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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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Baker Hughes Confirms a Third Weekly Decline in US Oil and Gas Rigs
In a recent announcement, energy services firm Baker Hughes stated that U.S. energy companies have decreased the number of operating oil and gas rigs for the third successive week. This development marks the first such consistent reduction since early September. As of October 6, the count for oil and gas rigs, considered a precursor to future production levels, has seen a decline by four, positioning it at 619. This is the lowest figure recorded since February of the preceding year. The overall rig count has decreased by 143 or 19% when compared to last year's statistics.
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.
Exxon Mobil recently completed its acquisition of Pioneer Natural Resources, a deal worth about $60 billion. This transaction, which is the biggest in shale oil history, significantly changes the competitive landscape in the Permian Basin, a major oil field. This marks Exxon Mobil's largest deal since its $84.4 billion merger with Mobil Corp. in 1999. With this acquisition, Exxon Mobil's production in the Permian Basin will double to 1.3 million barrels of oil equivalent per day.
OXY has been the leader in Permian Basin production for the past five years. Currently, the Houston-based oil and gas company is deepening its presence in the basin with a $12 billion acquisition of CrownRock, adding over 94,000 acres in the Midland Basin and increasing its oil output by about 170,000 barrels per day. Occidental announced an increase in its proved reserves to 4.0 billion barrels of oil equivalent by the end of December 2023, up from 3.8 billion the previous year. Activities in the Permian largely fueled this rise. Occidental added approximately 303 million barrels through infill development projects as well as new discoveries and the further development of existing fields brought in another 153 million barrels.
TotalEnergies kicked off 2024 with a net income of $5.7 billion in the first quarter, marking a modest 3% increase from the same period last year and a 13% rise from the previous quarter. This growth occurred despite experiencing drops in both the volume and price of gas sales over the year and the quarter. Their adjusted net earnings, which exclude one-time or unusual items, were $5.1 billion. This represents a significant 22% decline compared to last year and a slight 2% drop from the last quarter. The company's earnings before tax, depreciation, and amortization reached $11.5 billion, while their cash flow from operations significantly decreased to $2.2 billion, falling by 58% from last year and a steep 87% from the previous quarter. TotalEnergies also recorded $644 million in impairments.