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How Is the Comanche Acquisition Working Out for Sanchez Energy?

PART:
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Part 2
How Is the Comanche Acquisition Working Out for Sanchez Energy? PART 2 OF 13

Sanchez Energy’s Big Bet on the Eagle Ford: Has It Paid Off?

Productivity gains

The immediate benefit of Sanchez Energy’s (SN) Comanche acquisition in the Eagle Ford was visible in its 2Q17 production numbers. Sanchez Energy’s management noted in the 2Q17 earnings release that since it closed the Comanche transaction on March 1, 2017, it was able to utilize its completion methods on the newly acquired acreage. 

The company pointed out that this contributed to a 43% increase in production in 2Q17 compared to the previous quarter. We will discuss SN’s 2Q17 operational results in later in this series.

Sanchez Energy’s Big Bet on the Eagle Ford: Has It Paid Off?

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As we noted in the previous part, Sanchez Energy is committed to bringing all the 132 DUCs (drilled uncompleted wells) it acquired from the transaction within 12 months of signing the agreement. The company has already brought 57 of the 132 Comanche DUCs online, as detailed in its 2Q17 earnings.

As a result of this transaction, production is expected to rise 90,000–100,000 boepd (barrels of oil equivalent per day) by 1H18. This would be an increase its 2Q17 levels of 73,341 boepd.

Other implications

However, the increase in SN’s financial obligations as a result of the acquisition might not be ignored by some investors. To finance the deal, SN issued $744 million in non-convertible perpetual preferred equity with an annual dividend of 10%. This increases its annual dividend commitments.

We’ll talk about more about SN’s financial position in the next part of the series.

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