US shale drilling companies SM Energy and Northern Oil and Gas (NOG) have reached an agreement to acquire oil and gas assets from XCL Resources for $2.55bn.
The deal involves Denver-based SM Energy taking an 80% interest in the assets for $2.04bn, while Northern Oil and Gas will acquire the remaining 20% for $510m.
SM Energy, with operations in the Eagle Ford and Midland basins in Texas, will now add the Uinta Basin to its portfolio, a region known for producing a distinct waxy crude oil.
XCL Resources, backed by EnCap Investments and Rice Investment Group, is said to produce around 55,000 barrels of oil equivalent per day.
Following the deal’s completion, SM Energy will operate the assets, which include approximately 37,200 net acres and represent a 14% increase in the company’s core net acreage.
The assets are expected to yield a daily output of 38,000 barrels of crude and offer 390 drilling locations.
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By GlobalDataThis acquisition will also add 107 million barrels of oil equivalent to SM Energy’s preliminary proved reserves, an 18% increase in estimated net proved reserves.
SM Energy intends to finance the purchase through a mix of debt and available cash.
The company’s board of directors has already given the green light for the acquisition.
SM Energy president and CEO Herb Vogel said: “We believe that this transaction checks the boxes for our acquisition criteria, and we expect to demonstrate value creation through performance optimisation, inventory expansion and growth in adjusted free cash flow.”
NOG CEO Nick O’Grady said: “The Uinta Basin has emerged as one of the best and fastest-growing oil resources in the United States, and SM has a track record as one of our best and most responsible operators. We look forward to working with them for many years to come.”
With an effective date of 1 May 2024, the transaction is anticipated to close in September 2024, pending customary closing conditions.
This deal is indicative of the ongoing consolidation trend in the oil and gas industry as companies aim to scale operations and refresh their drilling inventories.
It also marks another exit for EnCap Investments, following Matador Resources‘ recent $1.9bn deal for assets from Ameredev, a portfolio company of EnCap Investments.
