SM Energy CompanySM has inked a definitive agreement with a subsidiary of Venado Oil and Gas, LLC, an affiliate of KKR, for the sale of its third-party operated assets in the Eagle Ford, comprising its ownership interest in related midstream assets.
The deal valued at $800 million is anticipated to close in first-quarter 2017, with an effective date of Nov 1, 2016. The purchase price will be subject to certain closing price adjustments. The transaction is subject to customary closing conditions, and there is no guarantee that it will close on time or at all.
The assets to be divested comprise about 37,500 net acres in the Maverick Basin/Eagle Ford area of south Texas and a 12.5% interest in the Springfield Gathering System.
As of year-end 2015, net proved reserves related with these assets were 65 million barrel of oil equivalent (38% oil, 31% natural gas and 31% NGLs). In third-quarter 2016, these assets produced about 27,260 net Boe per day (33% oil, 33% natural gas and 34% NGLs.)
SM Energy's positivity is reflected in its price movement, which has increased 76.1%, over the last one year. The Zacks categorized Oil & Gas-U.S. Exploration & Production industry on the other hand, has gained 41.6%.
This sale is in line with SM Energy's strategy to be a leading operator of top-tier assets. The company's 2017 capital program will emphasize on its top-tier oil position in the Midland Basin, comprising about 87,600 net acres, and its top tier operated natural gas and NGL position in the Eagle Ford, consisting of about 161,500 net acres. The proceeds raised from this sale will offer the company added flexibility to pursue aggressive growth from its Midland Basin assets, with related capital expenditures in excess of cash flow over the next few years. It will also help the company improve its debt position and maintain strong liquidity.
SM Energy currently has a Zacks Rank #3 (Hold). Some better-ranked players in the same sector include Braskem S.A. BAK , Suncor Energy, Inc. SU and Noble Midstream Partners L.P. NBLX . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Braskem posted a positive earnings surprise of 107.79% in the last reported quarter.
Suncor Energy posted a positive earnings surprise of 300.00% in the preceding quarter. It reported an average earnings surprise of 40.55% for the four trailing quarters.
Noble Midstream Partners posted a negative earnings surprise of 77.78% in the last reported quarter.
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