SM Energy Q3 Operations Update

SM Energy announced earnings last night (Oct. 31) and provided an operations update. In the Eagle Ford, production grew 32% over the second quarter to 128 mmcfe/d. The big jump was primarily attributable to the Eagle Ford Gathering pipeline that came online in the third quarter. Production was lower than the company expected for several reported reasons: Intermittent downstream constraints, construction related downtime on midstream facilities, and a greater number of wells being shut-in while offset wells were being completed. The company even scaled back drilling plans in the quarter to keep from creating a larger backlog of completed wells waiting for sufficient gathering capabilities.

SM plans to run 5 rigs in the play throughout 2012. Eight pilot areas are currently under development to test downspacing and longer laterals. Data gathered by year end will contribute to development decisions in 2012. Three multi-well pads have been constructed and are expected to lower costs across three wells by $1 million.

On August 2, 2011, SM Energy closed its previously announced sale of approximately 15,400 net operated acres in LaSalle and Dimmit Counties, Texas for cash proceeds of $226.9 million, before certain adjustments. (SM - Talisman - Statoil Reach Eagle Ford Deal)

In the non-operated portion of the EF program, the Company fully participated in Anadarko Petroleum Corporation's drilling program, which operated approximately 10 drilling rigs during the third quarter of 2011.

Read the full news release at