The Eagle Ford and Bakken shales helped lift SM Energy Co.'s output to new heights last year even as it remained focused on producing liquids in East Texas and the Permian Basin.

The company has sold more than $2.2 billion in assets since 2008 to fund development in the Eagle Ford and Bakken plays and to undertake new ventures in Texas and the Powder River Basin.

Annual production increased 32% from 2012 to 48.3 million boe, while daily output was 144,000 boe/d in the fourth quarter, which was above the midpoint guidance of 139,000-146,000 boe/d.

Estimated ultimate recoveries from the Eagle Ford wells were revised lower for the final period from 3Q2013 because the company focused more on completing wells than drilling them in the lower-yield southern tier, said COO Jay Ottoson.

"Two of the most important things we're working on to improve economics during 2014 is our plan to extend lateral lengths on almost all our wells, but particularly in higher liquids yield areas on the north side of the field, Ottoson said of the Eagle Ford program. “We are assuming an average lateral length of 6,500 feet now on all the wells we will be drilling. I expect a number of the laterals will be significantly longer than 6,500 feet as well."

In a note to clients, analysts at Wells Fargo Securities said the company was previously “too optimistic” about its Eagle Ford acreage after management also said its total unrisked resource potential there had decreased by 17%.

Ottoson said SM also is testing modified hydraulic fracturing (fracking) designs with higher sand loadings. The producer doesn’t have enough production results yet to show conclusive results from the modified frack tests, but he said the company is encouraged by early results.

Net income in 4Q2013 was $7.0 million (10 cents/share) with a 43% increase in revenues of $636.7 million compared to 4Q2012. In the year-ago period, SM lost $67.1 million (minus $1.02/share) on sales, hedging bets and higher taxes.

Overall, net income for the full year was $170.9 million ($2.57/share), compared with a loss of $54 million (minus 83 cents) in 2012.

Overall costs increased slightly from $1.6 billion in 4Q2012 to $1.7 billion in 4Q2013, drilling, finding and development costs decreased year/year by 26% to $7.77/boe.

CEO Tony Best said the “development programs were the performance drivers in 2013, resulting in 33% annual average daily production growth for the company and record annual production."

SM reported 428.7 million boe in proved reserves at year-end, comprised of 54% liquids, with a pre-tax value of $5.5 billion, or 44% higher than at the end of 2012.

Most of the reserves were booked in the Eagle Ford last year, where the company drilled and completed 95 wells and had 246 net producing wells. This year, 100 wells are planned for the South Texas play. In the Bakken, 42 wells were completed in 2013, and it was producing from 103 net wells. This year, the company plans to test various completion designs, spacing and new intervals to improve liquids production in the Bakken.

In the Midland Basin, SM has switched its focus to horizontal Wolfcamp Shale targets in Upton and Dawson counties. Peak 30-day initial production (IP) rates for two wells completed during the fourth quarter in Upton County were 981 boe/d and 950 boe/d, with both averaging about 80% oil. In Dawson County, SM completed its first horizontal Wolfcamp well with a 30-day IP rate of 375 boe/d.

The company said it plans to drill and complete eight wells in the Powder River Basin this year. As well, the Brollier IH well, the first well test in a new East Texas venture, showed a seven-day IP rate of 1,475 boe/d. SM plans to drill eight more exploration and delineation wells in East Texas this year.