Sanchez Energy Corp. (NYSE: SN) has a definitive agreement with an effective date of January 1, 2014, to purchase operated assets to be named Catarina in the Eagle Ford trend of South Texas from wholly owned subsidiaries of Royal Dutch Shell plc for approximately $639 million in cash.
The assets, consisting of 60 MMBOE of proved reserves and 24,000 BOE/D of average first-quarter 2014 production (60% liquids), are located on 106,000 net acres in Dimmit, LaSalle, and Webb counties, Texas. This additional acreage is expected to bring the total company position in the Eagle Ford to 226,000 acres with up to 3,000 potential drilling locations and average first-quarter 2014 pro forma production of 42,800 BOE/D.
Analysts from Global Hunter Securities said, “SN scores another major acquisition in the Eagle Ford, picking up RDS's 106K net acres for $639MM. With current production of 20 Mboepd, the purchase implies a price of ~$32K/boepd, well below previous transactions in the Eagle Ford. At this price, the transaction appears highly accretive to cash flow and increases our price target to $39 from $36. In addition to providing production and cash flow in the near term, the acquired assets include 200 identified future drilling locations with 800 additional potential locations, giving SN multiple years of double-digit growth. We like the acquisition and reiterate our Buy rating.”