SM Energy Company has signed a definitive agreement to sell 80% of its Powder River Basin assets for $500m to Denver-based Northwoods Energy.

This amount,  entirely in cash, is subject to customary closing price adjustments.

The transaction, which is slated to complete in the first quarter of this year, carries an effective date of 1 October, 2017.

SM Energy Company president and CEO Jay Ottoson said: “Divestiture of these assets is consistent with our strategy of focusing on development of our top tier Midland Basin and Eagle Ford assets and improving our balance sheet by reducing debt.

“Pro forma for this transaction, as of the end of the third quarter 2017, net debt is reduced by approximately 20% and net debt:EBITDAX is reduced to less than 3 times.”

The assets being divested consist of around 112,200 contiguous net acres in Converse County, Johnson and Campbell counties of Wyoming. These properties form around 80% of the firm’s existing acreage assets in the basin.

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The divestment will help SM Energy to focus more on its acreage positions in the Midland Basin in West Texas and the Eagle Ford Shale in South Texas, reported Chron.com

“Pro forma for this transaction, as of the end of the third quarter 2017, net debt is reduced by approximately 20% and net debt:EBITDAX is reduced to less than 3 times.”

As of last December, net production derived from the Wyoming assets stood at approximately 2,200boed while preliminary estimates of proved reserves for year-end 2017 indicated 4.2mmboe.

SM Energy intends to use proceeds from the divestment for its general corporate expenses, including to cut down its debt.

The deal will be completed once all the required closing conditions are met.

SM Energy Company acquires, explores, develops and produces onshore crude oil, natural gas, and natural gas liquids in North America. Northwoods Energy is a portfolio company operated by investment funds of equity firm Apollo Global Management. These funds plan to invest up to $850m in Northwoods Energy.