Sanchez presents at EnerCom’s The Oil & Gas Conference®
During Sanchez’s breakout session, management was asked the following questions:
- Can you talk about drilling plans for next year in Catarina?
- How do see asset dropdowns proceeding going forward?
- Do you feel good about SPP being able to finance asset dropdowns?
- As you have added drilling locations, how should we model the drilling program going forward, especially in terms of EUR?
- In the step out drilling program in Catarina, how far can or will you continue to move out?
- When you bought the acreage, how did you overlook the middle Eagle Ford potential in South-Central Catarina?
- Would the asset dropdowns be specifically for drilling, or would you use it for debt reduction?
- Could you talk about the opportunity set for the asset dropdowns and quantify the possibilities over the next 5 years?
- Is anyone else transferring wellbore ownership to the midstream MLP’s like you guys are talking about? In that structure, does the MLP reserve the residual?
- Does the amount of hedging done into 2018 and 2019 give any insight into where you guys think the natural gas price is heading?
- What is the short term ownership target with SN?
- EOG has talked a little bit about the Austin Chalk. Do you see any potential?
You can listen to Sanchez’s presentation by clicking here.
For the company’s second quarter results, click here.
Sanchez Energy Corporation (ticker: SN) is an independent exploration and production company located in Houston, Texas, that is involved in unconventional hydrocarbon development in the Eagle Ford Shale and the Tuscaloosa Marine Shale.
Sanchez’s operations are primarily focused on the Eagle Ford, where the company is trying to maximize returns through cost reductions and increased well performance. Sanchez Energy’s 2016 upstream capital spending guidance is $250 million to $300 million, which positions the Company to be able to deliver total production growth of between 5% and 8% in 2017. The 2016 capital expenditures are a significant reduction from 2015, when the annual total upstream capital expenditures totaled $545 million.
The company increased production approximately 4% over the second quarter of 2015, from 4.9 MBoe to 5.1 MBoepd, despite a significant reduction in capital spending. The company expects 2016 production as a whole to remain flat compared to 2015 levels. Additionally, Sanchez Energy has improved drilling times and has experienced drilling cost reductions of over 65% since 2014 in the Catarina area, which is the focus of the company’s Eagle Ford development.
The company has focused on reducing the costs of wells and improving the well performance. In an operations update for the second quarter 2016 Sanchez announced an average cost per well of $3.3 million, with the results of some wells coming in below $3.0 million during the quarter.
The reduction in well costs is accompanied by the improved type curves coming from new wells. Wells in the South Central region of Catarina show average 30-day initial production rates that range from 1,600 to 1,900 Boe/d, the company’s best wells to date. Preliminary type curves indicate an improvement of 20% to 30% better than expectations.
Company reported Adjusted EBITDA was $79.6 million for the second quarter of 2016, up 23% from Q1 2016. The company has significant hedge positions, which were valued at over $123 million as of March 31, 2016. This corresponds to hedge contracts covering approximately 82% of expected 2016 production.
