SM Energy expands in Midland basin with new acquisition

DENVER, Colorado -- SM Energy has entered into a definitive purchase agreement to acquire 35,700 net acres in Howard and Martin Counties in West Texas, expanding the company’s Midland basin footprint to approximately 82,450 net acres. The acquired acreage complements, and is partially contiguous to, the company’s recently closed Howard County acreage acquisition and includes approximately 2,400 boed net production.

The purchase price is $1.1 billion cash, subject to customary purchase price adjustments, plus 13.4 million shares of SM common stock to be issued to the seller. The seller is QStar LLC, a portfolio company of EnCap Investments L.P. and a related entity.

SM Energy has also entered into a definitive agreement for the sale of its Williston basin assets located outside of Divide County for $785 million, subject to customary purchase price adjustments. The purchaser is Oasis Petroleum.

President and CEO Jay Ottoson said, “Our strategy is straight-forward, we intend to deliver growth in cash flow per debt-adjusted share by being a premier operator of top tier assets. We have established a position as an outstanding operator in the Midland basin, and with this acquisition we also establish significant scale.”

“As with our initial Howard County acquisition, we expect to immediately employ our operational expertise to the area. Our preliminary plans for Midland basin activity include adding a fourth rig during the fourth quarter of 2016 and increasing to six rigs in early 2017, thereby increasing our expected aggregate 2016 capital program before acquisitions to approximately $710 million,” Ottoson added.

The acquisition is expected to close in mid-December, with an effective date of Sept. 1, 2016, and the divestiture is expected to close in early-December, with an effective date of Oct. 1, 2016.