SM Energy Co. intends "to pursue any and all legal remedies" arising from Endeavour International Corp.'s decision to terminate agreements to buy a 42,000-acre leasehold and associated pipeline assets in McKean and Potter counties in northern Pennsylvania, the Denver-based company said.
"SM Energy disputes Endeavour's ability to terminate the agreements," SM Energy said in a statement released late Wednesday. No matter what the outcome of the dispute, SM Energy said it "does not expect to make any capital expenditures [capex] related to its Marcellus Shale assets in 2012 and is not required to make such expenditures to maintain substantially all of its acreage position."
Houston-based Endeavour on Wednesday said it was terminating the $80 million deal, which had been expected to close by the end of the year (see Shale Daily, Dec. 15; July 19). Endeavour offered no reason for terminating the deal and on Thursday declined to comment on SM Energy's response.
"We terminated the agreement under the acceptable terms and we're going to move forward from there," an Endeavour spokesman told NGI's Shale Daily.
The transaction would have provided Endeavour with significant production and reserve potential on acreage that is adjacent to its existing Marcellus acreage, along with 100% ownership of Potato Creek LLC, which owns a midstream gathering system and related facilities in McKean County, PA.
Analysts who on Wednesday said termination of the deal would have minimal impact on SM Energy's plans for 2012 seemed encouraged by the company's 2012 Marcellus Shale capex plans. "While some white noise on this topic [is] expected going forward, 2012 estimates/guidance remain in check and SM remains a buy," analysts at Tudor, Pickering, Holt & Co. said Thursday.
Canaccord Genuity Energy Research analysts also reiterated a buy rating, based in part on SM Energy's recently closed $680 million Eagle Ford Shale drilling carry agreement with Mitsui & Co. Ltd. (see Shale Daily, Dec. 6). "SM remains our top mid-cap pick for '12 as we believe Eagle Ford productivity should be more fully appreciated by the Q1 reporting cycle with the completion of a significant Eagle Ford midstream expansion this month," Canaccord said.