FOLLOW US

SM Energy Company, advised by Kirkland & Ellis LLP, on Thursday unveiled plans to acquire the Uinta Basin oil and gas assets from private equity-backed XCL Resources LLC, led by Vinson & Elkins LLP, for an unadjusted purchase price of $2.55 billion. The Denver-headquartered company will then sell an undivided 20% of those assets to Kirkland-led Northern Oil and Gas for $510 million.

SM EnergyTo Acquire Uinta Basin Assets : Transaction Details

With SM Energy's purchase and corresponding sale of the Uinta Basin assets, the deal represents a $2.04 billion purchase price net to SM Energy for an undivided 80% interest in the assets, according to a Thursday statement. The assets purchased from XCL Resources, which is backed by EnCap Investments LP and Rice Investment Group, are located primarily in Uintah and Duchesne Counties in Utah. They include around 9,300 net acres and 97.6 underwritten net undeveloped locations, according to a separate Thursday statement from Northern Oil and Gas. "With XCL, we are acquiring a multi-stacked pay acreage position with significant long-term upside," Northern Oil and Gas President Adam Dirlam said in the company's statement. "These assets are exemplary of our returns-focused strategy: delivering immediately while offering significant exploration potential further enhancing NOG's optionality."

SM Energy To Acquire Uinta Basin Assets : Strategic Benefits

The assets expand SM Energy's core net acreage by about 14%, increase its 2025 net production to roughly 195 MBoed, or thousand barrels of oil equivalent per day, and boost its oil mix to more than 50%. The transaction is also expected to boost SM Energy's estimated net proved reserves by around 18%, according to the company's statement. "Our differentiated technical team has again demonstrated what sets us apart, having identified a unique opportunity to add top-tier assets with significant upside for a reasonable multiple," said SM Energy President and CEO Herb Vogel. "We believe that this transaction checks the boxes for our acquisition criteria, and we expect to demonstrate value creation through performance optimization, inventory expansion and growth in adjusted free cash flow." The deal is expected to expand SM Energy's portfolio with "assertive" scale, increase its oil volumes, and extend low-breakeven inventory life. It also boosts the company's return of capital while maintaining a strong balance sheet and provides high-margin barrels competitive with Midland Basin due to higher oil content and lower operating costs.

Financing and Operations

SM Energy plans to finance its acquisition through a combination of debt and cash on hand. The company has received "firm commitments" from J.P. Morgan, Bank of America, and Wells Fargo for an aggregate $1.2 billion unsecured bridge facility, according to the statement.