Blog Coverage SM Energy Announced Sale of Eagle Ford Assets

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LONDON, UK / ACCESSWIRE / January 4, 2017 / Active Wall St. blog coverage looks at the headline from SM Energy Co. (NYSE: SM) as the Company announced on January 03, 2016, that it has entered into a definitive agreement with a subsidiary of Venado Oil and Gas, LLC, an affiliate of KKR & Co. L.P. (NYSE: KKR), for the sale of its third party, operated assets in Eagle Ford. The purchase price, subject to customary adjustments, is about $800 million for the ownership interests in Eagle Ford and related midstream assets. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

One of SM Energy’s competitors within the Independent Oil & Gas space, ConocoPhillips (NYSE: COP), is estimated to report earnings on February 02, 2017. AWS will be initiating a research report on ConocoPhillips in the coming days.

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Breaking down the Agreement

The assets in consideration for the expected sell-off include approximately 37,500 net acres in the Eagle Ford/ Maverick Basin area of south Texas. An additional 12.5% stake is offered in the Springfield Gathering System. SM Energy reported 65 MMBOE (38% oil, 31% natural gas, and 31% NGLs) of net proved reserves from the property as of year-end 2015. For the Q3 2016, the assets in consideration produced about 27,260 BOE per day (33% oil, 34% NGLs and 33% natural gas).

The purchase price offered, works out to be about $29,374.03 per flowing BOE. SM Energy operates the assets through Anadarko Petroleum Corporation, where the sale of assets to Venado will generate around $2 billion from upstream portion while excluding the $750 million of midstream value.

The Eagle Ford Sales Strategy

Jay Ottoson, CEO of SM Energy, views this agreement as a unified development move. This sale will reportedly help SM Energy establish itself as the premier operator of top-tier assets. The 2017 capital program, according to Ottoson, will focus on the top tier assets in Midland Basin, consisting of approximately 87,600 net acres and the natural gas and NGL position in Eagle Ford, consisting of approximately 161,500 net acres. This sell-off, subject to its execution, will grant SM Energy additional flexibility to register aggressive growth from Midland Basin assets, where improvement in debt metrics and strong liquidity will be observed.

The Midland Basin Expansion Drive

SM Energy announced on October 18, 2016, a definitive purchase agreement, where it acquired 35,700 net acres in Howard and Martin counties in West Texas. This agreement expanded the firm’s footprint to approximately 82,450 net acres in Midland Basin. The deal was closed for the purchase price of $1.1 billion cash with 13.4 million shares of SM Energy’s common stock issued to the seller.

Previously, on August 08, 2016, SM Energy announced a purchase agreement to acquire 24,783 net acres in Howard County, West Texas, expanding the Midland Basin stake to 46,750 net acres. The purchase price for the deal was $980 million and offered 4,900 BOE per day net production.

Be it the Permian Basin acquisition or the $1.1 billion deal in West Texas, SM Energy is unifying its growth strategy toward Tier 1 assets and views stability in a long-term development portfolio across the Midland Basin.

Stock Performance

SM Energy’s share price finished yesterday’s trading session at $34.30, slightly sliding 0.52%. A total volume of 5.11 million shares exchanged hands, which was higher than the 3 months average volume of 2.90 million shares. The stock has rallied 32.14% and 72.40% in the last six months and past twelve months, respectively. The stock has a dividend yield of 0.29% currently has a market cap of $3.33 billion.

The stocks of KKR gained 2.86% from the previous closing price of $15.39 to trade at $15.83 at the end of the day. A total volume of 1.51 million shares exchanged hands which were higher than the 3 months average volume of 2.72 million shares. The stock has gained 1.02% and 12.21% since last month and last 3 months, respectively. The net market cap for the firm stood at $12.83 billion with a dividend yield of 4.04%.

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