Caturus to purchase some South Texas assets from SM Energy for $950 Million

SM Energy, a U.S. oil and gas company, announced?on Wednesday that it would sell selected assets in South Texas for $950 millions?in order to reduce its debt and bolster its capital structure.

SM Energy shares increased 4.8% during afternoon trading on the back of a rise in crude oil prices.

The sale achieves SM Energy’s main priority of selling assets worth more than $1 billion, aimed to rein in costs and improve financial flexibility.

SM Energy announced last year that it would?merge with Civitas Resources in a $12.8billion deal. SM said it expected to save $200m annually?and possibly up to $300m through lower overheads and operating costs.

The company also stated that it would 'prioritize cash flow in order to reduce debt.

Caturus acquired 260 wells that produced 250 million cubic foot per day (MMcfe/d), with a total net production pro forma of 950 Mcfe/d.

Caturus is building the Commonwealth LNG Export Facility in Louisiana and said that the acquisition of SM Energy’s Galvan Ranch?assets? would allow it to supply low-nitrogen gas to the key LNG hubs, Gillis, and Agua Dulce.

David Lawler, CEO of Caturus, said that the Galvan Ranch substantially expands our footprint in the Eagle Ford area and Austin Chalk. It also comes with existing infrastructure to support long-term capital-efficient development.

Gabriele Sorbara, analyst at Siebert Williams Shank & Co. said: "We see the transaction as a positive one; however, the operational?execution' of the pro-forma company is critical to?return investors to the story."

Caturus has executed a collective?7million tons per year of?long term natural gas offtake agreements?with Mercuria. Saudi Aramco. Glencore. Japan's JERA. Malaysia's PETRONAS.

The transaction should close by the end of the second quarter. Reporting by Pooja menon in Bengaluru, editing by Shilpimajumdar and Shreya biswas

(source: Reuters)