- $1.6B Howard/Martin County
Acquisition
- $0.8B Williston Basin Divestiture
SM Energy Company (NYSE: SM) today announced that it 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 Boe per day 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. The Company
also announced today that it has 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
Inc.
President and Chief Executive Officer Jay Ottoson comments: “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. We are particularly excited about the
performance and future potential of Howard County, leading us to
further core up our portfolio and focus on this fast emerging, top
tier area.
“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.
We continue to work to concentrate capital on the highest return
programs and generate higher company-wide margins, which drive cash
flow growth and value creation for our shareholders.”
The Company plans to fund the majority of the $1.1 billion cash
portion of the acquisition with the proceeds from the Williston
Basin asset sale and the remainder under the Company’s revolving
line of credit, which has a borrowing base of $1.35 billion,
aggregate commitments of $1.25 billion and was undrawn as of
October 14, 2016. The Company is issuing to the sellers $500
million in SM Energy common stock based on the 30-day
volume-weighted average price of $37.35 per share, or approximately
13.4 million shares. Further, the Company remains on track with the
planned sale of its non-operated assets in the Eagle Ford program,
which we expect will be a potential source of funding for the
acceleration of activity in the Permian Basin over the coming
years.
Mr. Ottoson adds: “We are delighted to have QStar/EnCap as new
shareholders and believe their desire to take a significant portion
of the consideration in stock is a strong vote of confidence in the
quality of the QStar acreage and in our Company.”
QStar CEO Gerald Carman comments: “SM Energy will have one of
the largest, highest-quality leasehold positions in the Midland
Basin, pro forma the QStar transaction, and we believe SM’s
operations team is ideally suited to optimize the long-term value
of QStar’s excellent asset base. SM is successfully executing a
transformation that we view as under-appreciated by the market, and
this transaction provides our management team and sponsor
significant upside exposure as we will be among SM’s largest
shareholders.”
The acquisition is expected to close mid-December, 2016, with an
effective date of September 1, 2016, and the divestiture is
expected to close early-December, with an effective date of October
1, 2016. Both transactions will be subject to customary purchase
price adjustments and subject to the satisfaction of customary
closing conditions, and there can be no assurance that either
transaction will close on the expected closing date or at all.
Petrie Partners served as exclusive financial advisor to SM
Energy in connection with both of the transactions. Jefferies LLC
served as sole financial advisor to QStar and EnCap Investments,
L.P.
Please join SM Energy management today at 8:00 a.m. Mountain
time/10:00 a.m. Eastern time for a discussion of today’s
announcements via webcast (available live and for replay) on the
Company’s website at www.sm-energy.com. Please reference the
“Coring Up in the Midland Basin” IR presentation to be posted to
the Company’s website prior to the call.
Alternatively, you may join by telephone with
the passcode 3439649 (applicable for live and replay calls) at:
Live - Domestic toll free/International:
877-303-1292/315-625-3086
Replay - Domestic toll free/International:
855-859-2056/404-537-3406
The call replay will be available
approximately two hours after the call until November 1, 2016.
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of securities laws. The words “anticipate,” “assume,”
“believe,” “budget,” “estimate,” “expect,” “forecast,” “guidance,”
“intend,” “plan,” “project,” “will” and similar expressions are
intended to identify forward-looking statements. These statements
involve known and unknown risks, which may cause SM Energy's actual
results to differ materially from results expressed or implied by
the forward-looking statements. Forward-looking statements in this
release include, among other things, expectations regarding growth
strategy, consummation of pending transactions, anticipated
drilling plans and capital expenditures, anticipated growth in cash
flows, the expected benefits, financing sources and timing of
acquisitions, and the expected benefits and likelihood of
completing divestitures. General risk factors include the uncertain
nature of acquisition, divestiture, joint venture, farm down or
similar efforts and the ability to complete any such transactions;
the uncertain nature of expected benefits from the actual or
expected acquisition, divestiture, joint venture, farm down or
similar efforts; the uncertainty of negotiations to result in an
agreement or a completed transaction; the availability of and
access to capital markets; the availability, proximity and capacity
of gathering, processing and transportation facilities; the
volatility and level of oil, natural gas, and natural gas liquids
prices, including any impact on the Company’s asset carrying values
or reserves arising from price declines; uncertainties inherent in
projecting future rates of production or other results from
drilling and completion activities; the imprecise nature of
estimating oil and gas reserves; uncertainties inherent in
projecting future drilling and completion activities, costs or
results, including from pilot tests; the availability of additional
economically attractive exploration, development, and acquisition
opportunities for future growth and any necessary financings;
unexpected drilling conditions and results; unsuccessful
exploration and development drilling results; the availability of
drilling, completion, and operating equipment and services; the
risks associated with the Company's commodity price risk management
strategy; uncertainty regarding the ultimate impact of potentially
dilutive securities; and other such matters discussed in the “Risk
Factors” section of SM Energy's 2015 Annual Report on Form 10-K, as
such risk factors may be updated from time to time in the Company's
other periodic reports filed with the Securities and Exchange
Commission. The forward-looking statements contained herein speak
as of the date of this announcement. Although SM Energy may from
time to time voluntarily update its prior forward-looking
statements, it disclaims any commitment to do so except as required
by securities laws.
ABOUT THE COMPANY
SM Energy Company is an independent energy company engaged in
the acquisition, exploration, development, and production of crude
oil, natural gas, and natural gas liquids in onshore North America.
SM Energy routinely posts important information about the
Company on its website. For more information about SM Energy,
please visit its website at www.sm-energy.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20161018005854/en/
SM EnergyINVESTORSJennifer Martin Samuels,
303-864-2507jsamuels@sm-energy.com
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