Acquisition among Sanchez Energy’s production update

Sanchez Energy Corp.

Sanchez Energy Corp. (NYSE: SN), an independent oil resource company targeting the onshore US Gulf Coast with a current focus on the Eagle Ford shale play, has provided an update on its second-quarter 2013 operations, including an agreement to acquire approximately 10,800 net acres in Fayette, Gonzales and Lavaca counties in Texas in its Marquis area, with 250 BOE/d of estimated net production for approximately $29 million.

The company’s operations update stated that it has 25 wells in various stages of drilling, completion or initial flowback. It reported an estimated second-quarter 2013 production of 682 MBOE (7,497 average BOE/d), an increase of 92% over the first quarter of 2013 and an increase of 772% over the same period a year ago. The update also reported proved reserves at June 30, 2013, of 43 MMBOE, an increase of 103% as compared to year-end 2012 and an increase of 187% as compared to the same period a year ago.

President and CEO Tony Sanchez III commented, "Our production and reserve growth continues to be strong, with both nearly doubling in the first half of the year. We successfully closed and have transitioned the Cotulla assets to our control as of June 1. We made the operational decision to accelerate the replacement of temporary flowback facilities on 16 of the acquired wells in order to further reduce operating costs. Consequently, a number of wells were shut in to allow that work to occur, resulting in the deferment of approximately 25,000 BOE of expected June production to future periods. Also, as previously disclosed, the Prost C #7H well in our Marquis area is currently being sidetracked due to a contractor error during the cementing of the production casing. This well was scheduled to be on production for 60 days of the second quarter, resulting in the delay of approximately 29,000 BOE of production, which we now expect to come online in the second half of the year once the well is sidetracked and completed.”

He also stated that the company currently has seven rigs running (six net), having added a rig to drill the Prost C #7H sidetrack, and a sizeable backlog of 25 wells in various stages of drilling, completion, or initial flowback. “This inventory of wells to be completed is the result of multi-well pad drilling, which we utilize in order to drive capital costs lower through more efficient drilling operations and the optimization of surface production and gathering facilities,” Sanchez said.

Sanchez Energy expects to close on the acquisition in its Marquis area by the end of July, subject to normal closing conditions. “This acquisition comprises approximately 10,800 net acres and is located just to the northwest of our Prost area in Marquis where we have seen strong performance from wells completed earlier this year,” Sanchez said. “The acquisition also includes interests in seven wells with modest proved reserves and production, and we anticipate this acquisition to have multiple developmental synergies with our current Marquis program."

The company’s estimated total production for the second quarter of 2013 was 682.2 MBOE. Crude oil represented 77% of the total production stream, natural gas liquids represented 12%, and natural gas represented 11%. The estimated 682.2 MBOE of total production compares to 78.2 MBOE in the second quarter of 2012, an increase of 772%, and an increase of 92% over the most recent quarter's total production of 354.9 MBOE.

Sanchez Energy currently has seven rigs (five operated rigs and two non-operated rigs) running across its four core project areas. Two rigs are running in Palmetto with a third rig expected to be added by October. Three rigs are currently running in Marquis, one rig is running in Cotulla and one rig is running in Maverick.

Houston-based Sanchez Energy Corp. focuses on the exploration, acquisition, and development of oil resources in the onshore US Gulf Coast, with a current focus on the liquids-rich Eagle Ford Shale, Austin Chalk, Buda Limestone, and Pearsall Shale areas. 


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