SM Energy-Mitsui Eagle Ford Carry Ends

Second Quarter Sand Loading Tests Yield Positive Results
SM Energy Eagle Ford Map

SM Energy Eagle Ford Map | Click to Enlarge

In SM Energy’s second quarter earnings report released this week, the termination of the drilling and completion carry with its joint venture (JV) partner, Mitsui, was confirmed.

SM Energy is now responsible for funding its proportionate share of drilling and completion costs in the area. An increase in SM Energy’s capital guidance for 2014 was announced in the company’s first quarter earnings report to accommodate for the additional costs.

Mitsui’s $680-million carry commitment in the Eagle Ford provided needed capital funding to accelerate SM’s development in the play. SM Energy and Mitsui entered their Eagle Ford joint venture agreement in 2011.

Read moreSM Energy-Mitsui Eagle Ford Carry Will End in Q2 2014

SM Energy Eagle Ford Non-Operated Acreage Update

Net production in SM Energy’s non-operated portion of its Eagle Ford shale program for the second quarter of 2014 averaged 23,800 boe/d. That’s a 2% sequential increase over the first quarter of 2014 and a 37% increase year-over-year.

The operator made approximately 95 flowing completions during the second quarter.

SM Energy Eagle Ford Update in Operated Acreage

During the second quarter, SM Energy made 23 flowing completions in its operated Eagle Ford Shale program. The company’s operated net production in the Eagle Ford shale averaged 83, 200 boe/d in the second quarter of 2014. That’s a 9% sequential increase from the previous quarter and a 26% increase year-over-year.

SM Energy Sand Loading Tests Yield Positive Results

SM Energy has been shifting its Eagle Ford drilling and completion program toward longer lateral wells and completions with higher sand loading. Company officials say longer lateral testing is ongoing, but sufficient data on SM’s increased sand loading tests is now available from wells in Area 2 of SM’s operated Eagle Ford shale position to conclude that wells completed with higher sand loadings are more productive and have improved initial condensate yields.


Mitsui Eagle Ford Carry of SM Energy Will End in Q2 2014

SM Energy First Quarter 2014 Production Up in Operated and Non-Operated Acreage 17% and 2% Consecutively
SM Energy Eagle Ford Acreage

SM Energy Eagle Ford Acreage | Click to Enlarge

SM Energy saw net production increases in both its’ operated and non-operated acreage of 17% and 2% consecutively. In the second quarter of this year, SM Energy expects the drilling and completion carry provided under its acquisition and development agreement with Mitsui to be exhausted. SM Energy made this announcement in December 2013, when the company released it’s 2014 capital budget.

In 2011, SM Energy entered a joint venture with Mitsui, whereby 39,000 net acres were sold to Mitsui for total commitments of $680 million (>$17,000 per acre).

[Read more…]

SM Energy Plans 100 Operated Eagle Ford Completions in 2014

Will Spend $250 Million More in 2014 Due to Mitsui's Cost Carry Being Exhausted
SM Energy Eagle Ford Map

SM Energy Eagle Ford Map | Click to Enlarge

SM Energy plans to spend $900 million in the Eagle Ford in 2014.

Approximately $650 million is planned for the company’s operated position where 100 Eagle Ford completions are expected. An additional $250 million will be spent on acreage operated by Anadarko.

The company’s costs carry from Mitsui will be exhausted in the first half of the year. From that point, SM Energy will be responsible for its working interest share of costs.

Read more: SM Energy and Mistsui Agree to Eagle Ford Joint Venture

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SM Energy’s Plans $650 Million in Eagle Ford Spending in 2013

Company-wide Production will Grow 20% in 2013
SM Energy Operated Eagle Ford Acreage Map

SM Energy Operated Acreage | Click to Enlarge

SM Energy plans to spend $650 million or more than 50% of its drilling and completion budget in the Eagle Ford Shale in 2013. That’s net of costs carries related to its joint venture with Mitsui. The company will spend a total of $1.5 billion in 2013, with the Bakken being the second largest area of focus.

SM will operate five drilling rigs and two frack crews. Operated activity will be focused in the northern portion of the company’s acreage. A total of 75 completions are expected during the year, with an inventory of 40 wells drilled, but not completed at year-end. SM also expects its non-operated partner, Anadarko, will run nine rigs and a spudder rig. Costs associated with Anadarko’s drilling are being carried by SM’s JV partner and are expect to last another 2-3 years before being exhausted. [Read more…]

SM Energy Eagle Ford Production Surpasses 200 MMCFE/d in Q2 2012

The company is plagued by delays yet grows Eagle Ford production 16% during the quarter
SM Energy Map

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SM Energy’s Eagle Ford production eclipsed 200 mmcfe/d in the second quarter and the company’s well completion schedule will be weighted toward the latter half of the year. Even though production grew 16% over the first quarter, the numbers were below expectations due to downstream pipeline curtailments and delays in receiving equipment.

SM completed 26 operated wells in the first half of the year and has seven operated drilling rigs running as of August. A total of 67 wells are planned to be completed during 2012, so 41 of those will come in Q3 and Q4.

SM Energy’s Non-Operated Acreage

The company also has a significant non-operated position that is operated by Anadarko Petroleum. Production from Anadarko operated acreage averaged 9.5 mboe/d in the second quarter. Anadarko has 9 drilling rigs and 1 spudder rig working the Eagle Ford and is expected to hold that level through the remainder of the year.

In a complex twist to joint venture agreements, Anadarko has increased the pace of expansion of its midstream assets, which in turn increase the capital needs of SM Energy for the year. Midstream expenses are not treated the same at development expenses and are not carried under the JV agreement with Mitsui.