Sanchez Energy (NYSE: SN) noted a reduction in its borrowing base Monday, down to $425 million from $500 million with commitments unchanged at $300 million. An amendment to its credit facility allows for $400 million in second lien debt.
Despite the borrowing base reduction, liquidity remains strong for the company and analysts with Seaport Global Securities gave the company a Buy rating. “Despite the reduced borrowing base, liquidity remains strong at $860MM ($435MM cash, $425MM undrawn revolver),” the analysts said, noting “the ability to tack on second lien debt further cements SN’s ability to manage through the commodity cycle,” supporting its upgrade of the company last week.
Noting management’s plan to fund its 2016 capital program ($200MM–$250MM) from operating cash flows and cash on hand, the analysts expect an “untapped revolver through YE17 at Strip prices.”
The company saw its borrowing base lowered from $550 million to $500 million in November 2015.