HOUSTON, Jan. 7, 2015 /PRNewswire/ -- Sanchez Energy Corporation (SN) (the "Company", "SN", "Sanchez Energy", "we", "our", or similar terms), today announced a revised 2015 capital plan and guidance, which included the following highlights:
- Total capital plan for 2015 is expected to be in a range of $600 million to $650 million, of which $560 to $600 million will be for well drilling and completion and $40 to $50 million will be for midstream, leasing, and other.
- Excluding carryover capital from 2014, the capital budget will be annualized at a rate of $400 - $450 million. This compares to the initial 2015 capital budget of approximately $1.15 billion, set prior to the decline in oil prices. The new budget represents a reduction of approximately 60%.
- Activity will be reduced from 8 gross (7 net) rigs to 3.5 rigs (3.0 net), a reduction of almost 60% from fourth quarter 2014 levels.
- Capital plan will be fully funded from operating cash flows and cash on hand without the need to draw on the Company's unused corporate credit facility through year end 2015.
- Average production for 2015 will range between 40,000 and 44,000 BOE/D, an increase of approximately 40% over expected 2014 average production at the mid-point of the guidance range.
- Targeted well costs at Catarina in 2015 are approximately $5 million per well (down from approximately $7.5 million per well), driven by service sector price reductions and increased efficiencies.
- At $60 per barrel for oil and $3.75 per mmbtu for natural gas, rates of return at Catarina and Palmetto are in excess of 35% and 60%, respectively.
Tony Sanchez, III, President and Chief Executive Officer of Sanchez Energy, commented: "In response to the deteriorating commodity price environment, Sanchez Energy has elected to further reduce its 2015 capital plan to a range of $600 to $650 million. This is a reduction of almost 30% from the $875 million capital plan announced in early November, which was itself reduced from the initial 2015 capital plan of $1.15 billion set prior to oil prices declining materially in the second half of 2014. The new 2015 capital plan will focus our capital spending on those areas with high rates of return while maximizing future potential. As a result, 2015 production is expected to average between 40,000 and 44,000 BOE/D, allowing us to maintain our expected fourth quarter 2014 average daily production rate and increase 2015 production year over year by approximately 40%. This revised capital plan, which assumes a flat price deck of $60 per barrel for oil and $3.75 per mmbtu for natural gas, is expected to be fully funded from cash flow from operations and cash on hand. As a result, we do not forecast any usage under our undrawn bank credit facility, which has a $650 million borrowing base with an elected commitment of $300 million.
We have asked all service vendors to reduce prices according to the changing commodity price environment. Material reductions have been made and are ongoing in all operating cost segments. At Catarina, we expect a decrease in overall well costs, with total drilling and completion costs averaging $5 million per well by mid-January.
Our 2015 drilling plan calls for us to move from 8 gross (7 net) rigs across our Eagle Ford position and 1 gross and net rig in the TMS in the fourth quarter of 2014 to 4 gross (3.5 net) rigs focusing on Catarina and Palmetto in the Eagle Ford and .25 gross and net rigs in the TMS. This represents an approximately 60% reduction in average rig count from fourth quarter 2014 to 2015. Our 2015 capital plan of $600 to $650 million is inclusive of carryover activity from the fourth quarter of 2014. On an annualized run rate basis, our 2015 capital plan would be $400 to $450 million as a result of reduced activity and lower wells costs from the service sector. A 2016 capital plan reflecting this $400 to $450 million with 3.5 gross (3 net) rigs focused on Catarina and Palmetto in the Eagle Ford would allow us to maintain our production levels over 2015."
2015 Capital Plan And Guidance
Sanchez Energy's 2015 capital plan calls for spending approximately $600 million to $650 million with $560 to $600 million allocated to spud 75 net wells and complete 88 net wells and the remaining $40 to $50 million to fund midstream, leasing, and other expenditures. Over 90% of the capital plan will be allocated towards drilling and completing wells, of which over 90% will be directed to the development of our Eagle Ford Shale properties as outlined below:
2015 Capital Plan ($MM)
Cotulla / Wycross
Total D&C Capital Plan
Midstream, Leasing, and Other
Total Capital Plan
Based on the above capital plan, Sanchez Energy expects average 2015 production to range between 40,000 and 44,000 BOE/D, an increase of approximately 40% over expected 2014 production at the mid-point of the guidance range. First quarter 2015 average production is expected to be between 40,000 and 44,000 BOE/D. Typical pad size in 2015 will vary between 5 and 10 wells per pad. Subsequent quarterly average production will fluctuate due to the use of extensive multi-well pad drilling.
Production Guidance (BOE/D)
40,000 - 44,000
40,000 - 44,000
% Oil / NGLs / Gas
46% / 27% / 27%
42% / 29% / 29%
Operating Cost & Expense Guidance ($/BOE)
Oil & Natural Gas Production Expenses
$9.00 - $10.00
$9.00 - $10.00
Production & Ad Valorem Taxes
$2.00 - $3.00
$2.00 - $3.00
$3.00 - $3.50
$3.00 - $3.50
Preferred Stock Dividends & Interest Expense
$8.40 - $9.25
$8.30 - $9.10
Effective Corporate Tax Rate
~35% (100% Deferred)
In Catarina, Sanchez Energy continues to see well results perform above initial expectations, demonstrating resilience in this lower commodity price environment. Using initial type curve expectations and targeted average well costs of $5 million per well, rates of returns are in excess of 35% at $60 per barrel of oil and $3.75 per mmbtu for natural gas. The 25% reduction of overall well cost is driven primarily by the reduction of unit costs that are being realized in the service sector. Efficiency gains and optimization will continue as Catarina benefits from a more manufacturing line based approach. This approach has decreased costs by 30% or more within the first year of operations in the Marquis and Cotulla areas. Development at Palmetto will be focused on the southern portion of the ranch where rates of return are in excess of 60% at $60 per barrel of oil and $3.75 per mmbtu for natural gas and average well costs between $7.0 and $7.5 million.
About Sanchez Energy Corporation
Sanchez Energy Corporation is an independent exploration and production company focused on the acquisition and development of unconventional resources in the onshore U.S. Gulf Coast with a current focus on the Eagle Ford Shale in South Texas, where it has assembled approximately 226,000 net acres, and the Tuscaloosa Marine Shale. For more information about Sanchez Energy Corporation, please visit its website: www.sanchezenergycorp.com
Forward Looking Statements
This 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 and Section 21E of the Securities Exchange Act of 1934. 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 related to our production and well results. 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," "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. These risks and uncertainties include, but are not limited to, the extent to which Sanchez Energy is successful in its efforts to acquire or discover additional reserves, its ability to continue to produce oil and gas at historical rates, costs of operations, delays, and any other difficulties related to producing oil or gas, the price of oil or gas, the extent and effect of any of its hedging activities, its success marketing and selling produced oil and gas, estimates made in evaluating reserves, competition, general economic conditions, the future availability and cost of employees and other personnel, facilities, equipment, materials and services, its ability to manage and continue growth and other factors as further described in Sanchez Energy's Annual Report for the most recently completed fiscal year ended December 31 and any updates to those risk factors set forth in Sanchez Energy's Quarterly Reports on Form 10-Q. No representation or warranty is made as to future performance. Further information on such assumptions, risks and uncertainties is available in Sanchez Energy's filings with the Securities and Exchange Commission ("SEC"). Sanchez Energy's filings with the SEC are available on its 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.
Cautionary Note to U.S. Investors
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves. We may use certain terms in our press releases, such as net resource potential and other variations of the foregoing terms that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the reserves disclosures in our filings with the SEC available on our website at www.sanchezenergycorp.com and the SEC's website at www.sec.gov. You can also obtain this information from the SEC by calling its general information line at 1-800-SEC-0330.
Michael G. Long
Executive Vice President and Chief Financial Officer
Sanchez Energy Corporation
Gleeson Van Riet
SVP, Capital Markets & Investor Relations
Sanchez Energy Corporation
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SOURCE Sanchez Energy Corporation