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What Is SM Energy’s Stance on Eagle Ford?



SM Energy divests its noncore assets

On April 4, SM Energy (SM) announced the sale of its noncore assets worth $292.3 million and its decision to continue its strategy of focusing on the Midland Basin and the Eagle Ford Shale play while reducing its debt.

The company decided to sell its remaining Bakken position and its third-party–operated assets (known as “Half East”) in Texas to undisclosed buyers. As a result, SM Energy estimates a reduction of 1.2 million boe (barrels of oil equivalent) in production this year from both transactions and roughly 3% of the company’s 2018 production guidance as of February 21.

SM Energy’s management said in a press release, “We are committed to our strategy to focus on development of our core top tier Midland Basin and Eagle Ford assets and improving our balance sheet by reducing debt.”

Year-to-date, SM Energy has announced the expected divestiture of ~$792 million of its noncore assets.

BHP Billiton (BHP), another key player, also announced its plans to divest its onshore US shale assets, including its Eagle Ford assets, this year.

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SM Energy’s 2018 capex

SM Energy (SM) has provided a capex (capital expenditure) budget of $1.3 billion for 2018 compared to its budget of $888 million in 2017, which represents a ~43% rise. Around 82% of SM Energy’s total 2017 capital spending will be spent on drilling and completion expenses.

Of the $1.0 billion the company has allocated for drilling and completion–related expenses, 86% will be spent in the Midland (Permian) Basin. The remaining 14% will be spent in Eagle Ford. Clearly, the company will be focusing more on its Permian Basin operations this year.

Next, we’ll discuss a key deal that’s been in the news recently in the Eagle Ford Shale.


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