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Current SPP Stock Info

Sanchez Production Partners (ticker: SPP), the latest piece of Sanchez Oil & Gas’ (SOG) corporate umbrella, reported its first quarterly results as a limited partnership on May 15, 2015. SPP reported Q1’15 production of 3,596 BOEPD and completed its first transaction, acquiring 1,000 BOEPD of producing assets from Sanchez Energy (ticker: SN). SPP believes the assets will produce consistent volumes through the year 2019.

Sanchez Production Partners represents a unique facet to the Sanchez Oil & Gas family by providing a different business model and scope than other organizations in the tree. SPP is a reliable vehicle for a business development relationship with SN, considering the E&P “has a substantial inventory of assets with characteristics favorable to the MLP model,” says the company press release. SOG spent about two years implementing its MLP model and believes its size is advantageous for asset acquisitions in the current commodity environment.

Another Tool for Sanchez

sanchez-structure

Sanchez Oil & Gas Structure

SOG described the thought process of Sanchez Production Partners in a company presentation on May 18, 2015. According to SOG, the MLP extends the company’s reach into smaller markets that were previously viewed as unattainable due to their size and scope. SOG has historically been very active on acquisitions, particularly in the Eagle Ford Shale. The parent company has financed five acquisitions for approximately $1.1 billion since 2013, allowing SN to become a premier operator in the Eagle Ford Shale. Production for SN has more than doubled on a year-over-year basis due to organic growth and asset purchases.

SPP, meanwhile, is seen as an ideal platform for SN’s non-operated, proved developed producing assets. The structure, combined with a hedging system, provides reliable cash flow with low overhead costs. SPP’s capital intensity (defined as the amount of every EBITDA dollar required to maintain a flat production rate) of 17% is the lowest of the 12 upstream MLPs in EnerCom’s MLP Scorecard Benchmarking Report. Its asset base holds more than 21 MMBOE of proved reserves, 84% of which are proved developed producing.

SPP’s growth will be predicated by additional acquisitions and joint bid ventures, some of which may be of the midstream variety. As the MLP grows, SOG management expects to access capital markets and receive larger borrowing bases to fuel the growth model. “We believe a large-scale transaction will be key to recapitalizing SPP and resuming distributions to unitholders,” said Gerry Willinger, Interim Chief Executive Officer of Sanchez Production Partners, in a conference call following the release.

The company plans on divesting its legacy Midcontinent assets as early as June as the MLP progresses towards its goal of reaching its distribution coverage of 1.2x and borrowing base utilization of 80%.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.