Sanchez Energy Exits 2011 Producing at 1,350 BOEPD Net; Increased Proved Reserves 118% Year-Over-Year

Sanchez Energy Corp. (NYSE: SN) disclosed its production and operational highlights for fiscal year 2011. SN exited 2011 producing nine wells (seven in the Eagle Ford) at 1,350 BOEPD net (80% oil) with two additional Eagle Ford wells awaiting completion. Click here for the news release.

Below are results from two wells the company recently completed and highlighted as part of its Palmetto prospect in Gonzalez County:

• Barnhart #5H (50% working interest): Began producing on December 2, 2011 at an average 30-day IP rate of 1,318 BOEPD gross on a 14/64-inch restricted choke. The well was drilled to a total depth of 17,122 feet (5,991 foot lateral) with a 17-stage frac.
• Barnhart #6H (50% working interest): Began producing on December 2, 2011 at an average 30-day IP rate of 1,235 BOEPD gross on a 14/64-inch restricted choke. The well was drilled to a total depth of 17,719 feet (5,998 foot lateral) with an 18-stage frac.

SN’s 2011 year-end reserve report prepared by Ryder Scott showed it increased its proved reserves 118% to 6.7 MMBOE, up from 3.1 MMBOE for 2010. The report also identified 9.2 MMBOE of probable reserves and 9.4 MMBOE of possible reserves for total 3P reserves of 25.3 MMBOE. The company’s proved reserves in the Eagle Ford, approximately 97% of which are located in its Palmetto prospect of Gonzalez County, are 84% oil and 86% proved undeveloped. The Palmetto acreage represents about 10% of SN’s 91,000 net acre position in the Eagle Ford (see table below for more detailed information regarding SN’s three Eagle Ford prospects).

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OAG360 Comments:

The Eagle Ford pure-play currently has 91,000 net acres located in the oil and liquids windows of the prolific Eagle Ford shale. SN estimates that it has 750 net drilling locations (assuming 120-acre spacing) throughout this acreage with total resource potential of 250 MMBOE. SN’s 91,000 net acres in the Eagle Ford are more than other micro-cap E&P names: GeoResources (NASDAQ: GEOI) owns 25,000 net acres prospective for the Eagle Ford shale; Crimson Exploration (NASDAQ: CXPO) owns 8,160 net acres; Magnum Hunter Resources (NYSE: MHR) owns 24,369 net acres; and Carrizo Oil & Gas (NASDAQ: CRZO) owns 41,000 net acres. OAG360 notes that only 14% of SN’s 6.7 MMBOE proved reserves are classified as proved developed as of December 31, 2011, giving the company the potential for production and reserve growth moving forward.

Recent Eagle Ford Completions:

The results of SN’s Barnhart #5H and Barnhart #6H wells in the Eagle Ford which produced at average 30 day IP rates of 1,318 BOEPD and 1,235 BOEPD compare favorably to GEOI’s three recent Eagle Ford completions in Fayette County (Northeast of Gonzalez County) which produced at average 30 day IP rates of 409 BOEPD. The wells also compare well to EOG’s recent completions in Gonzalez County. EOG’s Kerner Carson Unit (six wells) and King Fehner Unit (four wells) produced at average 30 day IP rates ranging from 757 BOPD to 1,242 BOPD and 761 BOPD to 997 BOPD, respectively.

SN’s Eagle Ford Prospect Breakdown:

Moving forward, SN plans to spend a combined $350 million drilling 46 wells in the oil and liquids windows of the Eagle Ford during 2012 and 2013.

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