SM Energy to acquire Uinta Basin oil and gas assets for $2.55B

SM Energy (SM) has entered into an agreement to acquire the Uinta Basin oil and gas assets owned by certain entities affiliated with XCL Resources, a private company backed by EnCap Investments and Rice Investment, for an unadjusted purchase price of $2.55B. Concurrently, Northern Oil and Gas (NOG) will acquire an undivided 20% of the oil and gas assets of XCL for $510M, resulting in a $2.04B purchase price net to the company for an undivided 80% interest of the assets. SM Energy intends to serve as the operator of the assets currently operated by XCL. The company plans to finance the acquisition through a combination of debt and cash on hand. XCL assets include: ~37,200 net acres – ~99% operated -, increasing the company’s core net acreage ~14%; 43 MBoed/38 MBod 88% crude oil, increasing the company’s 2025E net production to ~195 MBoed and oil mix to greater than 50%; increases the company’s inventory life by 2 years to 12+ years; $50.45/Boe 2025E cash production margin, increasing the company’s 2025E cash production margin by ~11%; and 107 million Boe preliminary proved reserves, increasing the company’s estimated net proved reserves by ~18%. This acquisition is expected to be immediately accretive to key metrics. 2025E Adjusted EBITDAX is expected to increase ~35%, 2025E Adjusted free cash flow is expected to increase ~45%, and 2025E cash production margin(6) is expected to increase ~11%. Adjusted free cash flow metrics support a Board of Directors approved 11% increase in the company’s fixed quarterly dividend policy from 18c to 20c per share, expected to commence in Q4. The Board has also authorized a new $500M share repurchase program through 2027, replacing the remaining existing program. SM Energy plans to finance the acquisition through a combination of debt and cash on hand. Closing is anticipated to occur in September, subject to customary closing conditions.