Denver-based SM Energy Co., formerly St. Mary Land & Exploration Co., has reported an initial capital budget of $1.04 billion for 2011. The company anticipates that full-year production will grow approximately 20% year-over-year in 2011.

SM Energy has allocated approximately $500 million for drilling investment in its total Eagle Ford shale position for 2011. Additionally, projects in the Eagle Ford shale program make up the largest portion of SM Energy's facilities budget of $65 million.

In the Eagle Ford, SM Energy plans to operate two drilling rigs on its high working interest, 165,000-net-acre position in Webb and La Salle counties in South Texas. During 2011, the company plans to increase its operated rig count to four drilling rigs, the vast majority of which will target portions of the acreage containing rich gas and condensate. Most of the wells planned for the year will be in the company's active Briscoe and Galvan Ranch program areas. A higher level of activity is also planned for La Salle County, Texas, in order to de-risk and delineate the company's acreage.

In the partner-operated portion of its 84,500-net-acre position prospective for the Eagle Ford shale, seven rigs are currently being operated by SM Energy's partner, Anadarko Petroleum Co., Houston, (NYSE: APC). For 2011, SM Energy anticipates that Anadarko will operate an average of ten rigs for the year.

Primarily in McKenzie and Divide counties, North Dakota, SM Energy plans to invest roughly $170 million, or approximately 20% of its drilling capital, on projects targeting the Bakken and Three Forks intervals in the Williston Basin. SM Energy plans to operate two drilling rigs through the first half of next year, with the addition of a third rig planned at mid-year. Operations in McKenzie County will focus on the horizontal Bakken wells in the company's Raven prospect area in the western portion of the county, with SM Energy operating approximately two-thirds of this activity. Activity in Divide County will target the Three Forks interval and will be entirely operated by the company.

In the liquids-rich Granite Wash play, SM Energy plans to invest $60 million to drill horizontal wells targeting the Marmaton and Missourian washes (also collectively referred to as the Granite Wash) in Beckham County in western Oklahoma. Two operated drilling rigs will be required next year to execute the program. SM Energy will operate more than 65% of this activity. The economics of these projects benefit from the contribution of higher BTU natural gas and condensate in the production stream.

In the oily Permian Basin, SM Energy plans to spend $40 million, of which approximately $20 million is expected to be invested to drill Wolfberry wells. The majority of this program will be operated by an outside partner. The remaining Permian Basin budget will be allocated to various other plays in the basin.

In the Haynesville shale, approximately $35 million is budgeted for activity in the play. SM Energy has approximately 22,000 net acres in the Shelby Trough in East Texas that is prospective for both the Haynesville and Bossier shales as well as other productive zones up hole. The company has budgeted for five gross operated horizontal wells for 2011, of which the majority of the drilling costs will be carried under a previously announced carry and earning agreement covering a portion of its acreage position in East Texas. The company will also participate in approximately 20 gross partner-operated horizontal wells (two net) in the coming year.

SM Energy is currently exploring a number of options for its operated Haynesville shale acreage position in East Texas which would allow the company to drill enough wells in 2011 and early 2012 to hold its existing acreage, while also minimizing the amount of capital deployed. Twelve gross wells in 2011, in addition to the operated wells discussed above, and eight gross wells in 2012 will be needed to hold the company's acreage position.

Targeting the Niobrara trend, SM Energy has budgeted $25 million for projects in the northern portion of the DJ Basin in southeastern Wyoming. Activity will be focused on acreage near the Silo Field in Laramie County, Wyoming.

SM Energy president and chief executive Tony Best says, "SM Energy has worked hard over the last several years to add resource plays with the scope and scale to build a multi-year drilling inventory. Today's capital budget emphasizes how far we have come in a short time, with 80% of our drilling capital being invested in Eagle Ford shale and Bakken/Three Forks projects next year."

Best notes that the company's drilling program for 2011 is focused on oil and rich-gas projects that are expected to generate solid returns for shareholders, while modest investments in natural gas and exploration projects will provide inventory for the future.

"The company's strong balance sheet gives us the flexibility to execute our program under a number of different scenarios," he adds.

SM Energy expects its total production in 2011 will range between 128 and 132 billion cubic feet equivalent (Bcfe), compared with 2010 production guidance of 106.5- to 109.01 Bcfe.