SM Energy sells $292 million assets to pay off debt

SM Energy Company said it would sell its remaining North Dakota and Texas assets for US$292.3 million to focus on top-tier assets and reduce debt.

The company signed two definitive agreements with undisclosed buyers for its Wilson Basin assets in Divide County, North Dakota and third-part operated assets in Texas known as Halff East in Upton County, SM Energy said in a statement.

"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,” said Jay Ottoson, president and CEO of SM Energy. “This is a significant step on both those fronts. Year-to-date we have announced the expected divestiture of approximately $792 million of non-core assets, which results in an expected reduction in net debt pro forma for year-end 2017 by 30 per cent."

The assets expected to be sold in Divide County include approximately 119,400 predominantly contiguous net acres, 28.8 million barrels of oil equivalent (MMBoe) net proved reserves as of year-end 2017, with December 2017 net production of approximately 6,100 Boe per day (83 per cent oil), SM Energy said.

The assets expected to be sold in Upton County include a 60 per cent working interest in third-party operated assets, approximately 5,400 net acres, 1.6 MMBoe net proved reserves as of year-end 2017 with December 2017 net production of approximately 1,025 barrels of oil equivalent per day (72 per cent oil).

The transactions are each expected to close in the second quarter of 2018, and each have an effective date of January 1, 2018.

The purchase price of each transaction will be subject to certain agreed upon closing price adjustments. The Company plans to use the expected sale proceeds for general corporate purposes, including debt reduction.

The estimated effect on 2018 production from both transactions is a reduction of 1.2 MMBoe, 81 per cent oil and 19 per cent natural gas.

RBC Richardson Barr served as exclusive financial advisor to the company in the Halff East divestiture and Tudor, Pickering, Holt & Co. served as exclusive financial advisor to the company in the Divide County divestiture.