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SM Energy Acquires 20,000 Acres in Texas for $90.6M
08/15/2023
SM Energy acquired 20,000 net acres in Dawson and north Martin counties in Texas, completing the transaction in cash.
SM Energy Co., based in Denver, intends to expand on its success from the second quarter by increasing its drilling and completion activities in the coming quarter. This plan also includes preparations to develop the newly acquired land in the Midland basin.
In June, the company's president and CEO, Herb Vogel, along with his team, raised their target for total oil and gas production for the second quarter to 13.9 MMboe, up from 13.4 MMboe. They exceeded this target, reaching nearly 14.1 MMboe, with oil making up 42% of that figure. During the quarter, SM Energy drilled 17 wells, with 12 located in South Texas and five in the Midland basin. They also completed 25 wells, 17 of which were in the Midland basin.
SM Energy's Q2 2023 Profit and Plans
Improved production and lower expenses led to notable figures in SM's Q2 2023 performance, and new plans are set for Q3:
- Q2 2023 Profit and Revenue: $150 million net profit on $551 million revenues.
- Q2 2022 Comparison: Profits and revenues were $323 million and $992 million, respectively, mainly due to 34% higher oil prices and 73% higher gas prices.
- Q3 Drilling Plans: Executives plan to drill 22 wells (10 in South Texas, 12 in Midland basin).
- Q3 Completion Plans: 28 wells are to be completed (17 in Midland basin).
- Q3 Capital Spending: Forecasted to be between $235-240 million, down from the adjusted $267 million in Q2.
SM Energy's Production Boost in 2024
"We are in the midst of finalizing our plans," Vogel mentioned during conference call. "Our prime wells are located in the Dean, and we are eager to explore our potential there. Our confidence is bolstered by the data from both vertical and horizontal adjacent wells."
SM Energy has intentions to introduce a fourth rig into its operations in the Permian basin by this autumn. They anticipate commencing production in the fourth quarter on the 20,000 acres acquired this spring for an approximate $90 million (OGJ Online, June 23, 2023). Vogel believes that along with the efficiency enhancements throughout their operations, this will pave the way for a significant production boost in 2024.
In addition, SM Energy's 2024 production is set to benefit from an additional 9,100 acres they recently acquired and have plans to develop. Vogel expressed that it's still the beginning phase for this undisclosed land. He also hinted that around the middle of the following year, SM Energy might divulge specific well information about this new acquisition. Ultimately, the company aims to boost its production by mid-single digits compared to the levels of 2023.
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Occidental, CrownRock Merger Under Regulatory Review: 2024 Update
CrownRock's 94,000+ net acres acquisition complements Occidental's Midland Basin operations, valued at $12.0 billion. This expansion enhances Occidental's Midland Basin-scale and upgrades its Permian Basin portfolio with ready-to-develop, low-cost assets. The deal is set to add around 170 thousand barrels of oil equivalent per day in 2024, with high-margin, sustainable production.
Diamondback's Viper Energy Acquires $1 Billion in Royalty Interests in the Permian Basin
Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.
Kinetik Holdings recently announced a series of transactions in the energy sector. They struck a deal to buy Durango Permian infrastructure for $765 million. At the same time, they're selling their 16% share in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $540 million. The total purchase cost includes $510 million in cash paid immediately and an additional $30 million that will be paid later, depending on whether they decide to expand further.
Recently, the Permian has seen significant acquisitions: Exxon Mobil purchased Pioneer Natural Resources for about $60 billion. Diamondback Energy's $26 billion deal to acquire Endeavor Energy Resources is currently on hold due to requests from the U.S. Federal Trade Commission. Occidental’s acquisition of CrownRock for $12 billion in the Midland.
EOG Resources is pushing boundaries in Ohio's Utica oil play and now drilling on the Sable pad, also located in Noble County. This site features the 3.7-mile lateral currently under construction. The company's first multi-well pads in the area Timberwolf and Xavier have each produced over 200,000 barrels of oil since their inception—Timberwolf in August and Xavier in October. A third site, the four-well White Rhino pad in Noble County, is also showing promising early results, according to Keith Trasko, EOG’s Senior Vice President of Exploration and Production, who noted the wells are performing as expected in their initial weeks.