SM Energy
SM could announce another transaction in the Eagle Ford in the next month or so. SM noted that its avg cost per net acre in the Eagle Ford is about $250/net acre, making its recent sale for $14,640/net acre seem even more attractive SM's average EUR estimate across its total 235,000 net acre position in the Eagle Ford (adjusted for recent sale) is 3.6 bcfe gross. However, mgmt pointed out that it has 21 different type curves across this area and that the range of EURs is wide. SM holds about 40K net acres close to a portion of ROSE's position & we think the EURs on SM's acreage in the area could be north of 7bcfe. We also think the 3.6bcfe average will increase over time. SM may not have any signific water issues because SM has purchased water rights directly from the Rio Grande River. Even assuming SM could only use 50% of the rights it has purchased, mgmt is confident it would have more than enough water to execute its long term program. However, some operators further to the northeast could have issues down the road because some of them draw water from the aquifer that the city of San Antonio uses to supply its residents. SM's midstream partner in the Eagle Ford expects to bring on additional capacity in September, leaving mgmt to continue expecting to have maximum gross capacity up to 220 mmcfpd in 2H11 vs. 100 mmcfpd currently. SM is ramping up to 6 operated rigs in Eagle Ford by YE11 and expects to hold that level through 2012. Its partner (APC) is increasing to 12 rigs in which SM holds a 25% interest. SM has experienced weather related delays in the Bakken, but still plans to ramp up to 3 rigs in the play by YE11. Mgmt still plans to meet its average FY11 total production guidance of 400 - 416 mmcfepd net.