Endeavour Pulls Plug On Deal To Buy SM Energy’s Marcellus Assets

Canceled deal to buy 100% op WI in approximately 50,000 net acres in McKean and Potter cos., PA, gaining, 4 MMcf/d.

Houston-based Endeavour International Corp. (NYSE: END; London: ENDV.l ) has canceld its plans to acquire leasehold and producing interests in the Marcellus shale in north-central Pennsylvania, as well as a pipeline and related facilities, held by SM Energy Co., Denver, (NYSE: SM) and its partners for a total of $110 million.

The deal was meant to represent an exit from the Marcellus shale by SM Energy, which projected receiving $80 million for its assets including infrastructure.

Endeavour originally planned to acquire 100% operated working interests in approximately 50,000 net acres in McKean and Potter counties. Current production from three existing wells is approximately 3- to 4 million cubic feet of gas per day, including the Potato Creek #3H well that initially flowed 11 million cubic feet of gas per day. Additionally, Endeavour intended to acquire 100% ownership of Potato Creek LLC, which owns a midstream gathering system and related facilities in southern McKean County.

SM Energy’s assets involve approximately 42,000 net acres as well as associated pipeline assets. Average first-quarter production from three producing wells was 2 MMcfe per day. As of year-end 2010, booked reserves totaled 5.6 billion cubic feet equivalent, of which 50% were classified as proved developed.

If the deal had been concluded, Endeavour's leasehold interests in the Marcellus shale will total approximately 93,000 gross (68,000 net) acres.

Bank of America Merrill Lynch was advisor to SM Energy.