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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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