SM Energy 2014 Eagle Ford Capex Budget Increased

August 29, 2014 Kirk Eggleston

SM Energy revealed in mid-August that it will add $30-million to its $900-million Eagle Ford capex budget for 2014.

Company officials indicate the increase is due to higher than expected activity in SM's non-operated acreage. The company currently holds approximately ~46,000 net non-operated Eagle Ford acres.

SM Energy Revises Production Guidance Portfolio-Wide

SM Energy increased its portfolio guidance for 2014 by approximately 3% in August, 2014. In addition to its Eagle Ford assets, the company is active in the Bakken, Powder River, and Permian.

The revised production estimates take into account the company's anticipated downtime in its operated Eagle Ford assets. During the third-quarter, SM will temporarily shut-in certain wells to conduct offset completion work. SM's operated assets in the Eagle Ford (~144,000 net acres) are located primarily in Webb County, TX, with a portion in Dimmit County, TX.

Baytex Energy Tackles Eagle Ford Debt with Bakken Sale

August 1, 2014 Kirk Eggleston

Calgary-based Baytex Energy, a recent entrant into the Eagle Ford, announced in late June of 2014 that it's selling its Bakken Shale assets in North Dakota to pay down a portion of its Eagle Ford debt. In February, the company added 22,200 net contiguous acres in South Texas through its $2.8 billion acquisition of Aurora Oil & Gas, which closed in June of 2014.

In anticipation of the Eagle Ford transaction, Baytex conducted a contingent resources assessment of its assets. During that process, the company earmarked certain properties for divestiture, including its Bakken assets.

Baytex Eagle Ford Debt Primary Reason for Bakken Divestiture

SM Energy will pay Baytex $330.5 million for 61,000 net acres in the Bakken. The transaction is expected to close toward the end of the third quarter with after tax net proceeds from the sale, estimated at $275-million. Company officials say the money will be directly applied against outstanding bank indebtedness.

SM Energy-Mitsui Eagle Ford Carry Ends

July 30, 2014 Kirk Eggleston

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.

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

April 30, 2014 Kirk Eggleston

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).

SM Energy Eagle Ford Operations Update (Non-Operated Acreage)

SM Energy's net production in its non-operated Eagle Ford acreage for the first quarter of 2014 averaged 23,400 boe/d. That's a 17% increase from the previous quarter, and a 46% increase compared to the first quarter of 2013. The operator made approximately 107 flowing completions during the first quarter.

SM Energy Eagle Ford Operations Update (Operated Acreage)

SM Energy's operated net production in the Eagle Ford shale averaged 76,300 boe/d in the first quarter of 2014, a 2% increase from the previous quarter. Average daily production in the first quarter of 2014 from the company's operated Eagle Ford shale program increased 47% compared to the first quarter of 2013.

During the first quarter, SM Energy made 20 flowing completions in its operated Eagle Ford Shale program. During the first quarter, the company's average lateral length of wells drilled was approximately 25% longer than the average length of wells drilled in 2013. The Company plans to complete these wells in the coming months, some of which will have modified completion designs.

SM Energy will be responsible for its' working interest share of proposed wells when the acquisition and development agreement terminates with Mitsui in the second-quarter. The company has budgeted approximately $250 million of drilling and completion capital for this program in 2014.

SM Energy Completes 95 Eagle Ford Wells in 2013 - 74,800 boe/d in Fourth Quarter

February 21, 2014 Kirk Eggleston

SM Energy made 95 flowing completions in its operated Eagle Ford Shale acreage in 2013, with 20 of those completions in the fourth-quarter.

In non-operated Eagle Ford acreage, the operator completed 84 gross wells in the fourth-quarter.

The company had production of 74,800 boe/d in the Eagle Ford in the fourth-quarter. Although production was at its highest during this time, there was less oil production.

“Liquids growth in 2013 resulted in a 50:50 liquids-gas split for both the third and fourth quarters of 2013. Although our actual oil rate was down slightly quarter-over-quarter due to the fact most of the Eagle Ford completions during the fourth-quarter were in southern lower oil yield areas than in the third quarter.”

— CEO Javan Ottoson

SM Energy 2013 Drilling and Proved Reserves in Eagle Ford

At the end of the year, SM Energy had 246 net wells producing in the Eagle Ford and 239 mmboe of total proved reserves at the end of 2013. During 2013, the company's operated well costs decreased by approximately 14% from 2012 in both the Briscoe and Galvan Ranch portions of its acreage position.

During the quarter in non-operated Eagle Ford acreage, the operator added one drilling rig to the program, ending the quarter with 10 rigs. In the fourth-quarter, the operator commissioned additional compression, which added throughput capacity to its program.

SM Energy 2014 Eagle Ford Plans

In 2014, SM Energy plans to make approximately 100 flowing completions on its' operated acreage, with 60% of the activity in Galvan Ranch and the rest of the activity in Briscoe Ranch. Various completion design tests throughout the company's Eagle Ford acreage have been planned to maximize economics.

SM Energy Fourth-Quarter Company-Wide Daily Production in 2013

Oil production company-wide was up 31% in the fourth-quarter of 2013 to 40,800 b/d from 31,300. Natural gas production was up 24% to 429.3 mmcf/d from 347.1 mmcf/d. NGL production was up 51% to 31,500 b/d from 20,800 b/d. Oil Equivalent production was up 31% to 143,800 b/d from 109,900 b/d.

SM Energy Eagle Ford Highlights - 2013

95 flowing completions in operated Eagle Ford shale program for the year
84 gross wells c0mpleted in the fourth-quarter of 2013 in non-operated Eagle Ford acreage
74,800 boe/d in the Eagle Ford in the fourth-quarter
246 net wells producing at the end of 2013
239 mmboe of total proved reserves
Q4 Eagle Ford completions were in southern lower oil yield area, yielding less total liquids production for the company

SM Energy Company-Wide Production Highlights

2013 Q4 company wide oil production up 31% - 40,800 b/d
2013 Q4 company wide natural gas production up 24% - 429.3 mmcf/d
2013 Q4 company wide ngl production up 51% to 31,500 b/d
2013 Q4 company wide oil equivalent production up 31% to 143,800 b/d