Assessing Sanchez Energy’s Cost Efficiency in the Eagle Ford
Sanchez Energy’s drilling and completion costs
In a September 2017 presentation, Sanchez Energy (SN) noted that it had the lowest drilling and completion cost compared to its peers, based on its 2016 results.
As we can see in the image above, SN’s drilling completion costs in the Eagle Ford were just under $4 million, while the highest drilling and completion costs seen by one of its peers was over $7 million.
However, SN’s average lateral lengths in 2016 were around 6,000 feet, and some its peers had an average lateral length of around 8,000 feet. The EIA (Energy Information Administration) believes that drilling longer laterals is a key step toward increasing drilling efficiency.
However, SN did drill longer laterals this year following its Comanche acquisition. During 2Q17, SN brought four horizontal wells online, with an average lateral length of ~10,000 feet in the Stumberg Ranch within the Comanche area.
During the 2Q17 earnings conference, an analyst inquired about the remaining DUCs that the company has in the Comanche region, as well as the average lateral length. SN’s management replied that it should be more than 7,000 feet.