2017 CapEx of $425 to $475 million to drill 109 wells
Sanchez Energy (ticker: SN) announced fourth quarter results Wednesday, showing a net income of $48.3 million, or $0.73 per diluted share. Full year results were a loss of $273 million, or ($4.63) per diluted share. After adjusting for non-cash and other special charges, fourth quarter and full year earnings are $9.5 million and $2.9 million, respectively.
While full reserves have not yet been released, preliminary values show year-end reserves increased significantly to 193 MMBOE, excluding acquisitions and divestitures. This is an increase of 55%, giving a reserve replacement ratio of 430%.
Eagle Ford acquisition produced massive stock boost
Sanchez energy recently made an important acquisition in the Eagle Ford. In January Sanchez and Blackstone Energy announced the acquisition of 318,000 acres from Anadarko, which would be split 50/50 between Sanchez and Blackstone. Sanchez therefore acquired 155,000 net acres and 33,500 BOEPD of current production. This was viewed favorably by investors, with Sanchez Energy stock increasing in value 53% in the three days after the announcement. For reference, the XOI index of oil and gas companies was almost perfectly flat in the same period.
After the acquisition Sanchez owns 335,000 net operated acres in the Eagle Ford, with an estimated 4,200 net potential drilling locations. The company estimates that 2017 CapEx will be between $425 and $475 million, with 90% of this spent on drilling Eagle Ford wells. Sanchez predicts that it will operate an average of 6 rigs in 2017 to drill 109 net wells.
Source: Sanchez Energy Q4 2016 Investor Presentation
Additionally, Sanchez currently has around 150 drilled uncompleted (DUC) wells in the area, mostly acquired in the Anadarko transaction. Current plans are to complete and bring online 32 of these wells in the next year.
Historical improvements in Eagle Ford completion design will be put to good use in these new wells. Pre 2014 completion designs used 750-1,200 lbs/ft of proppant, and resulted in a well cost of around $7.5 million. The current designs often use 1,750-2,000 lbs/ft of proppant for a well cost of about $3 million. This design improvement has increased EUR by about 50%, while decreasing costs by about 60%.
EnerCom Dallas presenter: SN
Sanchez Energy will be presenting its story at the Tower Club Downtown Dallas on Wednesday, March 1, as part of EnerCom Dallas, an investor conference which is modeled after EnerCom’s The Oil & Gas Conference® in Denver.
The Dallas conference is designed to offer investment professionals a unique opportunity to listen to a wide variety of oil and gas company senior management teams update investors on their operational and financial strategies and learn how the leading independent energy companies are building value in 2017.
The forum offers healthy dialogue and informal networking opportunities for attendees.
To sign up for EnerCom Dallas and hear Sanchez, request one-on-one meeting with management, or to find out more information about presenting companies and industry experts speaking at EnerCom Dallas, click here to visit the conference website.
