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Sanchez Energy Announces Third

The following excerpt is from the company's SEC filing.

Quarter 2015 Operating and Financial Results and Increases Total Production Guidance for Fourth Quarter 2015


(Marketwired)November 9, 2015Sanchez Energy Corporation (NYSE: SN) (Sanchez Energy, the Company, we, our, us, or similar terms), today announced operating and financial results for the third quarter 2015. Highlights from the report include:

Total production of 4,862 thousand barrels of oil equivalent (MBOE) during the third quarter 2015, up 37% over the third quarter 2014

Average production of 52,844 barrels of oil equivalent per day (BOE/D), which excee ded the high end of the Companys guidance of 46,000 to 50,000 BOE/D

Revenues of $114.5 million ($154.0 million inclusive of hedge settlements), and Adjusted EBITDA (a non-GAAP financial measure) of $94.3 million

Pro forma liquidity of approximately $842 million as of September 30, 2015, consisting of $197 million in cash and cash equivalents, approximately $345 million of cash proceeds from the Western Catarina Midstream Divestiture and an elected borrowing base commitment of $300 million

Average drilling and completion costs (including facilities) at Catarina of $4.1 million per well during the third quarter 2015

South-Central Catarina wells exceed expectations, with average 30-day rates of greater than 1,300 BOE/D and estimated ultimate recoveries tracking to nearly double the 600-700 MBOE Western Catarina type curve

A total of 41 wells drilled toward the Companys 50 well annual drilling commitment at Catarina for the period July 2015 to June 2016, with the Company expecting to fulfill this commitment by year-end 2015

Fourth quarter 2015 production guidance of 48,000 to 52,000 BOE/D, an increase of 2,000 BOE/D over the third quarter 2015 production guidance

In 2016, Sanchez Energy will have 18,000 BBL/D of crude and 39 MMCF/D of natural gas hedged

A borrowing base of $500 million recommended by the lead agent on the Companys bank credit facility, with final approval of that borrowing base anticipated in the next few weeks with no change expected to the elected commitment amount


Tony Sanchez, III, Chief Executive Officer of Sanchez Energy, commented: Better well performance and efficiency gains continue to drive our 2015 operating results. In the third quarter 2015, we achieved average daily production of approximately 52,844 BOE/D, well in excess of the top end of our production guidance, while continuing to reduce well costs. At Catarina, our average drilling and completion costs were $4.1 million per well during the third quarter 2015. Of note, our South-Central Catarina wells have exceeded expectations, with average 30-day rates greater than 1,300 BOE/D and estimated ultimate recoveries tracking to nearly double the 600-700 MBOE Western Catarina type curve.

To date, a total of 41 wells have been drilled toward the Companys 50 well annual drilling commitment at Catarina for the period July 2015 to June 2016. With our two rig drilling program and new drilling efficiencies, we are currently averaging nine days spud to total depth at Catarina. As a result, the Company expects to nearly fulfill its current drilling commitment by year-end 2015. This would provide us with significant discretion to manage the capital needed to meet all drilling obligations through the first half of 2016, which would greatly improve our financial flexibility as we head into next year.

Further improving our financial flexibility, we have added significant liquidity with the Western Catarina Midstream divestiture, which closed in October 2015. As a result of the transaction, the Company maintained pro forma liquidity of approximately $842 million at the end of last quarter. Subsequent to the quarter, we also entered into joint ventures with a midstream partner, which we expect will enhance our marketing capability at Catarina through the construction and operation of a cryogenic gas processing plant and associated gathering pipeline. We anticipate these joint ventures will allow us to achieve better liquids yields and lower processing fees, resulting in lower operating costs, higher net-backs, and greater price realization on our natural gas liquids revenue stream. The joint ventures are also expected to improve our access to end markets, including the developing Mexico and global LNG markets and provide opportunities to increase revenue through utilization of the new midstream system to transport and process third-party volume

As a result of our drilling and completion efficiency gains and cost reductions, today we reiterate our preliminary 2016 upstream capital spending guidance of $250 million to $300 million. Our 2016 capital budget is expected to maintain production consistent with 2015 levels and, based on the continuous improvements achieved in our well results, may lead to some moderate year-over-year growth. In addition, we currently forecast that the Company will make approximately $115 million in midstream capital investments associated with the joint ventures over the next 12 to 18 months.


The Companys Eagle Ford development plan remains primarily focused on Catarina, where the Company plans to average two gross (two net) rigs for the remainder of 2015. In the third quarter 2015, the Company brought 27 gross (26.5 net) operated wells online.

At Catarina, third quarter 2015 development was focused primarily in Western Catarina, with a portion of the development focused on continued delineation of the South-Central area of the ranch. Well results in Eastern Catarina have continued to exhibit a flat decline profile and are now tracking estimated ultimate recoveries (EURs) approaching the 600-700 MBOE type curve designated for Western Catarina. In South-Central Catarina, well results have continued to trend above expectations and are currently tracking EURs of approximately 1,200 MBOE, nearly double the Western Catarina type curve.

Well costs in the third quarter 2015 averaged approximately $4.1 million, and are continuing to trend down with recent pad averages coming in below $4.0 million. These reductions have come as a result of efficiency improvements and have been realized without modification to well design.

At Cotulla, the Company brought online six wells during the third quarter 2015 that are currently in the early stages of flow back. Well costs, inclusive of a forecast for initial lift, averaged $3.7 million per well. This area of the Eagle Ford continues be a high-rate of return development opportunity in the context of future capital programs, as the majority of the Companys acreage is currently held by production.

As of September 30, 2015, the Company had 592 gross (476 net) producing wells with 30 gross (27 net) wells in various stages of completion, as detailed in the following table.

Wells Waiting /







TMS / Other


The Companys mix of hydrocarbon production during the third quarter 2015 consisted of approximately 34% crude oil, 31% natural gas liquids, and 35% natural gas. By asset area, Catarina, Marquis, Cotulla, Palmetto/Other comprised approximately 77%, 8%, 12%, and 3%, respectively, of the Companys total third quarter 2015 production volumes.

Revenue for the three months ended September 30, 2015 totaled $114.5 million, a decrease of 45% over the same period a year ago, due to a 45% decrease in the average sales price per BOE, inclusive of realized hedge gains, over that period. The effect of the decrease in commodity prices was partially offset by higher production due to well performance and efficiency gains at Catarina.

Production, average sales prices, and operating costs and expenses per BOE for the third quarter 2015 are summarized in the table that follows:

Three Months Ended

Nine Months Ended

Production volumes -

Oil (MBo)

NGLs (MBbls)

Natural gas (MMcf)



Total oil equivalent (MBOE)






Average sales price, excluding the realized impact of derivative instruments -

Oil ($ per Bo)

NGLs ($ per Bbl)

Natural gas ($ per Mcf)

Oil equivalent ($ per BOE)

Average sales price, including the realized impact of derivative instruments -

Operating costs and expenses ($/BOE):

Oil and natural gas production expenses

Production and ad valorem taxes

General and administrative, excluding stock based compensation and acquisition costs included in G&A (1)(2)

(1) Excludes stock-based compensation of $0.07 and $0 per BOE for the three months ended September 30, 2015 and 2014, respectively, and $1.15 and $3.64 per BOE for the nine months ended September 30, 2015 and 2014, respectively.

(2) Excludes acquisition costs included in G&A of $0.26 and $0.25 per BOE for the three and nine months ended September 30, 2014, respectively.