SM Energy selling PRB leasehold for $500 million

Denver-based independent producer SM Energy said late Tuesday it’s selling a majority of the company's Powder River Basin assets for $500 million in cash to an undisclosed buyer.

The assets to be sold include roughly 112,200 predominantly contiguous net acres located in Wyoming’s northwest Converse County and portions of southeast Johnson and southwest Campbell counties, Kallanish Energy learns.

"Divestiture of these assets is consistent with our strategy of focusing on development of our 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.

Ottoson said pro forma for this transaction, as of the end of 2017’s third quarter, net debt is reduced by roughly 20% and SM’s net debt to EBITDAX (earnings before interest, taxes, depreciation, amortization, and exploration expense) is reduced to less than three times.

These assets represent roughly 80% of the company's current Powder River Basin acreage. Net production as of December was approximately 2,200 barrels of oil-equivalent per day (BOE/d) (51% oil, 18% NGLs and 31% natural gas) and preliminary estimates of proved reserves for year-end 2017 are 4.2 million barrels of oil-equivalent (MMBOE) (82% Proved Developing Producing).

The transaction is expected to close in the first quarter of 2018, with an effective date of Oct. 1, 2017. SM Energy plans to use the expected sale proceeds for general corporate purposes, including debt reduction.