Sale of interest in South Texas processing plant
includes an initial payment of approximately $47.7 million in cash
and the release of approximately $32.3 million in remaining capital
spending commitments
Sanchez Energy Corporation (NYSE:SN) (“Sanchez Energy” or the
“Company”) today announced that the Company has executed definitive
agreements with Sanchez Production Partners LP (NYSE MKT:SPP)
(“SPP”) pursuant to which the Company anticipates:
- SPP will acquire the Company’s 50% interest in Carnero
Processing, LLC (“Carnero Processing”) for an initial payment of
approximately $47.7 million in cash and the assumption by SPP of
remaining capital commitments to Carnero Processing, which are
estimated at approximately $32.3 million (the “Carnero Processing
Transaction);
- SPP will acquire certain non-core producing oil and gas assets,
located in South Texas, from the Company for total consideration of
$27 million, prior to normal and customary closing adjustments (the
“Production Asset Transaction”); and
- SPP will obtain an option to acquire a lease, currently held by
a wholly-owned subsidiary of Sanchez Energy, for a tract of land
leased from the Calhoun Port Authority in Point Comfort, Texas, the
location of which is intended for the construction of a marine
crude storage terminal.
Carnero Processing, which is constructing a
cryogenic natural gas processing plant in La Salle County, Texas
(the “Raptor Plant”), is currently jointly owned by Sanchez Energy
and Targa Resources Corp. (NYSE:TRGP) (“Targa”). The Raptor Plant
is expected to be operational in early 2017. Sanchez Energy
has invested approximately $40.2 million in Carnero Processing
since entering the joint venture with Targa in October 2015.
The Raptor Plant, together with the Carnero
Gathering System (which is 50% owned by each of SPP and Targa) that
will connect the Company’s Catarina asset to the plant, is expected
to provide significant operational and commercial benefits to
Sanchez Energy, including better yields and higher net-back
pricing. The Company has firm capacity for 125,000 Mcf/d of
plant processing and associated pipeline capacity for five years,
and has dedicated its Catarina acreage and all production
developed at the asset during the term of its 15 year agreement
with the joint ventures. The Company also has the option to deliver
additional volumes and commit additional acreage to the Raptor
Plant as production increases. Sanchez Energy currently plans
to spend approximately two-thirds of its 2016 drilling and
completion budget at Catarina, and considers the asset a key part
of its development focus and growth strategy.
The Production Asset Transaction includes
working interests in 23 producing Eagle Ford wellbores located in
Dimmit and Zavala counties in South Texas together with escalating
working interests in an additional 11 producing wellbores located
in the Palmetto Field in Gonzales County, Texas. The Production
Asset Transaction encompasses approximately 700 Boe/d of
production, on average, in 2017. The estimated proved reserves from
the producing wellbores is approximately 2,136 MBoe, of which 73%
is oil, 13% natural gas liquids, and 14% natural gas.
The Carnero Processing Transaction and the
Production Asset Transaction, which are expected to close in the
fourth quarter 2016, are subject to the satisfaction of customary
closing conditions, including SPP’s arrangement of financing to pay
the purchase price under each transaction agreement.
MANAGEMENT COMMENTARY“The
transactions announced today are further evidence of the benefits
of our strategic relationship with SPP,” said Tony Sanchez, III,
Chief Executive Officer of Sanchez Energy. “Proceeds from the
transactions, which are expected to close in the fourth quarter
2016, 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, consisting of approximately
$329 million in cash and cash equivalents and an undrawn bank
credit facility with an elected commitment amount of $300 million.
As we look to pursue asset acquisitions and an organic growth
strategy that stems from our extensive inventory of drilling
opportunities that are highly economic at today’s commodity price
levels, we continue to see our liquidity as a key competitive
advantage.”
OTHER INFORMATIONThe
transactions were reviewed and approved by the Board of Directors
(the “Board”) of Sanchez Energy following review and
approval by the Board's Audit Committee, which is comprised of
independent directors. Jefferies LLC acted as sole financial
advisor to the Board's Audit Committee. Richards, Layton
& Finger, P.A. served as counsel to the Board’s Audit Committee
and Akin Gump Strauss Hauer & Feld
LLP represented Sanchez Energy in connection with
the negotiation of the transactions.
ABOUT SANCHEZ ENERGY
CORPORATIONSanchez 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
approximately 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 the anticipated closing of the
Transactions; capital expenditures for, completion of, and
commercial in-service of the Raptor Plant; the expected operational
and commercial benefits of the Raptor Plant and Targa joint
ventures; the disposition of assets to SPP; and the Company’s plans
for development of the Catarina asset. 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, 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:
Garrick (Rick) Hill
Interim Chief Financial Officer
(877) 847-0009
General Inquiries: (713) 783-8000
www.sanchezenergycorp.com