to focus on our highest return assets," said CEO Jay Ottoson. "Proceeds from these sales will be applied to the outstanding balance on our revolving credit facility and for general corporate purposes."

The sales account for most of the noncore asset sales anticipated during 2016, as previously announced (see Shale Daily, Feb. 24). Closing, subject to the usual conditions, is expected late in the third quarter.

Wells Fargo Securities analyst David Tameron said the transactions were a “net positive as these properties were likely not going to see any capital allocation and funds [are] to be used to pay down [the] revolver.” As of the first quarter, revolving debt was $290 million.

The company is to report earnings on Tuesday and hold a conference call to discuss results on Wednesday.

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