The Eagle Ford Shale was the star of SM Energy Co.’s second quarter production story. The Denver-based company grew its average daily operated production in the oily play by 92% over the year-ago quarter. SM Energy is gaining on efficiencies and driving down costs in the South Texas play, executives told analysts following the company.

The Eagle Ford program was the largest driver of company-wide production gains, CEO Anthony Best said.

“…[W]e’re going to be able to drill, complete and flow to production roughly 20 more wells, at a total cost close to our original budget for the year [in the Eagle Ford],” he said. “We are benefiting from a number of efficiencies in both the operated and non-operated programs in the Eagle Ford…”

SM Energy’s operated net production in the Eagle Ford shale averaged 66,1000 boe/d, a 28% sequential increase over first quarter production of 51,800 boe/d. SM Energy made 22 flowing completions in the program during the quarter. Due to operational efficiencies from pad drilling, the company expects to make about 95 flowing completions this year on the operated Eagle Ford acreage. The last 15 wells in the Briscoe area averaged a cost of $5.4 million per well, a 13% decrease in the cost per foot versus last year. As a result, additional completions over the original budget of 75 are not expected to significantly increase capital investment, the company said.

“The biggest story in our Eagle Ford program…is really in our increasing development efficiency,” said COO Jay Ottoson. “Our last 15 wells in the Bristol area averaged $5.4 million per well, a 13% decrease in the cost per foot of well over the last year. Because of these cost savings, we expect to now be able to bring on 95 wells in 2013, a 20-well increase over our original plan, while spending little more than our original budget.

“…[A]t this point of the year, our operated Eagle Ford production is ahead of where we expect it to be, and our improved capital efficiency in the play is the major reason we can increase our corporate production guidance with very little additional spending on rate-generating projects.”

In the company’s non-operated Eagle Ford program, net production averaged 17,400 boe/d, a 9% sequential increase over the first quarter and an 83% increase over the second quarter of 2012. The operator, Anadarko Petroleum Corp. (APC), ran nine drilling rigs during the quarter, and an Anadarko affiliate placed into service a gas processing plant late in the second quarter and increased firm transportation capacity for the properties, SM Energy said.

Ottoson said SM Energy is encouraged by Anadarko’s results in the play with regard to longer laterals and revised frack designs.

“We learn a great deal from our partnership with APC, which is an additional benefit to us beyond the opportunity to participate in a very economic development,” he said. “We believe the operator will be running at least nine rigs for the remainder of this year. As you know, we’re being carried by Mitsui on essentially all our share of drilling and completion costs into 2014.”

Overall SM Energy quarterly production was 11.99 million boe, resulting in average daily production of 131,800 boe/d, which is 12% above the midpoint of the company’s guidance of 115,000-121,000 boe/d. Reported average daily production increased by 15% from quarterly production of 115,000 boe/d in the first quarter of 2013.

Production in the second quarter was 27% oil/condensate, 19% natural gas liquids (NGL), and 54% natural gas. The increase in the quarterly natural gas percentage reflects a backlog of wells in oilier portions of the Eagle Ford Shale that the company expects to be placed on production during the third quarter.

SM Energy reported net income of $76.5 million ($1.13/share) compared to net income of $24.9 million (37 cents/share) for the same period of 2012. Adjusted net income was $51.8 million (76 cents/share) compared to $5.9 million (9 cents/share) for the year-ago period. Operating revenues were $559.4 million compared to $304.4 million for the same period of 2012, representing an 84% increase.