Friday, February 6, 2015

SM Energy Could Post +15% Production Growth Amid Lower Crude Prices

This article was first published by Seeking Alpha on January 21, 2015

By Sarfaraz A. Khan. Research Asst. Adnan Mushtaq

Earlier this month, the Denver, Colorado-based SM Energy (NYSE:SM) revealed that it is going to sell its remaining Mid-Continent gas assets located in Northern Louisiana & Eastern Texas and Oklahoma's Arkoma Basin by the middle of 2015. Last year, these assets produced nearly 55.9 million cubic feet equivalents a day of gas and held more than 151 billion cubic feet equivalents of natural gas reserves (78% proved developing producing, 2013 estimates).

Although SM Energy hasn't given any estimates regarding the value of these properties, Topeka Capital Market's analyst Gabriele Sorbara wrote in a January report emailed to me that these assets could fetch between $150 million and $200 million. These assets could be of interest to an MLP or a private equity, even in a low oil price environment as they are natural gas weighted properties.

SM Energy's exit from Mid-Continent is a part of its larger strategic move aimed at increasing focus on its core assets in Texas's Eagle Ford and North Dakota's Bakken and Three Forks formations where the company owns 20 years of drilling inventory, as per its current pace of production. SM aims to redeploy the proceeds from the asset sales at its two core regions. This will help SM Energy in bridging its funding gap next year

Earlier in July, SM acquired North Dakota's Bakken/Three Forks properties from Baytex Energy Corp. (NYSE:BTE) for $330.5 million. Unlike Mid-Continent, the Bakken/Three Forks assets were …. Read full article at Seeking Alpha