SM Energy Completions Cost Down to $400 Per Lateral Foot

SM Energy Completions Cost Down to $400 Per Lateral Foot

SM Energy (NYSE: SM) is one of the few operators who has a positive free cash flow during 2016. They have reduced spending by almost half since 2015 and continue to manage costs having spent just under half of their planned $685 to $690 million for the year. They have taken advantage of the cost savings in the low oil price environment and have stuck to the core areas that will generate returns for them. The chart below shows SM Energy’s frac activity over the last 24 months.

SM-energy-frac-activity-energent

D&C Costs in the Williston Trend Below $4 Million

SM Energy has drilled 13 and completed 18 net wells in the first two quarters in 2016 with 4 wells drilled and 14 completed in the second quarter alone. The operator has used only Sanjel and Liberty as their pressure pumper in the Williston during 2016 with Sanjel falling off after Liberty acquired their U.S. assets in April.

SM Energy has been testing diverter technology in Divide county and has said it has seen positive results, now part of its standard completion design in the area. Drilling and completion costs in Divide county have trended below $4 million per well due to pad drilling and lower service costs.

energent-williston-well-cost-chart

Completion Costs Continue to Decrease in the Eagle Ford

Higher then expected production volumes were driven by better then expected production in the Eagle Ford. SM has seen strong well performance from the ability to drill long laterals around 8,000 feet and completed those wells with 2,000 pounds of sand per lateral foot. SM has used choke management to increase the cumulative production on wells instead of opening up the choke to increase IP rates, shown below against other Eagle Ford operators.

energent-eagle-ford-IP-Chart

During 2015 SM Energy moved away from Sanjel in the Eagle Ford and has since solely used Halliburton in 2016 for their frac jobs. Completion costs continue to decrease with SM Energy down to about $400 per lateral foot in completion costs for recent completions in 2016.

sm-energy-energent-eagleford-well-cost-chart

SM Energy Acquires 24,783 Acres in Howard County

In the beginning of August SM Energy acquired 24,783 net acres in Howard county for $980 million from Rock Oil Holdings LLC. This acquisition increases SM Energy’s position in the Permian to 46,750 net acres entering Howard county from Midland and Upton. The operator is expecting to run three rigs in the fourth quarter and increase during the next two years. The acquisition is expected to close in the beginning of October.

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