On Thursday, Jay Ottoson, CEO of Denver-based SM Energy Co., said that following a transformative 2016, the independent producer will “shrink to grow” this year.

“During 2017, we anticipate completing the process of coring up our asset portfolio, which will result in short-term contraction of our production profile in favor of long-term, higher-margin production growth,” Ottoson said. “We expect that proceeds from planned assets sales will help fund our accelerated drilling program and allow us to maintain high levels of liquidity while reducing debt.”

For 2017 capital spending is planned to be about $875 million. SM Energy plans to drill 100 Permian Basin wells and complete about 80 (gross, operated). In the Eagle Ford Shale the plan is to drill 25 wells and complete 35 wells (gross, operated). No capital has been allocated to the Williston Basin for this year, and about $50-55 million is slated for facilities buildout.

“We commence 2017 with a plan focused entirely on development of top-tier oil, natural gas and NGL [natural gas liquids] assets,” Ottoson said. “During 2016, we acquired substantial assets in the Midland Basin, where we believe we have the ability to create value through optimized drilling and completions and to drive margin expansion that we expect will deliver growing cash flows per debt-adjusted share in the coming years.

“Our Midland Basin assets are already demonstrating value creation through the outstanding performance of our recently completed wells. Our current 2017 operating plan focuses on completion optimization, testing to prepare for increased density drilling, and further delineation of our acreage position.”

During an earnings conference call Thursday, an analyst asked about the rush of new entrants to the Permian Basin and what it means for oilfield services availability and costs. Herb Vogel, executive vice president of operations, emphasized that SM Energy has roots in the basin and ties to vendors active there.

“We’ve been there for over a decade and we have great contacts with key suppliers,” he said. “So you just step through every single area of the rig, completion of the frack spreads and the facilities, the field, the tank, that sort of thing, we’ve got schedules laid out there. They’re aware of what our ramp-up plans are. We’re engaging on a continuous basis.

“I mean, we’re in the community, right? So, we’re a ways ahead of it in terms of making sure you’ve got everything in place…” Vogel added that SM Energy does business with multiple providers.”

SM Energy production for the year is expected to be 40-43 million boe, with oil accounting for about 29%. Due to the timing of asset sales and development activity, total Company production will decline through the third quarter of 2017, SM Energy said.

For the first quarter, SM Energy is projecting production of 11-11.4 million boe, a decline from the fourth quarter mainly because of asset sales. Completion of about 17 wells is expected this quarter. Spending this quarter is pegged at $200 million, plus $60 million for the acquisition of additional Permian Basin acreage announced in the fourth quarter and closed in January.

SM Energy posted a net loss for the fourth quarter of $200.9 (minus $2.20/share) compared with the fourth quarter of 2015 net loss of $340.3 million (minus $5.01/share). The year-over-year lower fourth quarter net loss was primarily due to lower impairment and abandonment charges taken in the 2016 period at $151.2 million versus $448.2 million in the 2015 period. In addition, the cash production margin increased 67% in the fourth quarter of 2016 compared with the fourth quarter of 2015 due to higher commodity prices and lower costs. The full year 2016 net loss was $757.7 million (minus $9.90/share) compared with $447.7 million (minus $6.61/share) in 2015.

The company’s adjusted net loss for the fourth quarter was $28.7 million (minus 31 cents/share) compared with $61.1 million (minus 90 cents/share) in the fourth quarter of 2015. Full year adjusted net loss was $142.4 million (minus $1.86/share) compared with $35.9 million (minus 53 cents/share) in 2015.