Current SM Stock Info

SM Energy announces sale of non-operated Eagle Ford assets for $800 million
Denver-based SM Energy (ticker: SM) announced Tuesday that the company has divested its non-operated Eagle Ford assets for $800 million.

SM has entered into a definitive agreement with a subsidiary of Venado Oil and Gas, LLC, an affiliate of KKR (ticker: KKR) for the sale of SM’s third party operated assets, including its ownership interest in related midstream assets, according to a company press release.

The assets expected to be sold include approximately 37,5...

Analyst Commentary

Johnson Rice & Company
As a reminder, the company's current guidance assumes 6 rigs in the Midland Basin in
FY:17 and 11 in FY:18, however with the influx of cash we would not be surprised to see
the rig count guidance, and more importantly production guidance, drift upwards.
The price is in-line with our flowing production valuation assuming $45k/flowing boe,
$25k/flowing NGL, and $3.5k/flowing mcf; however, we had assumed that the midstream
and acreage value would be able to get the price closer to $1.0b. The buyer
is Venado, a KKR portfolio company that initially had made its name as an early explorer
of the East Texas Eagle Ford (i.e. El Halcon).

SunTrust Robinson Humphrey
SM Energy (SM, $34.48, Not Rated) announced the sale of non-operated Eagle Ford assets to a private
for total proceeds of $800mm or ~$4,100/acre. While acreage valuation appears lower than recent deals
at $6,000+/acre, the true deal value metrics are difficult to analyze due to ambiguity over the infrastructure
price. However, the announced transaction is a good sign of continued interest in this East Texas play.

Wells Fargo
Selling NonOp
Eagle Ford Position. SM announced the sale of their NonOperated
Eagle Ford position to Venado, KKR
affiliate, for $800MM. Expected to close in 1Q17. Sale includes 12.5% working interest in the Springfield Gathering System,
27,260 boe/d (barrels/day) of flowing production, along with 37,500 net acres of which relatively little is undeveloped. Overall
proceeds from the sale are inline
with our expectations and what we had modeled in their NAV. As outlined by management
previously, proceeds from the sale will cover the planned outspend associated with developing their newly acquired Midland
Basin assets over the next two years and
right now we model outspend in 2017 of $220MM and $175MM in 2018 which is
more than covered by proceeds from this sale.

Capital One Southcoast
Price tag equates to ~12% of SM's enterprise value, and the lost volumes & cash flow represent ~18%/~22% of SM's total production & EBITDA. Specifically, we estimate the properties generate ~$170MM of annual EBITDA at our '17 price deck of $50/$3. Deal metrics thus include ~$23K per flowing boe/d and ~4.7x EBITDA vs SM’s standalone multiples of ~$48K per flowing boe/d and 8.9x EBITDA based on ‘17.  


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