Strong Production as Company Tests New
Well Designs and Increases Western Eagle Ford Oil Window
Development
Sanchez Energy Corporation (NYSE:SN) (“Sanchez Energy” or the
“Company”), today announced operating results for the third quarter
2016. Highlights include:
- Third quarter 2016 production of approximately 4.7 million
barrels of oil equivalent (“MMBoe”), or approximately 51,500
barrels of oil equivalent per day (“Boe/d”), was at the high end of
Company’s 50,000 to 52,000 Boe/d guidance for the
quarter;
- New generation of completion design that involves tighter
cluster spacing and increased fluid and proppant loading being
tested in the Upper and Middle Eagle Ford, with additional tests
planned in the Lower Eagle Ford at both Catarina and Cotulla
starting in the fourth quarter 2016;
- Through optimized process and design efficiencies, average cost
per well during the third quarter was $3.0 million, over a 25
percent savings compared to the third quarter 2015;
- Some of the most recent pads at Catarina and Cotulla came in
below $2.8 million per well;
- The Company’s 50 percent interest in Carnero Gathering, LLC
(“Carnero Gathering”) was sold during the third quarter 2016 to
Sanchez Production Partners LP (NYSE:SPP) (“SPP”) for a cash
payment of approximately $37 million and the assumption by SPP of
remaining Carnero Gathering capital commitments, estimated to be
$7.4 million (the “Carnero Gathering Transaction”);
- The Company recently executed a definitive agreement to sell
its 50 percent interest in Carnero Processing, LLC (“Carnero
Processing”) to SPP for an estimated cash payment of $47.7 million
and the assumption by SPP of remaining capital commitments to
Carnero Processing, estimated to be approximately $32.3
million (the “Carnero Processing Transaction”);
- The Company recently executed a definitive agreement to sell
certain non-core producing oil and gas assets, located in South
Texas, to SPP for total consideration of approximately $27 million
(the “Production Asset Transaction”);
- On Oct. 24, 2016 the Company executed a definitive agreement
with Carrizo Oil & Gas, Inc. (Nasdaq:CRZO) (“Carrizo”) to sell
approximately 15,000 net acres and approximately 3,000 Boe/d of
non-core Eagle Ford Shale production for $181 million in cash,
subject to normal and customary closing adjustments; and
- The asset sales are expected to enhance the Company’s already
strong liquidity position which, as of the end of the third quarter
2016, totaled approximately $629 million.
MANAGEMENT COMMENTS“We continue
to deliver strong operating performance in 2016,” said Tony
Sanchez, III, Chief Executive Officer of Sanchez Energy. “Our third
quarter 2016 production results, at approximately 51,500 Boe/d,
were at the high end of our guidance of 50,000 to 52,000 Boe/d for
the quarter, while our average cost per well during the quarter
came in at approximately $3.0 million. A continuing focus on
process improvements and efficiency gains has resulted in further
success, with several of our more recent pads coming in below $2.8
million per well. Having demonstrated a “best in class” cost
structure in our focus area, we are achieving well performance that
continues to improve as we test improved completion designs.
This combination of lower costs and strong production continues to
produce attractive returns on the Company’s capital program in
2016.
“At Catarina, we continue to focus on enhanced
completion designs across the ranch. Our new generation of
completion design, which involves tighter cluster spacing and
increased fluid and proppant loading, is currently being tested in
the Upper and Middle Eagle Ford at Catarina. During the third
quarter 2016, we extended our success in Western Catarina with
Upper Eagle Ford results consistently exceeding expectations.
With the performance improvements and cost savings realized this
year, the Western Catarina wells are now yielding returns in excess
of 50 percent. In South-Central Catarina, we have over 120
days of production from the E33 pad, and the four wells on that pad
continue to track 20 to 30 percent above our published 1,100 MBoe
type curve. We are currently in the process of appraising the
northern extent of Central Catarina and have plans for further
delineation of South-Central Catarina in the first half of
2017. Additional tests involving the new generation of
completion design are planned in the Lower Eagle Ford at both
Catarina and Cotulla starting in the fourth quarter 2016.
“At Cotulla, nine additional wells were brought
on-line in the Hausser area and are currently exceeding
expectations. The 30-day initial production rates for these
wells are averaging approximately 10 to 15 percent above our
publicly disclosed Maverick type curve. Of note, using both
current well costs and our Maverick type curve, these wells are
yielding returns of nearly 85 percent at current strip pricing.
We are very pleased with the results at Cotulla this year,
and currently anticipate an increase in drilling and completion
capital in this area of the Western Eagle Ford in 2017.
“Our successful drilling efforts are well
supported by our recent business development activity.
Leveraging our strategic relationship with SPP, we closed the
Carnero Gathering Transaction in early July 2016 for cash
consideration of approximately $37 million and the assumption by
SPP of an estimated $7.4 million in future capital obligations to
Carnero Gathering. Earlier this month, the Company extended
its business development activity with SPP by announcing the
execution of definitive agreements expected to result in the
planned divestiture of the Company’s 50 percent interest in Carnero
Processing and the sale of certain non-core oil and gas production
assets in South Texas. The Carnero Processing Transaction is
expected to result in an initial payment of approximately $47.7
million and the assumption by SPP of remaining capital commitments
to Carnero Processing, estimated at approximately $32.3 million,
and the Production Asset Transaction is expected to result in total
consideration of $27 million. Separately, we announced the
sale of approximately 15,000 net acres and approximately 3,000
Boe/d of non-core Eagle Ford Shale production to Carrizo for $181
million.
“The SPP and Carrizo transactions are expected
to close in the fourth quarter 2016. The additional capital
raised from these transactions further supports the Company’s
revised 2016 capital plan and strategic capabilities heading into
2017 and provides clear evidence of our dedication to improving our
balance sheet while maintaining a focus on core areas of
operations. We have an extensive, high quality inventory of
drilling locations at both Catarina and Cotulla that are attractive
at today’s commodity prices, and currently see a number of
opportunities to expand our footprint in a way that leverages our
key strengths and critical mass in the Western Eagle Ford.
With this goal in mind, the proceeds from the previously
announced transactions will improve the Company’s already strong
liquidity position which, as of the end of the third quarter 2016,
totaled approximately $629 million, consisting of approximately
$329 million in cash and cash equivalents and an undrawn bank
credit facility with an elected commitment amount of $300
million. This added liquidity, which has been attained by the
Company without tapping the financial markets, provides capital to
fund our drilling plans while creating a key competitive advantage
in today’s challenging commodity price environment.”
OPERATIONS UPDATEDuring the
third quarter 2016, the Company spud 21 gross (20.5 net) wells and
completed 19 gross (19 net) wells.
Drilling and completion costs at Catarina during
the third quarter 2016 averaged approximately $3.0 million per well
and continue to trend downward, with some wells coming in below
$2.8 million during the quarter. At Cotulla, well costs
during the third quarter 2016 averaged approximately $3.0 million
per well, with some results also coming in below $2.8 million per
well.
At Catarina, drilling durations (spud to total
depth) are now consistently coming in at approximately seven days
per well. Similarly, drilling durations at Cotulla continue
to decline, with recent wells coming in below 6 days per well.
During the third quarter 2016, the Company
brought 12 wells on-line at Catarina. The Company has now
drilled 39 wells toward its next 50 well annual drilling commitment
at Catarina, which runs from July 1, 2016 to June 30, 2017.
At Cotulla, the Company brought seven wells on-line during the
quarter. Wells drilled at Cotulla continue to meet and exceed
expectations.
As of Sept. 30, 2016 the Company was running two
rigs at Catarina and one rig at Cotulla and had 676 gross (558 net)
producing wells with 19 gross (17 net) wells in various stages of
completion, as detailed in the following table:
|
Project Area |
|
Gross Producing Wells |
|
Gross Wells Waiting/ Undergoing Completion |
|
Catarina |
|
323 |
|
13 |
|
Marquis |
|
103 |
|
-- |
|
Cotulla / Wycross |
|
160 |
|
2 |
|
Palmetto |
|
76 |
|
4 |
| TMS /
Other |
|
14 |
|
-- |
|
Total |
|
676 |
|
19 |
|
|
|
|
|
|
PRODUCTION UPDATEThe Company’s
estimated total production for the third quarter 2016 was
approximately 51,500 Boe/d, which was at the high end of the
Company’s 50,000 to 52,000 Boe/d guidance for the quarter and
represents relatively flat production when compared to the third
quarter 2015. The Company’s production mix during the third quarter
2016 consisted of approximately 33 percent oil, 30 percent natural
gas liquids (“NGLs”), and 37 percent natural gas. Total
production volumes are summarized in the following table:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, 2016 |
|
Three Months Ended September 30, 2015 |
|
% Change |
|
Three Months Ended June 30, 2016 |
|
Three Months Ended September 30, 2016 |
|
% Change |
| Net
Production: |
|
|
|
|
|
|
|
|
|
|
|
|
| Oil (MBbl) |
|
1,562 |
|
1,671 |
|
|
-7 |
% |
|
1,635 |
|
1,562 |
|
|
-4 |
% |
| NGLs (MBbl) |
|
1,413 |
|
1,509 |
|
|
-6 |
% |
|
1,519 |
|
1,413 |
|
|
-7 |
% |
| Natural Gas (MMcf) |
|
10,595 |
|
10,090 |
|
|
5 |
% |
|
11,602 |
|
10,595 |
|
|
-9 |
% |
| Total Oil Equivalent
(MBOE) |
|
4,741 |
|
4,862 |
|
|
-2 |
% |
|
5,087 |
|
4,741 |
|
|
-7 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Average Daily
Production Volumes |
|
|
|
|
|
|
|
|
|
|
|
|
| Oil (Bbl/day) |
|
16,981 |
|
18,166 |
|
|
-7 |
% |
|
17,962 |
|
16,981 |
|
|
-5 |
% |
| NGLs (Bbl/day) |
|
15,355 |
|
16,400 |
|
|
-6 |
% |
|
16,687 |
|
15,355 |
|
|
-8 |
% |
| Natural Gas (Mcf/day) |
|
115,166 |
|
109,671 |
|
|
5 |
% |
|
127,490 |
|
115,166 |
|
|
-10 |
% |
| Total Oil Equivalent
(Boe/day) |
|
51,531 |
|
52,844 |
|
|
-2 |
% |
|
55,898 |
|
51,531 |
|
|
-8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
ABOUT SANCHEZ ENERGY CORPORATION Sanchez
Energy Corporation (NYSE:SN) is an independent exploration and
production company focused on the acquisition and development of
unconventional oil and natural gas resources in the onshore U.S.
Gulf Coast, with a current focus on the Eagle Ford Shale in South
Texas where we have assembled over 200,000 net acres, and the
Tuscaloosa Marine Shale. For more information about Sanchez Energy
Corporation, please visit our website:
www.sanchezenergycorp.com.
FORWARD-LOOKING STATEMENTSThis
press release contains, and our officers and representatives may
from time to time make, forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of historical facts,
included in this press release that address activities, events or
developments that Sanchez Energy expects, believes or anticipates
will or may occur in the future are forward-looking statements,
including statements relating to capital expenditures for and
completion of Carnero Gathering and Carnero Processing, Sanchez
Energy’s ability to receive future payments from SPP and the
expected benefits of the Carnero Gathering Transaction, Carnero
Processing Transaction, Production Asset Transaction and the
transaction with Carrizo. These statements are based on
certain assumptions made by the Company based on management's
experience, perception of historical trends and technical analyses,
current conditions, anticipated future developments and other
factors believed to be appropriate and reasonable by management.
When used in this press release, the words "will,"
"potential," "believe," "estimate," "intend," "expect," "may,"
"should," "anticipate," "could," "plan," "predict," "project,"
"profile," "model," "strategy," "future," or their negatives, other
similar expressions or the statements that include those words, are
intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words.
Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond the
control of Sanchez Energy, which may cause actual results to differ
materially from those implied or expressed by the forward-looking
statements, including, but not limited to failure of our joint
ventures to perform as anticipated, inability to close announced
transactions, failure or delays on the part of our joint venture
partners, failure to continue to produce oil and gas at historical
rates, costs of operations, delays, and any other difficulties
related to producing oil or gas or completing our ongoing joint
venture projects, the price of oil or gas, marketing and sales of
produced oil and gas, estimates made in evaluating reserves,
competition, general economic conditions and the ability to manage
our growth, our expectations regarding our future liquidity, our
expectations regarding the results of our efforts to improve the
efficiency of our operations to reduce our costs and other factors
described in Sanchez Energy's most recent Annual Report on Form
10-K and any updates to those risk factors set forth in Sanchez
Energy's Quarterly Reports on Form 10-Q. Further information on
such assumptions, risks and uncertainties is available in Sanchez
Energy's filings with the U.S. Securities and Exchange Commission
(the "SEC"). Sanchez Energy's filings with the SEC are
available on our website at www.sanchezenergycorp.com and on the
SEC's website at www.sec.gov. In light of these risks,
uncertainties and assumptions, the events anticipated by Sanchez
Energy's forward-looking statements may not occur, and, if any of
such events do occur, Sanchez Energy may not have correctly
anticipated the timing of their occurrence or the extent of their
impact on its actual results. Accordingly, you should not place any
undue reliance on any of Sanchez Energy's forward-looking
statements. Any forward-looking statement speaks only as of
the date on which such statement is made and Sanchez Energy
undertakes no obligation to correct or update any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as required by applicable law.
COMPANY CONTACT:
Howard J. Thill
EVP & Chief Financial Officer
(713) 783-8000
General Inquiries: (713) 783-8000
www.sanchezenergycorp.com