Mitsui Finalizes Eagle Ford Deal With SM Energy

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Close Date
Estimated Price
$680.0MM
Description

To buy 12.5% WI in 85,000-acre nonop Eagle Ford shale position in Dimmit & Maverick cos., TX, gaining 20.1 MMcfe/d.

Mitsui E&P Texas LP, a subsidiary of Mitsui & Co. Ltd., Tokyo, (Nasdaq: MITSY; Tokyo: 8031) has closing of the previously announced deal to acquire a 12.5% working interest in nonoperated Eagle Ford shale position from SM Energy Co., Denver, (NYSE: SM) following the expenditure of $680 million in carried costs.

SM Energy will be carried on 90% of its drilling and completion costs (excluding costs associated with construction of mid-stream gathering assets) in this acreage until $680 million has been expended. Mitsui also reimbursed SM Energy a total of approximately $101 million at closing for Misui's share of capex and other costs, net of revenues, related to the period between the effective date of March 1, 2011, and the closing date.

The assets Mitsui is acquiring equal approximately 39,000 net acres of the total 85,000-acre position held by SM Energy, primarily in Dimmit and Maverick counties, Texas. Production is approximately 20.1 million cubic feet of gas equivalent per day, according to KeyBanc Capital Markets.

Production from the total 85,000-acre nonoperated Eagle Ford shale position is 43.5 million cubic feet of gas equivalent per day (42% oil). Proved reserves as of Dec. 31 were 52 billion cubic feet equivalent (52% proved undeveloped).

SM Energy will retain a working interest of approximately 14.5% in these properties.

After closing, SM Energy will have approximately 46,000 net acres in the nonoperated portion of its Eagle Ford shale position. The company's average working interest in this acreage will be reduced from approximately 27% to 14.5%. Reported average daily production from the company's total non-operated Eagle Ford shale position at the end of the first quarter was 43.5 million cfe/d (42% oil, 36% natural gas, and 22% NGLs). Proved reserves associated with the company's total non-operated Eagle Ford shale position as of Dec. 31, 2010, were 52 billion cfe (52% proved undeveloped).

SM Energy will have roughly 196,000 net acres in the Eagle Ford shale, of which approximately 75% will be operated by the company, after this transaction and the previously announced divestiture of Eagle Ford assets in LaSalle and Dimmit Counties, Texas are consummated..

Bank of America Merrill Lynch is financial advisor to SM Energy.

The deal is expected to close in June 2012.