SM Energy Co. has agreed to sell non-operated Eagle Ford Shale assets, including its interest in related midstream infrastructure, to a unit of Venado Oil and Gas LLC, which is an affiliate of KKR, for $800 million.
“This sale supports SM’s strategy to be a premier operator of top-tier assets,” said CEO Jay Ottoson. “Our 2017 capital program will focus on our top-tier oil position in the Midland Basin, consisting of approximately 87,600 net acres, and our top-tier operated natural gas and NGL [natural gas liquids] position in the Eagle Ford, consisting of approximately 161,500 net acres.”
The assets include 37,500 net acres in the Maverick Basin/Eagle Ford area of south Texas and a 12.5% interest in the Springfield Gathering System. As of year-end 2015, net proved reserves were 65 million boe (38% oil, 31% natural gas and 31% NGLs). In the third quarter of 2016, the assets produced about 27,260 net boe/d (33% oil, 33% natural gas and 34% NGLs).
The deal is expected to close in the first quarter with an effective date of Nov. 1, 2016.
Late last year, Ottoson and other SM Energy executives said the company would focus most of its 2017 capital on the Permian Basin while it restarts drilling on its operated Eagle Ford acreage.
“The proceeds from this sale will provide us with additional flexibility to pursue aggressive growth from our Midland Basin assets, with related capital expenditures in excess of cash flow over the next few years, while at the same time improving our debt metrics and maintaining strong liquidity,” Ottoson said Tuesday.
Last September, Venado and KKR formed a partnership targeting the Eagle Ford and funded by KKR’s Energy Income and Growth Fund I.
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