Sanchez Energy’s Eagle Ford Acquisitions Hit Pay Dirt

Sanchez Energy Corp. (NYSE: SN) tore through the fourth quarter of 2013 as its $500 million Eagle Ford acquisitions paid off with a 905% production increase from fourth quarter 2012.

Sanchez reported fourth quarter 2013 production of 18,810 barrels of oil equivalent per day (BOE/d).

During the fourth quarter, the company brought 32 net wells online, including eight net wells in the Wycross acquisition, which drove the strong production for the quarter. Sanchez purchased the Wycross acreage from Rock Oil Co. LLC in September as part of a $220 million deal.

Tony Sanchez III, president and CEO, said 2013 was a transformative year for the company.

“Our production and reserves grew tremendously as a result of successfully executing our 2013 capital plan and completing several acquisitions,” he said. “We also entered into the Tuscaloosa Marine Shale, providing significant upside potential without reallocating substantial resources from the Eagle Ford shale. Our focus in 2014 will be to continue to execute on our Eagle Ford development program, increasing efficiency and further reducing costs.”

Sanchez closed on the $77.5 million TMS acreage in August.

Sanchez Energy’s production was well ahead of Global Hunter Securities LLC’s (GHS) 15,918 BOE/d estimate and the company’s guidance of 15,000 to 17,000 BOE/d, said Curtis Trimble, senior analyst for GHS.

Crude oil made up 73% of Sanchez’s fourth quarter production with natural gas liquids (NGLs) at 13% and natural gas at 14%.

“Although we reduced our forecasted crude cut and realized price, SN's growth continues to support our buy rating and $32 price target,” Trimble said. “We believe that the company's performance should translate not only into one of the best growth profiles in E&P, but also into a solid value.”

Sanchez’s 2014 capital plan calls for spending $650 million to $700 million to spud and complete 70 net wells and fund production facilities and related expenditures along with additional acreage acquisitions and seismic work.

About 95% of the capital plan will be allocated toward drilling and completing wells, with most directed to the development of Eagle Ford properties. Sanchez owns 125,000 net acres in the play.

Sanchez’s proved reserves increased to 58.9 MMBOE as of Dec. 31, up 178% from 21.2 MMBOE from December 2012. The company set first quarter 2014 production goals of 18,000 to 20,000 BOE/d.