Great Expectations in the Uinta Basin

Over the last two years, Utah’s Uinta has re-emerged as a prolific oil basin whose stacked plays and overall economics solidly compete with those in the Permian. But transportation of its premium-priced waxy crude to hungry refineries has long been a hitch in the basin’s giddy-up. Can’t pipeline it. Can’t Fed-X it. Moving Uinta output is solely dependent on rail and truck, and producers are counting on a SCOTUS win of the proposed 88-mile Uinta Basin Railway in a case the court is now weighing. For producers, an added railroad could quintuple volumes flowing out of the region. For newcomers making their entry into the Unita, that train can’t arrive fast enough.

Reese Energy Consulting today is following the latest on Denver-based SM Energy, which made a grand entrance into the Uinta last June. SM, which also operates 111,000 net acres in the Permian Midland and 155,000 in the Eagle Ford and Austin Chalk, coupled up with Northern Oil and Gas to buy Houston-based XCL Resources, a pure-play Uinta operator. The $2.55 billion deal included 63,300 net acres and 43 MBOED (87% oil). In its recently announced 3Q earnings release, SM says it expects a 25% bump in 4Q total production due to its XCL acquisition, which would increase its current 170 MBOED to as much as 220 MBOED. SM reported $644 million in 3Q revenues and nearly $241 million in profit.