Sanchez Energy Corporation (NYSE:SN) (“Sanchez Energy” or the
“Company”) today announced operating results for the first quarter
2018. Highlights include:
- First quarter 2018 production of nearly 7.3 million barrels of
oil equivalent (“MMBoe”), or 80,572 barrels of oil equivalent per
day (“Boe/d”);
- The Company completed 73 gross wells, finished completion
activities on all of the 132 gross drilled-but-uncompleted wells
(“DUCs”) acquired with the Comanche asset in March 2017, and
brought 68 gross wells on-line during the first quarter 2018;
- The Company brought five horizontal wells on-line during the
first quarter 2018 at the Rogers Dentonio Lease, in the western
portion of Comanche Area 3, that had an average lateral length of
4,850 feet and achieved average 30-day peak production rates of
approximately 1,075 Boe/d, 62 percent of which was oil;
- Ten horizontal wells in the Briscoe Metcalf Lease of Comanche
were drilled during the first quarter 2018 in a “quad stacked”
pattern that targeted both the Lower and Upper Eagle Ford Shale
using a new generation completion design and, while early, achieved
average 24-hour initial production (“IP”) rates of approximately
1,405 Boe/d, 60 percent of which was oil;
- At Catarina, the Company brought four South Central wells
on-line late in the fourth quarter 2017 that realized average
30-day peak production rates during the first quarter of 2018 of
approximately 1,785 Boe/d, 37 percent which was oil;
- Consistent with the Company’s 2018 capital plan, drilling
activity currently consists of eight drilling rigs and four
completion crews and will be reduced to four drilling rigs and two
and one half crews in the third quarter; and
- The Company has provided second quarter 2018 production
guidance of 80,000 Boe/d to 84,000 Boe/d.
MANAGEMENT COMMENTS“Although we
made good progress on our drilling program during the first quarter
2018, multiple factors led to production coming in below our
expectations,” said Tony Sanchez, III, Chief Executive Officer of
Sanchez Energy. “Among the factors that impacted production
were a weather-related disruption, a temporary third-party bottle
neck in natural gas takeaway capacity, and certain operational
impacts stemming from the testing of a variety of completion
methods across the asset base.
“We are actively working to remedy the
operational impacts on production, which were primarily the result
of hybrid completions on the DUCs acquired with the Comanche
assets, many of which were spaced tighter than we normally space
wells in our drilling program, and testing of more aggressive choke
management techniques on newer wells. Our analysis of these
operational impacts has led us to move almost entirely to
slickwater completions and a less aggressive choke management
strategy. Despite the lower than expected production, we
continue to see good rates of return on the Comanche DUCs, due to
the limited amount of capital that was needed to complete these
wells, and continue to test and refine various spacing, completion,
flowback and other strategies to drive additional value from our
assets.
“Early results from our 2018 development program
at both Comanche and Catarina have yielded positive results in
several areas. During the first quarter 2018, for example, we
brought 10 wells on-line in the Briscoe Metcalf Lease of Comanche
in Area 3 that were drilled in a “quad stacked” pattern that
targeted both the Lower and Upper Eagle Ford Shale using a new
generation completion design. These Metcalf wells were
monitored with surface and downhole micro-seismic and have shown
encouraging early flowback results from both zones. Although
we have limited data to date, 24-hour IP rates from the six Lower
Eagle Ford Metcalf wells averaged approximately 1,843 Boe/d, 55
percent of which was oil. The four Upper Eagle Ford Metcalf
wells also had encouraging 24-hour IP rates, averaging
approximately 750 Boe/d, 75 percent of which was oil. While
the Lower Eagle Ford accounts for approximately 80 percent of our
Comanche 2018 drilling program, we are pleased with the recent
Upper Eagle Ford well results in Comanche Area 3 and plan to
continue to appraise and evaluate the zone across other areas of
Comanche as a co-development target with the Lower Eagle Ford.
“Results from wells drilled on the western
portion of Comanche Area 3 have also exceeded our expectations.
We recently brought five horizontal wells on-line at the
Rogers Dentonio Lease that showed average 30-day peak production
rates of approximately 1,075 Boe/d, 62 percent of which was
oil. The wells, which had an average lateral length of 4,850
feet, were completed in five days, on average.
“Additionally, well results in Central Catarina
continue to outperform. During the first quarter 2018, four
E32 wells in South-Central Catarina showed average 30-day peak
production rates of approximately 1,785 Boe/d, 37 percent of which
was oil. In North-Central Catarina, we recently brought a
four well pad on-line that is also outperforming
expectations. The 24-hour IP rates for these wells averaged
approximately 2,000 Boe/d, 38 percent of which was oil, which
exceeded our type curve. These results are further
confirmation of the extent of the North-Central fairway at
Catarina, which has a rate of return profile second only to
South-Central Catarina.
“Sanchez Energy’s drilling and completion
activity is progressing ahead of schedule this year and, with the
successful integration of the Comanche asset, we are now realizing
operating as well as drilling cost efficiencies and synergies.
One example of these efficiencies is a reduction in the
amount of time it takes us to drill a well. We are currently
averaging nine days to drill horizontal wells with 9,800 foot
laterals at Comanche, an improvement of 18 percent compared to last
year. With this improvement, we drilled 49 gross wells during
the first quarter 2018. We also completed 73 gross wells,
finished completion activities on all 132 gross DUCs acquired with
the Comanche assets in March 2017, and brought 68 gross wells
on-line during the quarter.
“While we have seen improvements recently in oil
price fundamentals, we remain focused on capital discipline.
We intend to reduce our operated rig count from eight rigs to four
rigs and reduce our completions activity from four to two and one
half crews in the third quarter, which will reduce the pace of our
capital spending as originally planned in the second half of
2018. We continue to forecast that our capital spending will
remain within our guidance range of $420 million to $470 million
for the full year 2018.”
OPERATIONS UPDATEDuring the
first quarter 2018, the Company drilled 49 gross (25.67 net) wells
and completed 73 gross (23.3 net) wells. The Company brought
62 wells on-line at Comanche and 6 wells on-line at Catarina during
the quarter.
The Company finished completion activities
during the first quarter 2018 on all of the 132 gross DUCs acquired
with the Comanche assets in March 2017. With continuous
drilling activity on the asset, the Company exited the first
quarter 2018 with 42 gross DUCs at Comanche, which is closer to a
normalized inventory level for the asset.
As of March 31, 2018, the Company had 2,233
gross (883.2 net) producing wells with 59 gross wells in various
stages of completion, as detailed in the following table:
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Gross |
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Gross |
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Wells Waiting / |
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Project |
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Producing |
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Undergoing |
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Area |
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Wells |
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Completion |
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Catarina |
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395 |
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13 |
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Comanche |
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1,644 |
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42 |
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Maverick |
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63 |
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0 |
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Palmetto |
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84 |
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4 |
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TMS /
Other |
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47 |
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0 |
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Total |
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2,233 |
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59 |
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As of March 31, 2018, the Company had banked or drilled 59 total
wells toward its 50 well annual drilling commitment at Catarina for
the period that ends on June 30, 2018. As a result, the
Company has met its annual drilling commitment at Catarina for the
current period and has already drilled nine wells toward a maximum
bank of 30 wells for the next annual drilling commitment period
that begins on July 1, 2018.
PRODUCTION UPDATEThe Company’s
estimated total production for the first quarter 2018 averaged
approximately 80,572 Boe/d and consisted of approximately 35
percent oil, 33 percent natural gas liquids (“NGLs”), and 32
percent natural gas.
The Company has provided second quarter 2018
production guidance of 80,000 Boe/d to 84,000 Boe/d. The
midpoint of second quarter 2018 production guidance represents over
10 percent production growth when compared to the second quarter
2017.
HEDGING UPDATEOn a consolidated
basis, the Company has hedged approximately 22,000 barrels (“Bbls”)
per day of its 2018 oil production and 191,000 million British
thermal units (“MMBtu”) per day of its 2018 natural gas production,
and approximately 10,600 Bbls per day of its 2019 oil production
and 48,000 MMBtu per day of its 2019 natural gas production.
Additional information on the Company’s hedge positions can be
found in the Sanchez Energy Investor Presentation posted at
www.sanchezenergycorp.com.
ABOUT SANCHEZ ENERGY
CORPORATIONSanchez Energy Corporation (NYSE:SN) is an
independent exploration and production company focused on the
acquisition and development of U.S. onshore unconventional oil and
natural gas resources, with a current focus on the Eagle Ford Shale
in South Texas where we have assembled approximately 285,000 net
acres. For more information about Sanchez Energy Corporation,
please visit our website: www.sanchezenergycorp.com.
FORWARD-LOOKING STATEMENTSThis
press release contains, and our officers and representatives may
from time to time make, forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of historical facts,
included in this press release that address activities, events or
developments that Sanchez Energy expects, believes or anticipates
will or may occur in the future are forward-looking statements,
including statements relating to future financial and operating
results and returns, our strategy and plans, including future
drilling plans and economic drilling zones, our ability to increase
reserves and production and generate income or cash flows, our
ability to keep well costs down, the benefits related to the
Comanche transaction and the Company’s anticipated ability to fund
capital expenditures or reduce its leverage. These statements
are based on certain assumptions made by the Company based on
management's experience, perception of historical trends and
technical analyses, current conditions, anticipated future
developments and other factors believed to be appropriate and
reasonable by management. When used in this press release,
the words "will," "potential," "believe," "estimate," "intend,"
"expect," "may," "should," "anticipate," "could," "plan,"
"predict," "project," “budget,” “forecast,” “guidance,” "profile,"
"model," "strategy," "future," or their negatives, other similar
expressions or the statements that include those words, are
intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words.
Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond the
control of Sanchez Energy, which may cause actual results to differ
materially from those implied or expressed by the forward-looking
statements, including, but not limited to the failure to
successfully execute our business and financial strategies, the
failure of acquired assets, including
the Comanche assets, and our joint ventures (including
our partnership with affiliates of the Blackstone Group, L.P.)
to perform as anticipated, the inability to successfully integrate
the various assets acquired by us into our operations, fully
identify potential problems with respect to such properties and
accurately estimate reserves, production and costs with respect to
such properties, the failure to continue to produce oil and gas at
historical rates, the costs of operations, delays, and any other
difficulties related to producing oil or gas, the price of oil or
gas, the failure to realize benefits from our transactions with
Sanchez Midstream Partners LP, the marketing and sales of produced
oil and gas, the estimates made in evaluating reserves,
competition, general economic conditions and the ability to manage
our growth, our expectations regarding our future liquidity,
leverage or production, our expectations regarding the results of
our efforts to improve the efficiency of our operations to reduce
our costs, disruptions due to extreme weather conditions, such as
extreme rainfall, hurricanes or tornadoes and other factors
described in Sanchez Energy's most recent Annual Report on Form
10-K and any updates to those risk factors set forth in Sanchez
Energy's Quarterly Reports on Form 10-Q or Current Reports on Form
8-K. Further information on such assumptions, risks and
uncertainties is available in Sanchez Energy's filings with the
U.S. Securities and Exchange Commission (the "SEC"). Sanchez
Energy's filings with the SEC are available on our website at
www.sanchezenergycorp.com and on the SEC's website at www.sec.gov.
In light of these risks, uncertainties and assumptions, the events
anticipated by Sanchez Energy's forward-looking statements may not
occur, and, if any of such events do occur, Sanchez Energy may not
have correctly anticipated the timing of their occurrence or the
extent of their impact on its actual results. Accordingly,
you should not place any undue reliance on any of Sanchez Energy's
forward-looking statements. Any forward-looking statement
speaks only as of the date on which such statement is made, and
Sanchez Energy undertakes no obligation to correct or update any
forward-looking statement, whether as a result of new information,
future events or otherwise, except as required by applicable
law.
COMPANY CONTACT:Kevin SmithVP
Investor Relations(281) 925-4828
Cham KingInvestor Relations & Capital
Markets(713) 756-2797
General Inquiries: (713)
783-8000
www.sanchezenergycorp.com