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Independent operator SM Energy Company (SM - Analyst Report) announced that an exploratory test well located in San Jacinto County, Texas has been completed successfully.

A horizontal completion in the Woodbine interval – the Horizontal Properties 2H – generated about 740 barrels of oil equivalent per day (Boe/d) in a 24-hour test. While clearing up after fracture stimulation, the well was found to flow at a rate of 1,520 PSIG casing pressure on a 27/64ths inch choke.

The well yielded 305 barrels of oil per day of 42 degree API gravity and 2,600 thousand cubic feet per day of rich gas. It will be closed until the construction of a gathering system.

The latest success increases SM Energy’s acreage position in East Texas to about 105,000 net acres. Starting third quarter 2013, the company expects to drill further test wells aiming the Woodbine formation and other important intervals. The necessary gathering systems will be erected after drilling a number of these wells. The company’s existing New Venture budget will be mainly utilized to finance the capital program of 2013.

As a result of its lenders’ regularly scheduled semi-annual redetermination process, SM Energy’s borrowing base under the company’s existing revolving credit facility has been increased to $1.9 billion from $1.55 billion. SM Energy has also revised the terms of its credit facility to boost the commitment amount from the bank group to $1.3 billion, from $1.0 billion. The alterations in the terms of the credit facility will also extend the maturity of the facility by about two years to Apr 2018.

SM Energy carries a Zacks Rank #2 (short-term Buy rating). There are other stocks in the oil and gas industry, like Range Resources Corporation , EPL Oil & Gas, Inc   and Stone Energy Corporation (SGY - Analyst Report) , which appear more promising and carry a Zacks Rank #1 (Strong Buy).

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