Unloads PRB, increasing concentration on Midland and Eagle Ford
SM Energy Company (ticker: SM) said that it entered into a definitive agreement to sell a majority of the company’s Powder River basin assets for a cash purchase price of $500 million. The buyer was undisclosed.
President and CEO Jay Ottoson said, “Divestiture of these assets is consistent with our strategy of focusing on development of our top tier Midland basin and Eagle Ford assets and improving our balance sheet by reducing debt. Pro forma for this transaction, as of the end of the third quarter 2017, net debt is reduced by approximately 20% and net debt:EBITDAX is reduced to less than 3 times.”
The assets to be sold include approximately 112,200 predominantly contiguous net acres located in northwest Converse County and portions of southeast Johnson and southwest Campbell Counties, Wyoming. These assets represent approximately 80% of the company’s current Powder River basin acreage position. Each acre sold for approximately $4,456.
Net production in the basin as of Dec. 2017 was approximately 2,200 BOEPD (51% oil, 18% NGLs and 31% natural gas) and preliminary estimates of proved reserves for year-end 2017 are 4.2 MMBOE (82% PDP). According to these numbers, SM Energy sold its assets for $227,272 per flowing BOEPD and $119.05 per BOE of reserves.
The transaction is expected to close in the first quarter of 2018, with an effective date of Oct. 1, 2017. The purchase price will be subject to certain closing price adjustments. The company plans to use the expected sale proceeds for general corporate purposes, including debt reduction.
SM Energy Map of Operations
