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 sm-energy.com

Pioneer Permits Another Long Lateral in Live Oak County

Pioneer Natural Resources permitted another long lateral in Live Oak County, TX this past week. The well is almost six miles north of Three Rivers, TX and will be drilled to a total depth of 21,000 ft in the Sugarkane field. Other permits across the play included the normal players Chesapeake, EOG, Petrohawk (BHP), and Talisman. 

SM Energy - Talisman and Statoil Reach Eagle Ford Acreage Deal

SM Energy sells 15,400 acres in LaSalle and Dimmit counties for $225 million ($14,600 per acre) to a partnership of Talisman and Statoil. SM Energy has been courting offers over the past several months and it looks like it wasn't able to get a satisfactory JV agreement across all of its acreage. Expect another announcement across a larger portion of the company's acreage in the coming weeks.

"The position is a detached block of acreage that is comprised of the entirety of the Company's operated acreage in LaSalle County, Texas, as well as an immaterial portion of adjacent operated acreage in Dimmit County, Texas. In total, approximately 15,400 net acres are being sold for cash proceeds of approximately $225 million. Due to limited infrastructure, there is currently no production associated with three wells that have been drilled on the acreage. As of year-end 2010, there was an immaterial amount of proved reserves booked for this acreage. The buyers will be entitled to approximately 12% of the takeaway capacity associated with SM Energy's agreement with Eagle Ford Gathering LLC, a joint venture between Kinder Morgan Energy Partners, L.P. and Copano Energy, L.L.C."

Read the full press release at sm-energy.com