With its focus now squarely turned to Texas, SM Energy Co. said initial first quarter results from the Permian Basin have exceeded guidance, with new completions coming on “stronger than expected.”

SM agreed in January to sell the bulk of its Powder River Basin (PRB) assets to Northwoods Operating LLC for $491.5 million, a sale closing in early April. With the sale, Denver-based SM updated its production outlook.

Based on output from the Permian Basin in January and February, overall production is exceeding the original forecast “as new completions came on stronger than expected,” management said.

Production was offset in the first three months, however, because of downtime at a third- party pipeline system in the Eagle Ford Shale.

“As a result, first quarter production is expected to be closer to the upper end of original guidance (9.5-10.0 million boe), with the oil percentage estimated to meet or exceed 40%,” management said.

Total capital spending in 1Q2018 was $350 million, including expenditures for 18 net completions in the Permian Midland sub-basin and five in the Eagle Ford. There also were costs associated with constructing a water handling system in the RockStar area.

For 2018, capital expenditures (capex) are forecast to be $1.27 billion, with higher spending expected through June.

“During the second quarter, planned flowing completions are expected to increase from the first quarter; however, the vast majority of Permian Basin, and all Eagle Ford, completions are scheduled to come online during May and June,” management said. “Therefore, expected production growth from new wells is primarily projected for late in the quarter and into the third quarter,” with the biggest production benefit in 3Q2018.

Looking ahead, the independent still is eyeing mid-year 2019 as the time period when it is able to align cash flow and total capex. Total capex next year is expected to fall by around 15% from this year, but SM still expects to complete the same number of wells with a similar Permian drilled-but-uncompleted well count.

Next year’s capex projections “include expected lower facilities and sand costs, as well as expected lower drilling and completion costs associated with several wells drilled in 2018 that are expected to come online in early 2019.”