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EnerVest Buys SM Energy's Anadarko Basin Assets

EnerVest Ltd. is the buyer of SM Energy Co.'s Anadarko Basin properties, including its Granite Wash interests. The sale resulted in cash proceeds of $343 million for Denver-based SM Energy and adds to Granite Wash holdings EnerVest acquired earlier this year.

Production from the assets during the third quarter was 8,500 boe/d (75% natural gas), which was about 6% of SM Energy's production during the quarter. The sale included 58,000 net mineral acres.

"As our portfolio continues to deepen and strengthen, we regularly look for opportunities to monetize noncore assets in order to high-grade our portfolio and develop higher-return assets, while preserving the strength of our balance sheet," said CEO Tony Best.

The company said in July it was selling assets in the Anadarko Basin (see Shale Daily,July 11). During a third quarter earnings conference call at the end of October, SM Energy COO Javan Ottoson said the company had "great participation" in the sales process. The sale shifts SM Energy "to a more oily mix as well," he said.

Proceeds from this sale and smaller asset sales give the company "a pretty substantial war chest," said one analyst, who was curious about capital allocation at SM Energy.

"...[W]e'll be reviewing all those capital allocation decisions over the next few months before we come out with our '14 plan," said CFO Wade Pursell. "And it really does depend on the success of the new ventures areas. I mean, those could add a lot of capital for very good reasons. So right now that's really all we're saying on it. But as we always do, we'll review all of our options and consider our balance sheet as we go along."

Last May, EnerVest affiliates agreed to pay $438 million in cash for all of Laredo Petroleum Holdings Inc.'s Granite Wash properties (see Shale Daily,May 23). The deal included about 58 MMcfe/d (valued at $7,600 per Mcfe/d), proved reserves of 171 Bcfe, 104,000 net acres and associated gathering assets in Western Oklahoma and the Texas Panhandle. EnerVest and affiliates are active in Arkansas, Colorado, Kansas, Kentucky, Louisiana, Michigan, Montana, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Virginia and West Virginia.

The effective date of the SM Energy sale is Oct. 1, 2013; closing is expected by year-end and is subject to customary conditions, price adjustments and fees.

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