Sanchez Energy Corp. (NYSE: SN) has executed a definitive agreement to purchase assets in the Eagle Ford trend of South Texas from Hess Corp. (NYSE: HES) for US $265 million.
The assets consist of 13.4 million barrels of oil equivalent of proved reserves, 4,500 barrels of oil equivalent per day of current production, and 43,000 net acres in Dimmit, Frio, LaSalle, and Zavala counties, Texas. The transaction grows production significantly at a cost of US $59,000 per flowing barrels of oil equivalent per day and adds proved reserves at a cost of US $19.70 per barrels of oil equivalent.
The acquisition will materially increase the company's reserves, production, and net acres. The company’s current production will increase by 4,500 barrels of oil equivalent per day, or 115% over the company's 3,800 barrels of oil equivalent per day average rate for first two months of 2013. The company's 2012 year-end total proved reserves will increase by 13.4 million barrels of oil equivalent, or 63%, and increases proved developed reserves by 6.6 million barrels of oil equivalent, or 178% to 10.3 million barrels of oil equivalent. The company’s producing well count will increase by 50, or almost 150%, to 84 gross producing wells. The acquisition increases Eagle Ford net acres by 43,000 net acres to 138,000 net acres.
The acquisition includes estimated proved reserves of 13.4 million barrels of oil equivalent (70% oil) with estimated proved developed reserves of 6.6 million barrels of oil equivalent (64% oil). The proved reserves were estimated by the company's internal reserve engineers, and confirmed by the company's third party independent engineering firm, Ryder Scott Company LP, as of March 1. The acquired properties currently have 50 gross operated producing wells and an estimated current net production of approximately 4,500 barrels of oil equivalent per day (72% oil). The acquisition is expected to close 2Q 2013, with an effective date of March 1, and is subject to regulatory filings and other customary closing conditions. Moelis & Company acted as financial advisor to the company in this transaction.
In connection with the acquisition, the company has secured commitments for US $325 million in debt financing and expects to access the capital markets in the near term, subject to market conditions and other factors. Closing of the acquisition and availability of the debt financing are expected to occur concurrently in the second quarter of this year and will be subject to the satisfaction of various customary closing conditions.
Sanchez Energy Corp. is a Houston-based independent E&P company currently focused on the Eagle Ford Shale trend of South Texas.
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