Sanchez Reduces 2015 Capex by 60%

January 13, 2015 Elizabeth Alford

As oil prices hit new lows, Eagle Ford producers are scrambling to revise budget projections for 2015.

On January 7th, Sanchez Energy joined other companies who are forced to update 2015 capex projections from just two months ago. The company reports that the initial 2015 estimate of $1.15 billion will be slashed almost 60% to $400 - $450 million.

“Due to ‘the deteriorating commodity price environment, Sanchez Energy has elected to further reduce its 2015 capital plan. Our 2015 drilling plan calls for us to move from 8 gross (7 net) rigs across our Eagle Ford position and 1 gross and net rig in the TMS in the fourth quarter of 2014 to 4 gross (3.5 net) rigs focusing on Catarina and Palmetto in the Eagle Ford and .25 gross and net rigs in the TMS. This represents an approximately 60% reduction in average rig count from fourth quarter 2014 to 2015.’”

— Tony Sanchez, III, President and Chief Executive Officer of Sanchez Energy

Despite the drastic cuts, the report predicts that the company will maintain 2014 Q4 production numbers. It is also expected that oil production will continue to rise in 2015 and should average 40,000 to 44,000 barrels a day.

Read complete report at sanchezenergycorp.com

Sanchez Energy Stock Dips, Despite Good Q3 Production

October 24, 2014 Kirk Eggleston

Sanchez Upper Eagle Ford Wells Production Rates

Amid a drop in oil prices, Eagle Ford-focused Sanchez Energy, has seen a sharp dip in its stock price, falling nearly 35% in the past month to ~$18.50. According to the investment research firm, Zacks, the Houston-based company's earning picture suggests the slump may continue.

Despite its 30-day earnings consensus moving lower over the last 30-days, Sanchez returned excellent third quarter production results. During the reporting period, Sanchez's estimated portfolio wide production was 38,613 boe/d, an increase of 91% over the second quarter 2014 and an increase of 228% compared to the same period a year ago. The company reported total production volumes for the quarter of 47% oil, 27% NGLs, and 26% natural gas.

“The company has planned for and is poised to rapidly adapt to a changing commodity price environment. As of September 30, 2014, SN’s liquidity was approximately $900 million, consisting of $600 million in cash and an undrawn revolver with a $300 million elected commitment from a$362.5 million borrowing base. Current liquidity combined with future operating cash flow is expected to fully fund the Company’s anticipated 2015 capital program. SN’s substantial amount of HBP acreage and long-term leases allow it to treat the majority of capital spending as discretionary. The Company’s only significant capital commitment is Catarina’s continuous drilling provision of 50 wells per year, which SN believes can be met with 2 to 2.5 rigs per year. Since inception, SN has intentionally avoided long-term contracts and commitments for goods and services in order to maximize its flexibility.”

— CEO Tony Sanchez III

At the end of the second quarter, Sanchez Energy closed its massive $639-million Eagle Ford acreage deal with Royal Dutch Shell for 106,000 net Eagle Ford acres.

Read more: Eagle Ford Deal Closings

In the third quarter, Sanchez focused on assuming operations in its new 'Catarina' acquisition. According to officials, two rigs have been deployed on the western part of the asset drilling development wells targeting the Lower Eagle Ford, while a third rig has begun appraisal drilling on the eastern section of the asset, also targeting the Lower Eagle Ford. The company has also completed the first group of wells that were drilled by the previous operator in the Upper Eagle Ford, and they are now online and flowing to sales. The 9 Upper Eagle Ford wells had initial 24-hour average production rates ranging from 973 boe/d to 2,117 boe/d, with average production rates of 1,402 boe/d, with a 64% liquids cut.

Eagle Ford's Sanchez Energy Reports Record Revenue in Q2 2014

August 13, 2014 Kirk Eggleston

Eagle Ford-focused Sanchez Energy reported record revenue of $151.7 million in the second quarter of 2014, with portfolio-wide production increasing 164% year-over-year to 20,437 boe/d.

At the end of the quarter, the company closed its massive Eagle Ford acreage deal with Royal Dutch Shell for 106,000 net Eagle Ford acres in Catarina. The acquisition almost doubled the company's acreage in the play. Total purchase price for the acquisition was approximately $639 million, less approximately $85.5 million in normal and customary closing adjustments.

“As of August 1, 2014, Sanchez Energy has officially taken over all operations at Catarina after a brief transition period with Shell. The transition of operations has gone smoothly and the ramp up of Sanchez Energy operations is ahead of schedule. We have fully staffed our operations at Catarina and now have drilling, completion, and artificial lift installation in progress. Additionally, now that we have achieved critical scale from the Catarina assets, we are utilizing a dedicated frac spread as well as direct sourcing of chemicals and proppant. We expect these factors will reduce completions costs by an additional 30%, allowing flexibility to increase fracture stage size or improve returns from a lower development cost.”

— Sanchez CEO, Tony Sanchez, III

With the Catarina acquisition, Sanchez increased its proved reserves 170% to approximately 117 MMBOE as of June 30, 2014. Crude oil constituted 49% and NGLs constituted 24% of the company's proved reserves. 56% of the company's proved reserves were classified as proved undeveloped, compared to 70% at same time last year.

Sanchez Eagle Ford Q2 Operations Update

Sanchez Energy currently has 6 gross rigs running across its Eagle Ford acreage, with 419 gross producing wells and 38 gross wells in various stages of completion.

By area, the company's Cotulla, Marquis, and Palmetto Eagle Ford operating areas comprised approximately 42% of the crude oil cut from total second quarter 2014 production volumes. Company officials expect the percentage of oil expected in the company's third quarter production volumes should decrease as the impact of the production volumes from Catarina are recorded.

The company's third quarter production guidance range portfolio-wide of 37,000 to 41,000 boe/d has been revised to 36,000 to 40,000 BOE/D while its fourth quarter production guidance range of 45,000 to 49,000 boe/d has increased to 48,000 to 50,000 boe/d. Production guidance for 2015 remains the same at a range of 53,000 boe/d to 58,000 boe/d.

Eagle Ford Deal Closings - June 2014

July 1, 2014 Kirk Eggleston

Several significant Eagle Ford acquisitions were announced in April and May of 2014. In June of 2014, the details of these acreage deal closings were announced by the buyers, which included Encana Corporation, Sanchez Energy, Panhandle Oil & Gas and Warwick Energy.

Encana Corporation

The Encana deal was by far the largest. The company completed its acquisition of ~45,000 net Eagle Ford acres located in the oil window of Karnes, Wilson and Atascosa Counties from Freeport McMoran on June 20, 2014 for $3.1 billion.

In the first quarter of 2014, the acreage produced 53,000 boe/d. Company officials estimate a drilling inventory of more than 400 locations. The company plans to update its production guidance in its next quarterly report on July 24, 2014.

Read more about the deal: Encana Purchases Eagle Ford Assets from Freeport McMoran

Sanchez Energy

Sanchez Energy announced on June 30, 2014 that it closed its massive Eagle Ford acreage deal with Royal Dutch Shell for 106,000 net Eagle Ford acres.

Total consideration for the acquisition was approximately $553.5 million, comprised of the $639 million purchase price less approximately $85.5 million in normal and customary closing adjustments. The transaction was funded from cash on hand from a portion of the net proceeds from the company's previously issued $850 million senior unsecured 6.125% notes due in 2023.

Panhandle Oil & Gas

Panhandle Oil & Gas announced the closing of its Eagle Ford acquisition on June 17, 2014. The deal includes a 16% non-operated working interest in a 11,100 leasehold acres (1,775 net) block that company officials say is held largely by production with 63 producing wells.

Net to the company's interest, May 2014 production in the newly acquired acreage was 825 boe/d , with an 80% oil cut. The property is currently being developed with a one drilling rig program by the operator, Oklahoma City-based Cheyenne Petroleum Company.

Warwick Energy

Read more about the deal: Warwick Energy Buys Eagle Ford's R/C Sugarkane for Undisclosed Amount

Closing details: Warwick Energy Closes Deal for 7,300 Net Eagle Ford Acres

Sanchez Nearly Doubles Eagle Ford Acreage in $639 Million Deal with Shell

May 22, 2014 Kirk Eggleston

Houston-based Sanchez Energy Corporation announced in May of 2014 that it has entered a deal with Royal Dutch Shell subsidiaries in the Eagle Ford to purchase 106,000 net acres for $639-million. The acquisition increases Sanchez's total net Eagle Ford acreage to 226,000, and adds 60 MMBOE of proved reserves, nearly doubling the company's acreage position and proved reserves in the play.

During the first-quarter, the acquired assets had production of 24,000 boe/d (60% liquids). Sanchez estimates there are at least four years of drilling inventory from 200 "de-risked" wells in the new acreage, which extend across Dimmit, La Salle and Webb Counties.

“The addition of this asset includes at least 200 identified drilling locations and up to 800 additional potential locations that can be added through our planned appraisal work on the rest of the asset and will take us to a total of almost 3,000 potential drilling locations. The estimated 200 de-risked ready-to-drill locations will provide at least four years of drilling inventory at a 50-well-per-year pace. We expect that this drilling activity will generate well-level rates of return in excess of 35% - 50%.”

— CEO, Tony Sanchez III

This most recent acquisition is the largest for Sanchez in a string of acreage deals beginning early last year. In March of 2013, the company purchased 43,000 net acres in Dimmit, Frio, La Salle, and Zavala counties from Hess Corporation for $265-million. At that time, the acquisition from Hess also doubled the size of the company. In June of 2013, Sanchez stuck another deal for Eagle Ford acreage, acquiring 10,300 net acres in Fayette, Lavaca, and Gonzales counties for $28.8-million.

Shell Exiting the Eagle Ford

In September of 2013, Shell announced it had plans to sell 106,000 acres in the Eagle Ford. The oil giant, unlike many other companies in the Eagle Ford, didn't meet its internal targets for size and profitability in the play. With the divestiture of its primary Eagle Ford assets, Shell retains 147,000 acres of non-operated leases in Maverick County.

The acquisition is expected to close in the second quarter of 2014, with an effective date of January 1, 2014.

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