Sanchez Energy Corp. (NYSE: SN) spent at least $600 million in 2013 to strengthen its flagship position in the Eagle Ford.

The company has so far hit pay dirt in the Eagle Ford shale.

Sanchez fourth-quarter 2013 production grew 904% year-over-year (yoy). Fourth-quarter 2013 production was 18,810 barrels of oil equivalent per day (boe/d) compared with 1,874 boe/d in the fourth quarter of 2012.

Oil production also soared, hitting 13,746 boe/d, a 669% increase.

The company has offered production guidance of 107% for 2014.

“Drilling efficiencies, many of the most impactful of which are resulting from SN assuming operatorship of acquired assets, accelerated through fourth-quarter 2013 with completion costs declining 35% sequentially,” said Curtis Trimble, Global Hunter Securities LLC senior analyst.

With production growth guidance forecast at the 22,000 boe/d midpoint of 2014 production guidance, 2014 should again be an active year for the company.

Sanchez 2014 Operating Capital Plan ($MM)

Project Area

Gross Rig Count

Wells Spud

Wells Completed

Capex

% D&C Capital

Marquis

3.0

35

32

$300-$315

48%

Palmetto

0.7

5

8

50-60

9%

Cotulla

0.5

9

9

60-70

10%

Wycross

1.5

19

19

145-155

23%

TMS

1.3

2

2

60-65

10%

Total D&C Capital

7.0

70

70

$615-$665

100%

Source: Sanchez Note: SN will spend another $35 million on facilities, leasing and other costs.

Trimble raised Sanchez’s price target to $35 from $32 and held his rating at Buy.

Dan McSpirit, BMO Capital Markets Corp. analyst, said rig count assumptions show the Marquis operating area in the Eagle Ford representing about 50% of Eagle Ford completions in 2014.

Sanchez’s cash flow outspend is about $290 million. The company reported $479 million in liquidity in March.

On a simplistic level, the company offers inexpensively priced growth.

“What makes it less simple are drilling results expected in the Sante North area of the Marquis operating area, a data point viewed as somewhat critical to further de-risking the 69,000 net acres in this part of South Texas,” he said.

The results at Sante North could also add to the company’s inventory count.

“Recall the mechanical issues suffered on this well, not to mention the somewhat premature release of results to the Texas Railroad Commission,” he said. “One well doesn’t make a trend or condemn/validate a play, meaning we’ve placed a lot less emphasis on early results than what maybe the market has done,” he said.

McSpirit rates Sanchez “Outperform.”

In 2014 Sanchez plans to spud and complete 70 net wells, 68 of which are expected to be in the Eagle Ford using seven rigs.

Sanchez plans capex in the Eagle Ford are expected to drive triple-digit growth, especially as efficiency increases continue.

More multi-well, pad-based drilling and zipper fracs have given Sanchez significant drilling and completion efficiencies.

“In the Alexander Ranch area, wells are going from spud to total depth in as fast as eight days, resulting in drilling costs for the fourth quarter that were 25% less than for the first quarter of 2013,” he said.

Completion costs have dipped more substantially, by 35%, from the third quarter of 2013 to the start of the fourth quarter of 2013. Alexander Ranch wells cost are down to $6 million compared to $8.3 million before Sanchez took over.

Production for the first quarter of 2014 should range from 18 Mboe/d to 20 Mboe/d. Proved reserves for 2013 amounted to 58.9 MMboe, carrying a $1.5B estimated PV-10 value.

While participating in a number of non-operated Tuscaloosa Marine Shale (TMS) wells, Sanchez also plans to complete two operated TMS wells in 2014. Sanchez holds, or is in joint ventures in, 80,000 net acres in the TMS.