Sanchez Energy sells Eagle Ford midstream assets to affiliate

Sanchez Energy Corp. has agreed to sell certain pipeline, gathering, and compression assets on the western part of its Catarina asset in the Eagle Ford shale of South Texas to affiliate Sanchez Production Partners LP (SPP) for $345 million. The deal is expected to close in October.

Sanchez Energy says proceeds from the sale will enable the company to pursue asset acquisitions, the acceleration of cost-efficient drilling and completion, and the strategic leasing of additional acreage in its core operational areas.

Sanchez Energy previously reported that it had liquidity of $572 million as of June 30, which included $300 million in available capacity on the company's undrawn bank credit facility. As a result of the sale, pro forma liquidity will increase to $918 million, inclusive of cash on hand and the $300 million elected commitment under its undrawn revolving credit facility.

“The midstream assets which we acquired as part of the Catarina transaction in 2014 cover a dedicated area of approximately 35,000 net acres, or about 16% of our total Eagle Ford footprint,” said Tony Sanchez III, chief executive officer of Sanchez Energy, which at the time acquired 100% interest in 106,000 net acres in Dimmit, LaSalle, and Webb Counties, Tex., from Royal Dutch Shell PLC for $639 million (OGJ Online, May 21, 2014).

As part of the deal, Sanchez Energy will sell 150 miles of midstream gathering lines and associated midstream infrastructure concentrated in four gathering and processing facilities. Concurrent with the closing of the divestiture, the company will enter into a gathering agreement with SPP that provides for fixed rates over an initial term of 15 years.

For the first 5 years of the gathering agreement, there will be a minimum delivery commitment of 10,200 b/d of liquids and 142 MMcfd of gas.

Sanchez Energy also confirmed that its third quarter average production will likely meet or exceed the high end of its previous guidance range of 46,000-50,000 boe/d. The company remains confident that it will be able to build a 20-30 well bank toward its 50-well/year drilling commitment at Catarina at its current rig count.

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now


Shell Leverages Data to Transform from Reactive to Predictive Operations

This 6-page report describes how Shell engaged in a massive project with OSIsoft to transform the...

Selection, Use, Care and Maintenance of FR Clothing

For industries operating in an inherently dangerous environment, the importance of selecting the ...

Evolution or Revolution: IT / OT convergence means a world of possibilities

The oil and gas industry is experiencing a rapid paradigm shift in regards to digital transformat...

Predict, Prescribe, Profit: Creating a World that Doesn't Break Down

What are you doing to reduce unplanned downtime at your plant? Equipment breakdowns and process i...