uploads/2016/10/debt.png

How Is Sanchez Energy’s Debt Position?

By

Updated

Sanchez Energy’s net debt to EBITDA

Sanchez Energy’s (SN) net-debt-to-adjusted-EBITDA (earnings before interest, tax, depreciation, and amortization) has slightly risen since 2Q15. In 2Q16, the company’s net debt-to-adjusted EBITDA ratio was ~4.3x.

Sanchez’s net debt-to-adjusted EBITDA ratio has mostly risen between 2Q15 and 2Q16, while its net debt levels have fallen slightly since 2Q15. SN’s net debt rose consistently between 2Q14 and 3Q15, after which it dipped and became relatively steady between 4Q15 and 2Q16.

Between 2Q15 and 2Q16, both SN’s net debt and trailing-12-month adjusted EBITDA fell. However, its 2Q16 trailing-12-month adjusted EBITDA fell further, explaining its high net debt-to-adjusted EBITDA ratio in 2Q16 compared to 2Q15.

Sanchez Energy’s 2Q16 net debt was ~$1.4 billion, compared to ~$1.5 billion in 2Q15 and $1.3 billion in 1Q16. Its trailing-12-month EBITDA was ~$321 million in 2Q16, compared to ~$477 million in 2Q15.

Article continues below advertisement

Peers

By comparison, upstream peer California Resources (CRC) saw its 2Q16 trailing-12-month adjusted EBITDA fall 57% compared to 2Q15. These companies make up 2.5% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

SN’s liquidity

As of June 30, 2016, Sanchez Energy had ~$324 million in cash and cash equivalents and a $300 million elected commitment on its revolving credit facility, totaling a liquidity of $624 million.

In its 2Q16 earnings conference, SN said, “Because we have no debt maturing until 2021, an undrawn credit facility and a bank of wells against our 2016 to 2017 Catarina drilling commitment, we had considerable financial flexibility as we look to execute our 2016 capital plan.”

As discussed earlier, SN increased its 2016 capital expenditure by $50 million in 2Q16, citing its strong liquidity and financial performance in 1H16.

Advertisement

More From Market Realist