SM Energy Co (NYSE:SM) Divests Two More Non-Core Assets To Trim Net Debt


SM Energy Co (NYSE:SM) has reached an agreement for the sale of its remaining assets in the Williston Basin in Divide County. The asset comprises of 119, 400 predominantly contiguous net acreages and 28.8 MMBoe net proved reserves.

Asset Divestiture Impact

In addition, the company is to sell its third party operated assets known as Halff East in Upton County. The two asset sell-offs should result in combined proceeds of $292.3 million. The transactions should close in the second quarter, subject to the required closing conditions.

According to the Chief Executive Officer, Jay Ottoson, the divestiture will allow SM Energy Company to focus on its core top tire Midland Basin and Eagle Ford Assets.

“This is a significant step on both those fronts. In combination with the recent divestiture of our non-core Powder River Basin assets, year-to-date we have announced the expected divestiture of approximately $792 million of non-core assets, which results in an expected reduction in net debt pro forma for year-end 2017 by 30%,” said Mr. Ottoson.

SM Energy expects a reduction in production of about 1.2MMBoe, made up of 81% oil and 19% natural gas because of the two divestiture. The company will also not be able to record any production associated with the Powder River Basin divestiture, from the second quarter.

The independent energy company also plans to use proceeds from the sell-off to trim its debt burden. Over the past one year, the company has raised about $792 million from the sale of non-core assets. The funds have gone a long way in trimming net debt by 30%.

Drilling Activities

The sell-off comes just days after SM Energy said it expects production for the January to March quarter to come at the top end of its initial projection of 9.5 million barrels.  The energy company expects crude production to be 40% more.

Production could increase further, going forward, as the company completes more wells in the Permian Basin and the Eagle Ford Shale in May and June.


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