Chart in Focus: Sanchez Energy’s Financial Position
Sanchez Energy’s financial position
As we saw in the previous part, Sanchez Energy’s (SN) Comanche acquisition resulted in annual dividend payments as a cost of raising the capital required for the transaction. Possibly as a result of its increased financial commitments, on August 23, 2017, Sanchez Energy announced that it would pay the quarterly dividend payment on its convertible preferred stock in common stock.
Following this announcement, SN stock fell 16% the next day. This development could concern investors, as it dilutes the position of existing shareholders.
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On June 30, 2017, Sanchez Energy (SN) had a cash balance of $128 million. Including its borrowing capacity under two credit facilities, its total liquidity was ~$560 million.
As we saw in Part 1, in a recent effort to boost liquidity, SN sold its Javelina assets in the Eagle Ford for $105 million in cash. Investors could be watching to see whether the company might sell more assets to manage its liquidity.
As we can see in the image above, Sanchez Energy has no major maturities until 2021, with only $300 million coming due before that, in 2019. Under its existing revolving credit facility, SN is required to maintain a 1.0x current ratio and a 2.0x net-first-lien-debt-to-EBITDA1 ratio.
- earnings before interest, tax, depreciation, and amortization ↩